In the first half of 2017, e-commerce revenue amounted to approximately $1,268.9 billion of all retail sales in the U.S., according the U.S. Census Bureau. While e-commerce sales increase from the same period in 2016, the percentage of total retail sales increased from 4.3 percent. What this shows is that more consumers are finding confidence in online shopping. This is good news for online merchants. However, the rapid growth of e-commerce has created tons of new sales opportunities, including aggressive direct marketing companies who have found ways to target online shoppers.
By forging relationships with well-known companies who have a substantial online presence and customer base, direct marketing companies are selling club memberships, which incur monthly fees, to online shoppers at checkout. Unfortunately, not all of the online shoppers are aware that they purchase these memberships. The memberships, masked by offers such as cash back rewards, future purchase discounts or free magazine subscriptions, are frequently tied to trusted web sites. Shoppers only discovered they were enrolled in the clubs after finding unauthorized charges, ranging from $9 to $20, on their credit card statements – sometimes after they had been charged these fees for a few months.
“The memberships, masked by offers such as cash back rewards, future purchase discounts or free magazine subscriptions, are frequently tied to trusted web sites. “
After discovering and investigating these unauthorized charges, most online shoppers found the club enrollment process deceptive and misleading. What is angering cardholders most is that their credit card information was passed on to third parties without their consent. Unfortunately, the consent was hidden in the small print (they likely did not read) when they accepted the online offer.
High volumes of consumer complaints to the Better Business Bureau, state attorney generals and consumer advocate groups about these controversial sales tactics prompted an investigation by the U.S. Senate Committee on Commerce, Science, and Transportation, chaired by Senator John D. (Jay) Rockefeller (D-WV). The investigation, launched in May, 2009, researched three Connecticut-based direct marketing companies – Webloyalty, Affinion and Vertrue – their online retail partners and the web sites which sell club memberships to online shoppers. Their findings thus far were published on November 16, 2009.
Some of their findings discovered:
These offers are called “post-transaction” because they appear after online shoppers enter their billing information but before a transaction is confirmed. Misleading “yes” and “no” buttons cause consumers to think they are completing the original transaction, but instead they are entering into a separate financial purchase. If the shopper accepts the offer, the billing information is passed on to the third party who manages the monthly memberships. These offers have been found on well-known – and trusted – sites such as Expedia, Orbitz, Priceline, Hotels.com, Fandango, Buy.com, and Classmates.com (who reported more than $70 million in revenue from the memberships).
In an interview with MSNBC, Webloyalty CEO Rick Fernandez stated that Webloyalty made sure the terms and conditions were clear to online shoppers in the post transaction process. However, online consumers who have been enrolled in the club memberships without their knowledge don’t agree. These marketing and sales practices are causing negative effects on e-commerce and tarnishing consumer loyalty in the web sites and companies who employ these marketing practices. Complaints from online shoppers, and now the release of the Senate report, are forcing e-commerce companies to revise these marketing tactics towards a more conservative approach – or to end the partnerships with these firms all together. Affinion claims that the activities in the Senate report describe Webloyalty’s practices and claims that Affinion has changed their business practice but did not describe what changes were made. Vertrue, also known as Adaptive Marketing LLC, stated that they are “strengthening” its practices to provide consumers with “clear, conspicuous and repeated disclosure” of their terms and conditions.
Online merchants should consider the effects of similar marketing and sales tactics before deploying them. Online shoppers prefer to shop with merchants they can trust – a strong influence contributing to online shopping behavior and consumer loyalty.
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