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March 20th, 2014

Children, the Internet and Ecommerce

2 comments | 1 shares

Estimated reading time: 5 minutes

Blog Administrator

March 20th, 2014

Children, the Internet and Ecommerce

2 comments | 1 shares

Estimated reading time: 5 minutes

John CarrConcerns about pornography tend to make the headlines in terms of the risks children face online, as do occasionally the harm caused by cyber-bullying or grooming. John Carr points out that children are also buying online and are targeted by online advertising raising questions about other kinds of risks they face as online consumers. 

Kids have money. However, because the available research evidence is based on studies using different time frames and methodologies, at the moment there seems to be no certainty about how much.

In 2006, children and young people in the UK up to the age of 19 apparently spent £12 billion from their own pocket money or earnings derived from part-time jobs. When one adds to the equation the amounts spent by parents on household items, over which in varying degrees children and young people have some influence, in the same year the total value of the market increased to around £100 billion[1]. In February 2010 it was estimated that on average it costs a family in excess of £200,000 to see each child through to their 21st birthday.

A study published by the LSE and O2 in 2009 suggested UK youngsters would spend over £6,000 between the ages of 7 and 15. In total they were “worth £4.89 billion to the UK economy, twice the value of the UK toy industry.”[2]

Aviva published research showing that in 2012 children and young people in the UK between the ages of 5 and 18 received £43 million per week in pocket money from their parents. That’s over £2 billion in a single year.

Whichever way you look at these numbers, and whatever the definitive position turns out to be, it is clear why businesses are interested in reaching out to young people and influencing their views on purchasing decisions. It’s not just about building brand loyalty for tomorrow. It’s also about hauling in cash today.

What are children and young people buying?

A study published in November 2013 gave an insight into American young people’s online purchasing activities. This showed that 78% of teenage girls and 82% of teenage boys shops online and 25% and 37% respectively prefer it to shopping in stores. The largest categories of expenditure were in apparel (29%), footwear (22%) and electronics (20%). Amazon was the top online retailer. eBay was also very popular. Streaming video from Netflix was another major item.

What are the different children’s markets worth? It’s hard to track down reliable data, but information on how much is being spent on advertising is more readily available. In the USA, for example, between 2006 and 2009 US$1.79 billion was spent on food-marketing to the young[3]. In 2006, 44 food and beverage companies in the USA spent US$1.6 billion combined promoting their products to children. This level of spending on advertising suggests a sizeable market which companies wish to tap into.

How do kids pay?

Again, the picture is unclear and while it seems unlikely that very young children will have mastered the intricacies of going to the shops or going online to buy things, their older siblings will have no such difficulties. Although in law there may be limits to the contractual powers of legal minors in practice, at least on the internet, these tend to evaporate. With a few notable exceptions, for example in the UK with online gambling, where there is an age specific component to a purchase, many online suppliers only ask for the would-be customer to tick a box to confirm they are of age. No effort is made to determine whether or not this is a truthful statement. Online retailers often say they can only do so much, the rest is down to parents’ responsibility to supervise their children’s online activity.

On the internet children and young people can directly purchase goods and services using their own means of payment i.e. without the need, in practice, to secure the immediate co-operation of a parent or other adult. This can be achieved in a number of different ways.

Many banks will routinely issue debit cards to children as young as 11. These will not have any credit associated with them but nonetheless they will be fully usable online. Parents might pay their children’s pocket money into the account and further sums can be added either when gifts of money are received or from part-time earnings.

In several European countries payment cards which utilise the Visa, Mastercard, Maestro, Amex and other major brands’ online payment systems can be bought for cash and used online by anyone, in some instances effectively anonymously.

Some of these cards might specify that the person buying the card must be over 18, although there are doubts about whether or to what extent this might be enforced by vendors, for example at corner shops or petrol stations where they are commonly sold. However many of these cards specifically say they can be used by persons either of any age or by persons aged 13 or above.

On top of that there is a proliferation of gift cards which can either be store specific or site specific e.g. allowing the holder to purchase items at, for example, eBay or Debenhams. Again these cards often say they can be used by anyone or by persons aged 13 or above. “Holiday Cash” cards are also part of this broad sweep of new ways of paying for items online.

Another payment mechanism open to children and young people is their mobile phone. These can be used either to pay for items via premium rates services (which in some countries are regulated but in others they are not) such as reverse SMS or similar mechanisms which charge an amount to the phone’s account.

Thus it is important that companies trading over the internet bear in mind that children and young people are in the mix, in many senses just as capable of interacting with their web sites and businesses as any adult. This is particularly important as it appears from at least one study younger people are likely to have a low level of “financial awareness”.

What are the consequences?

We can all expect a flurry of research and policy making activity in this space as we all start to wake up to this new dimension to internet policy. It raises several hot button items, including:

  • Equity: are companies taking unfair advantage of children and young people’s lack of worldly experience?
  • Privacy: are children giving informed consent to their personal data being collected and processed, how is their data being stored, who can access it within the company and how is it used?
  • Public health: how much of the marketing pressure on kids is driving them towards unhealthy options e.g. high fat, high sugar foods that will not only harm them as individuals but also create a burden for the communal health services in later years?

One thing is certain: this online dimension to children’s expenditure will be of growing importance. Goldman Sachs reported that in 2013, the total value of consumer focused online retailing globally was US$638 billion. They predict that by 2016 almost half of all ecommerce will be via mobile devices, principally smartphones and tablets and that’s where kids hang out in very large numbers and for substantial periods of time. That means we need to start paying attention to the above issues and how kids are spending online right now.

This article gives the views of the author, and does not represent the position of the LSE Media Policy Project blog, nor of the London School of Economics. The Conversation

[1] “Consumer Kids”, Mayo & Nairn, Constable & Robinson Ltd., at pp5 and 18.



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