The Anglo File: U.K. Holiday Shoppers Steer Clear of the Net

Holiday sales on the Net are suffering amid a general distrust of e-shopping, or rather, e-paying.
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LONDON -- Katharine Whitehorn, a British journalist, once summed up the commercial value of Christmas by saying that "if it did not exist, it would be necessary to invent it." Yet in the U.K., a combination of shoddy customer service and a suspicious public is likely to keep e-tailers from enjoying the benefits of the season anytime soon.

On the surface of it, the fundamentals look good for all retailers. Bricks-and-mortars sales continued their march higher in November, rising 0.2% from October and 4.1% year-on-year, according to the

Office of National Statistics

. And British Internet users are a perfect demographic for online gift shopping. Some 36% of Internet users in the U.K. have one or more children under the age of 15, giving e-tailers more than 3 million online parents to target with Christmas bargains, according to

Fletcher Research

, a new-media consultancy.

Yet the stock performances of the e-tailers have been decidedly mixed recently. In the last month, shares of high street retailers with Internet divisions, such as bookseller

WH Smith

and electronics seller

Dixons

(DXNGY)

were up 4.3% and 4.5%, respectively. Purer online retailers have performed less well:

Sports Internet

was down 0.7% and

Electronic Boutique

was 0.6% lower. By comparison, U.S. e-tailing giant

Amazon

(AMZN) - Get Report

has stormed 28% higher in the holidays run-up, although not all American e-tailers have performed so well.

So who's to blame for this sorry state of affairs? The problem lies with both retailers and the consumer.

Jupiter Communications

, an Internet research firm, reckons that Europe as a whole is likely to spend a mere $790 million on the Internet this Christmas. This low figure can be partly attributed to the perennial European malaise of bad customer service. A recent survey of top European Web sites this week by Jupiter showed that 65% of these sites did not respond to a customer query within 48 hours, which, the research firm says, is the standard for good customer service.

This has wider implications for e-retailers. "There are now more Web merchants selling products to new online shoppers. However, the relationship between the two should be for life, not just for Christmas,

and poor customer service can kill this relationship," says Nick Jones, analyst at Jupiter.

Yet bad service is something Europeans have grown accustomed to, and that alone can't explain the lack of buying over the Internet. Another problem lies with the fact that for all the excitement about the Internet, consumers in the U.K. remain a suspicious lot.

According to Shobhit Kakkar of Fletcher, some 86% of U.K. Internet users are comfortable using it as a source for information, but only 30% actually buy anything online, with 43% of that group citing security as the main worry.

Why this is so remains something of a mystery since this fear doesn't extend to handing over the credit card to a waiter at the local fish and chippie, who could easily run into the back and copy the details down before returning it. Yet justified or not, those fears persist and e-tailers are trying to combat it.

One approach has been the accreditation of Web sites. Two accreditation firms are the British consumers association

Which?

and the Internet service provider

LineOne

, which claims to monitor the service of all the retailers listed on and linked to its portal.

While accreditation schemes will help in the short run, Kakkar believes that ultimately, the British public will learn to trust the Web. Much more important for e-tailers, he says, will be word-of-mouth recommendations. That will, however, take time.

Finally, sloppy implementation of Internet shopping tools that help consumers find the best prices remains a problem in the U.K. Three new shopping agents, set up along the lines of

Excite@Home's

(ATHM) - Get Report

Jango aren't as robust as their American forerunners.

To succeed, shopping agents must offer cheaper prices, a broad range of goods and detailed information about those goods. Unfortunately,

British Telecom's

(BTY)

Spree

,

Focus Digital's ShopSmart

and

Asda's ValueMad

fall short on all fronts.

The British shopping agents are still only search engines. They don't offer consumers any information about the products on sale, either by providing their own content, offering links to external reviews, as Jango does, or inviting users to contribute, as, say, Amazon or

eBay

(EBAY) - Get Report

do.

However, the most serious flaw is that some don't even offer lower prices. Fletcher found that ValueMad offered the Dyson DCO2 vacuum cleaner for 175 pounds from

BeDirect

. This was less than

Argos'

price of 229 pounds, but it didn't match the 169.99 pounds the consultancy found at

Great Universal's Essential Electrics

.

Bad customer service can be tolerated and suspicions overcome in time. However, if online retailers can't offer lower prices, this and every other Christmas is likely to be a bleak one.