Is Spam Choking E-Commerce?

To most online consumers, receiving unwanted e-mail marketing messages is just part of being online. Like offline junk mail, it is something people do not like but have learned to live with.

But analysts say there is a price to pay for too much spam, and e-commerce may have to foot some of the bill.

“Privacy continues to be something that consumers say is holding them back,” Forrester analyst Christopher Kelley told the E-Commerce Times. “It’s always one of the first answers to the question of why more people aren’t online.”

And to many consumers, Kelley noted, the spam clogging their inbox is proof positive that their personal information can easily fall into the wrong hands.

Growth Industry

No one disputes that spam has exploded and that even more is coming. According to GartnerG2 analyst Denise Garcia, the US$200 billion-a-year direct mail marketing industry is looking closely at e-mail because of the low cost and high response rates of e-mail ads.

Many new users of direct marketing services will be retailers and others hoping to use the Web to improve customer retention and brand loyalty, Garcia said, setting up a dangerous tightrope walk for e-commerce: Use e-mail effectively without pushing customers away.

In Case of Emergency

E-commerce heavyweights may have set an example by sending e-mail to customers only when it contains something the recipient will deem to be of value. For instance, most e-mail from Amazon.com (Nasdaq: AMZN) contains a discount coupon or other special offer.

Auction giant EBay (Nasdaq: EBAY) uses e-mail even more sparingly, relying instead on its network of bulletin boards to post updates for members. E-mail is reserved for more important notices, such as changes in the company’s privacy policy.

In fact, EBay has fought hard in favor of anti-spam measures, as its members often have had their addresses hijacked through the site.

Name Your E-Mail

Priceline.com spokesman Brian Ek told the E-Commerce Times that the name-your-price travel site tries to make sure visitors are not bombarded with e-mail after they register.

“Our use of e-mail is on a special-situation basis,” Ek said. “We use suchcommunication to let customers know about added-savings offers that are not available to the general public. You might even think of it as our version of a loyalty program.”

In that way, analysts said, the Pricelineprogram may be a model for e-commerce companies to follow: Limit e-mail messages to essential communications, and make sure they contain something of value.

Holding Back

Some industries are being held back by spam and the reluctance it causes among consumers about giving out personal information. For instance, Forrester analyst Kenneth Clemmer told the E-Commerce Times, financial institutions stand to gain or lose about $60 billion worth of business in the next two years based on privacy concerns.

“Consumers still worry about privacy,” Clemmer said. He noted that 15 percent of bank and brokerage customers chose to have their personal information kept secret when given the option to do so.

“Financial institutions have to be able to assure customers of their privacy,” Clemmer added. “That’s hard to do if the consumer thinks they’re getting spam that’s in any way related to their online banking.”

Making that distinction may be the hardest job of all for e-commerce, analysts said. Whether or not spam originates from a person’s online shopping experiences, just the possibility may be enough to put a damper on future e-commerce growth.

“Perception matters as much as reality,” Kelley said. “People want to feel confident in where their information is going.”