BBB Research: BBB Seal is TRUSTED when it comes to online retail
According to the latest figures from the U.S. Census Bureau, 13% of retail shopping takes place online. The COVID-19 pandemic boosted online commerce. We took a dive into BBB data to see what we could find about online retail.
Our BBB data has some industry codes for online shopping, but they only capture part of the picture. We built a series of algorithms to crawl through 1,000,000 BBB complaints and customer reviews on over 1,000 types of business (TOBs) for all of the retail industry. Here is what we found.
We found that ~40% of BBB complaints on retail companies stemmed from online purchases. That’s triple the estimated proportion of online sales from the U.S. Census Bureau. This means that, if a consumer makes a retail purchase online (as opposed to in-person), they would be three times as likely to wind up complaining to BBB about that purchase. Therefore, BBB is three times as relevant for problems with online retail purchases as for problems with brick-and-mortar retail purchases.
Why might this be? We know from BBB Scam Tracker data that there are a lot of scams related to online purchases. Everyone knows it's easy to set up a shady, fly-by-night operation based on a website and not as easy to scam people when tied down to a brick-and-mortar storefront. We know that it's easy for a buyer to return an item in-person and to talk face-to-face with company personnel to resolve an issue. And we know that an online purchase can be fraught with unanswered emails and broken promises, creating an opportunity for a dissatisified consumer to turn to BBB for help in filing a complaint.
We also looked for clues by diving deep into customer experience data. We ran our algorithms to analyze the 10 million sentences in the 1 million retail complaints and negative customer reviews, and found some interesting results. Narratives stemming from online purchases had slightly higher rates of mentions of communication/responsiveness issues, time management issues, and pricing/billing issues than those from brick-and-mortar retail purchases: 44% to 38% (communication), 26% to 22% (time), and 29% to 27% (money). There are more challenges with online retailers failing to respond to emails and phone calls, delivering too slowly, and charging too much/scamming.
Key Product Types
We looked for the key types of products. According to market search company eMarketer, 29% of clothing purchases take place online, 3% of food and beverage purchases take place online, and 11% of health and beauty care purchases take place online. The rest take place at brick-and-mortar locations. We drilled down into BBB data with an algorithm based on a custom library of 4,000 product words and phrases, to group BBB complaints into 26 categories. We estimate that 70% of clothing complaints stemmed from online purchases, 35% of food and beverage complaints stemmed from online purchases, and 48% of health and beauty care purchases stemmed from online purchases. This means that, when a shopper buys clothes online as opposed to in-person, she is twice as likely to end up filing a complaint with BBB. And when a shopper buys food or beverages online versus in-person, he is 10 times as likely to file a complaint with BBB about it. And when a shopper buys health and beauty care products online versus in-person, she is 4 times as likely to file a complaint with BBB about it. So these are the 3 "riskiest" retail types that we found.
We found that some other types of retail were relatively safer when purchased online. For example, when a consumer purchases music/videos/books online as opposed to in-person, they would be slightly less likely to file a complaint with BBB than would be expected from eMarketer's sales figures (37% compared to 55% respectively). We also found that computer/phone/gadget purchases seemed to be just as safe (in likelihood of resulting in a BBB complaint) if made online compared to brick-and-mortar stores: 38% to 43%. And we found that purchases of toys and hobby supplies weren't much different: 37% of sales online and 55% of BBB complaints from online.
Why might these product types be safer online? We can guess that many purchases of music/books/videos are made through Amazon, a BBB Accredited Business, which has its own dispute resolution mechanisms that lessen the need for BBB assistance. We'll look more at Amazon below.
Coronavirus Effect
We looked to see how these figures have changed over time. Here's what we found.
Aside from minor seasonal fluctuations (a spike at the end of each year), the percentage (around 40%) of complaints stemming from retail purchases made online hadn't changed much for a couple years...at least until the pandemic hit. We can see this in the second chart above. In March 2020, we saw retail complaints from online purchases at 37% and falling. If the pandemic hadn't hit, we would have expected the percentage to have fallen to 30% to 35% in these past few months, just like it had in past years at this time. But because of the pandemic's lockdowns, the rate climbed to 39% in April, 49% in May, and 55% in early June.
