For companies seeking customers for life, there's a simple
axiom: The earlier you earn a customer's loyalty, the more money
you can generate.
That's a big part of why more companies are trying to
focus on teens
and even younger children. But doing business with kids involves
a lot of complications, and finding ways to open up your business
to kids without sparking huge controversies is a major challenge
for many industries.
Tapping the online market
Online retailers
have done a good job attracting business from adults. With the
convenience of free delivery from many retailers as well as
sales-tax savings, buying online has gotten increasingly popular
in the past decade.
But the shift to online retail has largely failed for teens.
The obvious reason why is that teen-friendly electronic payment
methods are only starting to appear. A recent
SmartMoney
article cited figures from SurveyU.com that only 6% of teens have
credit cards. Moreover,
prepaid cards
and other alternatives are only beginning to gain traction and
sometimes carry high fees and other undesirable traits, making
them less attractive.
As a result, if teens want to buy online, they typically have
to use an adult's credit card. It's true that many banks offer
checking accounts to teens --
Bank of America
(
BAC
) lets teens 16 to 18 open a checking account with parental
approval, while
Wells Fargo
(
WFC
) has accounts for teens as young as 13 -- that would include
debit cards, but they give the co-signing parent full rights and
responsibilities over the account. Either way, giving parents
details on every purchase isn't exactly an ideal situation for
most teens, so instead, they have tended to stick to
bricks-and-mortar retailers where they can spend cash.
The same issues apply to other websites. The Children's Online
Privacy Protection Act, or COPPA, requires a list of actions for
websites collecting information about children under 13,
including parental consent and access to all information their
children provide.
Opening the doors
Increasingly, online companies are trying to engage children and
teens directly. In an interview with the
Wall Street Journal
, an executive at
eBay
(Nasdaq: EBAY) shared the company's plans to let those under 18
to set up accounts and gain access to at least certain parts of
its auction marketplace.
The company acknowledges that not all purchases would be
appropriate for minors, so it's looking to come up with ways to
lock them out of adult-specific areas of the website. But with
eBay starting to focus again on its core
marketplace
, it's pulling out all the stops in its search for growth.
Facebook
(Nasdaq: FB) set off a wave of debate when it considered letting
children under 13 sign up for Facebook accounts with parental
supervision. Given evidence that many parents are opening
accounts for underage children despite the company's current
policy against it, allowing access may not seem like a big deal.
But given the criticism that Facebook has already gotten for its
adult privacy policies, opponents are quite concerned about the
implications -- especially given that COPPA doesn't cover
collection of browsing data or indirect information that the
company could use.
The smarter approach
In the WSJ article, online retail leader
Amazon.com
(Nasdaq: AMZN) chose not to comment, and that's probably the
safest course that any online retailer could take in this
controversy. Unfortunately for eBay and other more ambitious
retailers, electronic payment systems haven't kept up with the
pace of online commerce, at least to the extent that would be
necessary for teens to have access to a cash-like payment method
that wouldn't require disclosure to parents. Until that happens,
online retailers are likely to find that the controversy they
bring on in trying to move forward with marketing to teens and
children outweighs the potential gain.
If teens spent less of their money on shopping and set even
the smallest amount aside for long-term investments, putting time
on their side would make a huge difference in their finances over
the long haul. Steer your kids toward a smarter investing life by
reading the Fool's latest special report on long-term investing,
which reveals some useful tips for smarter stock strategies,
along with three stocks to help you retire rich. Get your free
copy today while it lasts!
Meanwhile, be sure to check out our premium investment report
on Bank of America to learn what our senior bank analyst's
thoughts are on B of A and the entire banking sector.
Fool contributor Dan Caplinger isn't looking forward to the
marketing onslaught against his 7-year-old daughter. He doesn't
own shares of the companies mentioned in this article. You can
follow him on Twitter @DanCaplinger. The Motley Fool owns shares
of Facebook, Amazon.com, and Bank of America. Motley Fool
newsletter services have recommended buying shares of eBay,
Facebook, Wells Fargo, and Amazon.com. Try any of our Foolish
newsletter services free for 30 days. We Fools may not all hold
the same opinions, but we all believe that considering a diverse
range of insights makes us better investors. The Fool's
disclosure policy is good for all ages.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a
disclosure policy
.