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 (NYSE: BAC ) lets teens 16 to 18 open a checking account with parental approval, while Wells Fargo (NYSE: 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!
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