Marketers see cybercash solution

They are among the most avid and sophisticated Internet users in Canada. And their spending power is nothing to sneeze at. According to YTV, Canadian tweens control $1.8 billion in discretionary income, and they influence 10 times that much in family...

They are among the most avid and sophisticated Internet users in Canada. And their spending power is nothing to sneeze at. According to YTV, Canadian tweens control $1.8 billion in discretionary income, and they influence 10 times that much in family purchases. And that’s just kids 9 to 14.

Yet – through no fault of their own – Canadian youth have done little to contribute to the growth of e-commerce in Canada. The fact is, kids don’t have credit cards, nor do they have access to the slew of digital currency services currently being tested and launched in the U.S.

According to a recent report by Cambridge, Mass.-based Forrester Research, wired Canadians 16 to 22 spend 2.5 more hours online each week and are 95% more likely to have broadband access than the same group in the U.S., but stateside Web heads are much more advanced when it comes to ‘broader Internet behaviours’ – namely, shopping.

All in all, the study found, Canadian youngsters are half as likely as American kids to buy online.

But although online penetration among Canadian youth varies by region in Canada – from 7.5% in the Prairies to a high of 19% in Quebec – there’s room for serious growth in online spending. In fact, Forrester Research predicts that the rise in online spending among young Canadians will mirror that of total household online spending, which is forecasted to triple to $3,317 in 2004, up from $1,127 per household in 2000.

There is no shortage of companies offering to help young people buy over the Web. Over the last several years, a slew of companies have set up shop south of the border to provide alternatives to credit cards for making Web purchases. These initiatives include CyberCash and RocketCash, which manage teen accounts for purchases on authorized merchant sites, Mad Cash and Visa Buxx, which market prepaid Internet cash cards (similar to prepaid phone cards), and PayPal, which allows visitors to securely send money to anyone with email.

‘These solutions are in their infancy,’ says Jim Okimura, senior partner with Toronto-based retail and marketing consulting firm J.C. Williams Group. ‘It’s one of those chicken-and-egg things where the merchant network will not develop unless you have the user base, and the user base won’t get there without the attractive merchants to buy from.’

Susan Arthur, director of marketing for Toronto-based Chum Specialty Television, frames the issue this way: ‘We’re in the same boat as everyone else. Unless kids have their own credit card, or get parental permission to use the credit card, that’s the only way they can shop online in Canada right now.’

Arthur, who promotes MuchMusic.com, one of the top youth sites in Canada with about seven million monthly impressions, says Canadian youth are very tech-savvy and are already predisposed to shopping online – they just need the means to do so. ‘As soon as there’s some kind of online banking solution available for kids, I think our e-commerce site or strategy will change completely.’

Arthur says the Canadian market is too small to support the kinds of services that are available in the U.S. She contends marketers north of the border will simply have to wait until the U.S. players cross over.

In the meantime, says Okimura, Canadian marketers should refocus their attention on building content-rich ‘community’ Web sites for the bubblegum set, in order to gain their trust in preparation for the day that they will be able to buy online.

For its part, www.MuchMusic.com has already set up a Web site with ‘ease of purchase’ in mind: features like listening lounges and top-30 countdowns link users directly to retail partners. The station also recently extended its MuchAXS viewer loyalty club online, says Heather Gordon, sales manager at ChumCity Interactive. To address the payment problem, it enables young members to charge their membership fee – a minimal $2.99 – to their Bell phone bill if they don’t have a credit card. But the site strongly encourages subscribers to get their parents’ permission.

Another strategy for getting cash out of the credit-challenged was demonstrated last year by Toronto-based Internet retailer HMV.com. Aiming for a slightly younger crowd than its usual core target of Canadians aged 18 to 24, the site launched a promo featuring the live Webcast of a Rage Against the Machine concert from Toronto’s Phoenix nightclub. In an effort to boost store sales – both online and off – visitors to the one-time Web show were offered a printable one-day-only coupon discounting purchases at HMV. Roughly 1,000 people tuned in to the live Webcast, and more than 100 coupons were redeemed, says Sara Ross-Schlatter, Internet marketing manager at HMV.com.

‘We knew we were targeting a young audience and we wanted to try to get a purchase out of the effort,’ she says. ‘We know there is spending power that exists with these customers.’

Initiatives targeted at a younger audience (kids aged 13 to 18) are few and far between for HMV.com, says Ross-Schlatter, because the results simply don’t compare to those for the adult-contemporary market, which has the power and the credit to shop online. However, she says that they do help expose younger consumers to the HMV brand, and may help to encourage online purchases in the future.