Consumers put online shopping on hold

WHEN dot.coms were in vogue, which was not that long ago, many foresaw a world dominated by online commerce.

Brick-and-mortar businesses were on their way out, to be replaced by models which functioned via the click of a mouse.

Alas, this vision of the future has been postponed, maybe indefinitely.

Business-to-consumer (B2C) models were to first to flounder. Now, business-to-business (B2B) dot.coms are also going through the crunch. It is altogether not a pretty scene.

Notwithstanding optimistic forecasts of billions of dollars in transactions, Businessweek reported that there were simply too many B2B exchanges chasing too few dollars.

Amazon.com, probably the best-organized online retailer, is still bleeding profusely and has seen its stock market valuation fall dramatically in recent months.

Is this just a much-needed shakeout -- to be followed by a recovery? It could be the case for B2B but hardly for B2C.

There are still many obstructions to online commerce which, if not removed, will continue to stymie its growth.

The biggest hurdle is security. People do not feel as assured as they would like to be when they buy things online.

Consumers worry about having their credit card numbers hijacked by hackers. And will the online retailer deliver what was ordered intact and on time?

Indeed, retail fraud, whether by buyers or vendors, is more prevalent online. According to a Gartner Group analyst, it could reach US$500 million this year.

And it would be worse for wireless transactions via technologies like Wireless Application Protocol (WAP) with its vulnerability to a hack at the WAP gateway server.

There has been some talk about establishing a standard for digital cash for online transactions but it remains talk largely.

If manufacturers cannot agree on a common VCR or DVD standard, what of a universal platform for electronic cash?

This week, American Express moved some way towards easing the fears of online buyers when it announced disposable credit-card numbers.

The single-use credit-card number eliminates the risk of an online binge using stolen credit-card information.

And if other card companies and banks can come up with better ways to reduce the risk of fraud, then so much the better.

Another important concern of consumers is privacy. People do have good reasons to worry about their privacy being compromised when they go online.

One example: A recent glitch at Amazon.com's servers released some customers' e-mail addresses to another member of the company's associates program.

The FBI came under fire when it revealed inadvertently the existence of the Carnivore e-mail surveillance program. And remember the Singnet scanning episode last year?

When more news about yet more security loopholes in the popular Microsoft Explorer and Netscape Communicator browsers surface, the paranoia escalates.

The days when individuals put up firewalls around their home PCs or Virtual Private Networks are not far off.

Will this further impede the growth of online commerce? This is an issue the vendors must address quickly.

Assuming the process of an online purchase goes through without a glitch, there is still the biggest challenge of them all, fulfillment -- getting the goods to the customer quickly and at the lowest shipping cost.

This has been, and will continue to be, the most difficult step for e-commerce.

While there are the usual courier companies, there is a need for more dedicated Internet delivery services such as Kozmo.com in the US.

In sum, online commerce is hardly a no-brainer activity as some of the now defunct dot.coms and their financial backers have learnt -- painfully.

It takes more than just setting up a website and waiting for the money to roll in.

Above all, unlike some dot.com investors who are prepared to fork out money in pursuit of what might be mere dreams, online shoppers expect no less from retailers than they would of brick- and-mortar businesses.

-- The Straits Times