In recent years, online shopping has brought about life-altering changes to the global consumer market; just a click away and one can connect with the world and purchase products and services from a diverse range of markets. Targeting this emerging trend, the Consumer Council has, for the first time, published a research report on online shopping, which discovered that consumer satisfaction with online shopping reached 98%. However, consumers may overlook the problems and hidden hazards with online shops' trade practices and they lack knowledge in certain important consumer rights issues such as information accessibility, return/refund policy, privacy policy and legal protection. The report found that legal protection afforded to Hong Kong online consumers in some aspects lag behind some countries and regions, reflecting that the existing legislations could be improved to cope with different consumption risks arising from rapid development of online shopping. The Government is recommended to conduct in-depth review in existing legislations to safeguard consumers' right to shop online.
The Council released a report named "Online Retail in Hong Kong: A Study on Consumer Attitudes, Business Practices and Legal Protection", results of which were collected through a street survey of 1,010 people, 15 mystery shopping experiences, as well as interviews with 24 companies and checked websites from other 23 companies who declined to be interviewed from 4 sectors. The study was developed to evaluate consumers' online shopping experience, retailers' online trade practices and, to review existing legislations of more relevance to online shopping.
Result of the survey
According to the Council's report, 79% of respondents expressed confidence in online shopping and, the overall satisfaction rate is very high, with 98% of them being either satisfied or very satisfied. Consumers in the younger cohort (15—44 years old) appreciated that goods arrived on time as well as online shopping's efficiency and convenience, whereas consumers in the older cohort (aged 45 and above) are satisfied with the products sold online being cheaper than those in bricks-and-mortar shops, and the products and services meet their expectations.
The report revealed that online shoppers in Hong Kong are higher-educated and mostly in the young and middle-aged cohorts, with 46% of them fall between 25 to 34 years of age.
The report indicated that many respondents had started online shopping because of "recommendations from friends and relatives", it was more apparent among female consumers (females: 50%, males: 35%), followed by "quick and convenient". Among those who chose not to shop online, 30% expressed "worry about leakage of personal information"; another 22% said "they have no confidence in product quality". Factors like "guarantee after-sales refunds/returns" and "better transparency of terms and conditions" are encouraging non-online shoppers to give online consumption a try.
Online shoppers in average spend $790 in one purchase such as air tickets, events/concerts and dining services. The medium spend per online shopper is $3,600 a year, and the average spend is $15,250. In terms of frequency, consumers shop online about every 10 days. Consumers purchase products and services online from a wide range of sectors, with non-branded clothes (89%) being the most popular commodities, followed by books/toys (53%). "Software/games/app" (42%) is the hottest item which people always purchase online.
Online shoppers are particularly price sensitive as they would switch purchase channels for slight changes in price. The report indicated that consumers would consider switching between online and physical shops when 5% price difference for the same product is found. This behaviour is more apparent among frequent online shoppers.
Speaking of criteria to select online retail websites, most consumers prefer the ones "with good reputation" (76%), and track record (62%), "security measures" (33%) are also regarded as important. Nonetheless, when asked what online safety measures they knew about, respondents normally said they "do not disclose personal or account information easily" (72%) and, "change passwords regularly" (70%); but taking up the simple and effective approaches such as using encrypted connections or purchasing from retailers having SSL encrypted connections only accounts for 9% to 15%, which reflected that there is need for consumers to raise their awareness on online safety measures, to minimise risks of privacy and transaction data leakage.
Should conflicts occur, nearly half respondents chose to contact the websites directly for redress, 30% quit purchasing from the same websites. Younger consumers are found to be less tolerant of bad experiences, while older consumers preferred to seek assistance from the Council (18%), doubling the number of young consumers (9%).
Various hidden risks of online consumption
Another two highlights of the report are the review on online traders' trade practices and the existing legislations more relevance to online shopping. The result revealed that some problems are hard for consumers to notice, on the other hand, traders need to improve their service quality and sales tactics. Additionally, the report also pointed out problems in law enforcement and those detected from legislation review, summarised as follows:
Transparency on sellers' geographic locations is a concern, the website addresses ending ".hk" do not necessarily mean they are operated in Hong Kong. Consumers who purchase goods or services from specific traders on online shopping platforms are clueless about the complex business arrangements between the platform, seller and shipping company. Besides, during transaction, consumers may be redirected to a third party to purchase ancillary services such as insurance without their acknowledgement. If there is mistake or delay in data transfer, it is unclear which party should be held responsible and perhaps hard for consumers to pursue redress.
Some traders may apply drip pricing or partitioned pricing tactics to attract consumers to buy. Some even use unauthorised quality labels or outdated test results. All these could mislead consumers. Moreover, payment option is fairly restricted, with only 20% websites being interviewed allow consumers to pay after they receive the products, and accept cheque or bank transfer.