This fits in with the picture of online purchase scams on ScamTracker seeing record highs during the pandemic, and inquiries on online retailers seeing record highs as well. Online shopping is still huge, and now consumers are feeling the pain more than ever, especially with the slow economy.
Resolutions of complaints
We looked to see how BBB complaint resolutions factored in.
We found that 79% of complaints from in-person retail purchases were resolved, compared to 71% for complaints from online retail purchases. We can see this in the chart to the right. That's only a modest difference, but it reinforces the notion that there are more scammers operating in online retail. Some of these scammers don't bother try to reply to complaints presented by BBB. They simply defraud their victims, close up shop, and start again elsewhere under new names.
The good news is that, even though consumers are three times as likely to wind up filing a complaint with BBB when they shop online as opposed to in-shop person, consumers can expect a reasonable rate of resolution from BBB complaint handling even when shopping online. It's not as good a rate as with brick-and-mortar purchases, so it exacerbates the pain of online shopping problems. But it still offers hope to many online shoppers. BBB's complaint handling services are more vital when consumers shop online.
Costs
We looked into the typical dollar amounts lost as well.
We found that that complaints stemming from online retail purchases had a typical amount disputed that was less than one-third of complaints from brick-and-mortar retail purchases: $98 to $305. In other words, online purchases were less expensive, or their losses less damaging.
This is due to the fact that both automobiles and furniture, two of the highest ticket items in retail, are mostly purchased in-person (96% and 74% respectively, according to eMarketer). According to BBB complaint data, the typical purchase price for a new automobile is $15,000, a used automobile $9,000, and a piece of furniture $1,500.
Compare that to the most common type purchased online - books/music/video (purchased online 55% of the time) - which has typical prices around $60, according to BBB data. That compares with $55 for cosmetics and perfume, $91 for nutritional supplements, $40 for food, and $87 for clothing.
Why are many of the more expensive items purchased more often in-person than online? We have a few guesses. It could be that larger items like automobiles and furniture require more personal inspection by shoppers before purchasing. It could also be a matter of trust, where shoppers are less willing to risk thousands of dollars on a purchase from an unknown website than they are, say, $50. With changes in the industry such as Carvana's "automobile vending machine" sales model and car dealerships in general now trying ecommerce, the retail industry is expected to continue to change.
Amazon
What do we see in BBB data for Amazon (a BBB Accredited Business)? Surprisingly, not too much. Amazon itself accounts for only about 5% of BBB complaints on online retailers. If we add complaints on other sellers that mention Amazon in the narratives (as in "I bought from this company selling through Amazon"), we get closer to only 10% of online retail complaints. Even if we assume that many narratives about retailers might not mention purchasing through Amazon, we still don't get anywhere near the 50% share of online purchases that Amazon holds.
Amazon has its own, large-scale mechanisms for customer service, refunds, and dispute resolution. Amazon also has its own rating/reviewing system that helps its customers detemine how likely sellers are to deliver (for example, we see ratings on Amazon like "97% of 12,345 customers received their orders from this seller"). So while shopping through Amazon might not actually be safer than shopping on other sites, it's definitely less likely to result in complaints to BBB.
BBB Accreditation
So how much do BBB Accredited Business seals on websites protect online shoppers? It turns out that it makes a noticeable effect. For complaints on retailers stemming from brick-and-mortar purchases, 32% of them were on Accredited Businesses. In comparison, for complaints on retailers stemming from online purchases, only 25% were on Accredited Businesses. This means that there is less relative dissatisfaction (likelihood to complain to BBB) with Accredited Businesses when a consumer is purchasing online, as opposed to purchasing in-person. This is an indication that many online retail complaints to BBB are about shady, non-BBB-Accredited operations. That's exactly what the BBB seal is designed to protect consumers from.
Sadly, there is still a lot of scamming, and a lot of mistrust in online retail. This means that there is more need than ever for BBB awareness and Accreditation. Just in the issues that reach BBB in the form of complaints, we see tens of millions of dollars a year in reported losses. And based on the total dollars exchanged in online retail, we can guess that fraud claims billions of dollars each year, most of which goes unreported to BBB.
All this means that BBB works to protect consumers in online retail, by providing dispute resolution, customer reviews, ratings, and BBB Accreditations. Even some 25 years after e-commerce first began to take hold in North America, and BBB launched its "BBB Online" seal program to safeguard consumers, the need for BBB online is still there.