The report also found that nearly 70% of websites require consumers to be registered as members before they can start purchasing, but about 20% of them have yet to allow consumers to opt out of receiving promotional materials.
Best trade practices adopted by the industry
The report focuses on trade practices of online retailers in 4 key sectors: airlines and travel, food and dining, clothing and beauty care, and computers and electronic goods. For instance, online travel agencies may not share consumer data with airline companies in a timely manner, whether fresh food products sold online comply with legislative requirements, whether home appliances imported from overseas meet the standard under the relevant regulations, and beauty clinics use coupons distributed online to attract consumers and apply high pressure techniques to sell their expensive beauty treatments.
Advocate improving information transparency and strictly adhering to the privacy regulation
The Council believes that the aforementioned trade practices of online shopping can be improved if the industry adopts best trade practices. For instance, enterprises can improve client services by displaying all mandatory charges in a "what you see is what you pay" basis to let consumers compare and improve information transparency. Clearly state company's online business policies such as refund policies and service guarantee can also boost consumer confidence. In terms of privacy, enterprises should strictly adhere to the Personal Data (Privacy) Ordinance and relevant principles regulating information protection, to minimise the risk of information leakage.
Recommend Government to introduce new legislations
The Council is of the view that apart from the best practices initiated by the industry, the Government should consider introducing new legislations to reinforce regulation on online trade practices:
- Establishing the statutory right of withdrawal--At present, the EU and England allow online shoppers to exercise the right of withdrawal from online transactions within 14 days; the Mainland China and Taiwan also give 7 days with Hong Kong yet to have such legislations. The Council recommends the Government investigates the merits of cooling-off period for diverse consumer contracts, and the specific right for online consumers to cancel the transactions within a prescribed period of time, except for certain products that ought to be exempted.
- Regulating information disclosure--The Council opines that in addition to enforcing the Trade Descriptions Ordinance to regulate sales tactics of online sellers, the relevant authority should take reference from the United Kingdom's legislation, which requires online retailers to display all important information including the total price of goods or services and all additional costs. Disclosing details of sellers' identity and contact information is also made mandatory. At the same time, traders should state clearly their policy and procedure for handling complaints, contract period, and details of transaction cancellation.
- Clarifying the right and protection for digital content products--At present, the existing legislations on consumer protection to purchasers of digital content products such as software, downloaded films and songs, are not clearly stated. Neither the Sales of Goods Ordinance nor the Supply of Services (Implied Terms) Ordinance specifies consumers' rights in purchasing digital content. The Council advises the Government to review the legislations and clarify the protection afforded to consumers in purchasing digital content products.
Strengthening the monitoring the issues arising from online shopping
The unique trade model of online shopping brings convenience to consumers but at the same time creates risks such as those leading to inhibition of competition and leakage of personal data. The Council suggests the Government monitor the development of online platforms, to prevent some local and international trade leaders on the internet, from crippling the competition environment resulting in increase of product prices and limit consumer choice, by exploiting their market dominance. The report also indicates that although big data generated from the internet facilitates traders to provide goods and services meeting consumer preferences, the Government should be wary of the risks caused by the use of big data. For example, traders may classify consumers into different types to which different prices are applied through aggregating and analysing non-personal data collected, to the consumers' detriment.
Medicines and health food products are popular items sold on the internet. This gives rise to concern about the sale of counterfeit medicines and fake health food products. The Council maintains that the Government should review the online sales of medicines and health food products and tightly enforce existing regulations.
Proposal of establishment of Online Dispute Resolution Platform
The Council has received 3,300 to 5,600 complaints lodging against online transactions between 2013 and 2015, representing 11% to 18% of overall consumer complaints. Most complaints stemmed from purchases with substantial amount in the sectors like online air tickets and travel (39%) and electronic products (13%).
Based on the Council's past experience in handling disputes on online consumption which involved overseas merchants, reconciliation efforts tend to be more difficult. The Council suggests taking reference from overseas experience such as from the EU to establish the first Online Dispute Resolution Platform in Asia, to handle cross-border online transaction disputes involving modest amounts in a simple, fast and flexible manner, for Asian consumers and traders.
The Council has included online consumption as part of its constant undertaking to safeguard consumers' rights, and will continue to monitor trade practices of online traders. With the upcoming trend of online consumption, consumers are reminded to enhance their knowledge on how to protect their online shopping rights as well as the safety measures on privacy. Meanwhile, traders should establish best practices to boost consumer confidence. The Government should proactively address various issues arising from online consumption through strengthening law enforcement, introducing new regulations where appropriate and monitor. Only with concerted effort by consumers, traders and the Government can a better and sustainable online consumption environment be achieved.