Shopping online can net you a bargain, with top-selling items such as clothing, electronics, books and sporting goods costing far less than if you’d bought them in a local bricks and mortar store. So it’s no wonder that online shopping is on the increase, but despite its popularity there are still some hazards that savvy shoppers can avoid.

Our guide to online shopping will help the novice internet buyer, and probably give experienced online shopaholics a few extra tips as well.

Where to shop online?

There are different sorts of online stores, and each one has its advantages and disadvantages.

Online auctions

Online auctions are popular places for trading goods. Almost everything you could possibly think of is available, whether you want to sell or buy goods. Register as a user and away you go. But be aware, there are risks alongside the benefits:

• Prices can be much cheaper.
• Can obtain hard-to-get items.
• Can often get “past history” of users to evaluate honesty and trading.
• Vendors may not be willing to ship overseas.
• Vendors are registered with the auction house but aren’t official businesses, so the risk is higher.

Classifieds

Online classified are similar to traditional newspaper classifieds.

• Can locate hard to get or used items.
• May get good discounts.
• Traders’ history is hard to evaluate, so risks are higher.

Comparison sites

These online shopping centres gather multiple shopping destinations together in one location.

• There are many stores to choose from.
• Navigating between shops is simplified.
• You may be moved between sites without being told.
• Advertising may determine what sites are available as destinations.

Manufacturers and retailers

Often there are online outlets for small or large stores and manufacturers.

• You can buy direct from the retailer/producer.
• There’s often a lot of information available.
• You may not get the best deal.

Can you trust the retailer?

Safe online shopping is all about doing your homework. If you’ve never shopped online, start with recommendations from family and friends, and always try to find out as much as possible about the company before you hand over your credit card details.

If something goes wrong with your transaction, the more information you have, the better off you’ll be. Look for the business’s street address, phone number and ABN (Australian Business Number) if it’s a local site. This tells you it’s a bona fide business.

If you’re unsure about a company’s track record, do some research online:

• Search for complaints by typing the company’s name, plus “complaint” or “problem” into Google’s forums.
• Check the ASIC (Australian Securities & Investments Commission) website to confirm whether or not the company exists and if its directors and owners have been banned from running a company.
• Or, if the website is a registered business, it should be listed with the department of consumer affairs or fair trading in your state or territory.

We also recommend you use our Checklist for staying safe when buying online.

What about buying abroad?

Overseas goods are often cheaper, even taking exchange rates and shipping into account. Australian retailers argue that there’s good reason for this, and good reasons to still shop locally, including local warranties and after-sale support. They’ve long argued that Nike shoes, for example, can cost $100 in the US and more than twice that in Australia because of shipping costs, the exchange rate, the smaller Aussie market, higher store rents, and higher wages.

But do those factors justify a mark-up of 100% or more for clothes, shoes or other manufactured goods? It’s hard to say which part of the retail sector is responsible for inflated prices, but what is clear is that things can still cost a lot more here than in places like the US and UK.

Overcoming the distance barrier

Before the online shopping boom it was hard – and sometimes impossible – to shop in the US from the other side of the planet, unless you had a US credit card and shipping address. Other shopping destinations posed similar challenges.

Australians used third party transaction and delivery services such as PayPal’s HopShopGo or Australian-based Price USA to get around this, but their services are becoming less necessary. Meanwhile, many UK online retailers ship directly to Australia, as do a growing number of overseas stores.

But be warned: overseas retailers are well aware of exchange-rate advantages and aren’t above a little price gouging of their own. They may charge more on goods if they’re priced in Australian dollars. Check the overseas website prices and do your own exchange rate conversion before buying, to ensure you don’t get charged more just because you’re in Australia.

For more information on buying from overseas websites, read our guide to buying cheaper clothing online.

Beware different rules

Consumer law changes from country to country, and if you’re shopping using a website not based in Australia there are other considerations in addition to the usual precautions.

• If in doubt about your rights, be doubly careful when checking your ‘contract of sale’ – the site’s general policies and terms and conditions – and what consumer protection measures are available.
• It can be difficult to get assistance when things go wrong with an international transaction. If you have trouble resolving a complaint, contact the relevant consumer affairs organisation in the country where the company’s located.
• You can use websites such as the National Information Fraud Centre in the US and Companies House in the UK to check the credibility of international businesses.

Payment options

We usually recommend paying by credit card when you’re shopping online. It’s a widely accepted payment method and you shouldn’t be liable for unauthorised or fraudulent transactions made with a credit card. The rising concern about online fraud, however, suggests it’s not an entirely safe option. So what are the other options?

Third party payment options

If you’re dead set against keying in your credit card details every time you shop online, a third-party payment service may suit you. These facilities act as an intermediary between you and the merchant so you don’t have to disclose your details to sellers. The drawbacks, however, may include registration fees, transaction charges and a limited number of participating websites.

PayPal is an online payment service owned by eBay that allows you to send money to anyone (as long as they have an email address) via the internet. You register with PayPal to set up an account that’s linked to your credit card or nominated bank account. To pay for items, you log in to your PayPal account and enter the email address of the recipient and the amount. PayPal then sends an email notification to the recipient, who logs into their PayPal account and checks that the money’s arrived.

PayPal supports Australian dollar payments (there are more than one million Australian accounts), as well as US dollars, Canadian dollars, euros, pounds sterling and yen. It’s one of the safest ways to pay for goods, particularly if you use online auction services.

WARNING: PayPal is a popular target for online email scams in which fraudsters try to steal your account details in order to access your money. Read all emails claiming to be from PayPal carefully, and always type in the website address when accessing your account.

Credit card security blanket

If you prefer to use your credit card, consider registering for the additional authorisation services offered by some credit card providers.

The services from MasterCard (SecureCode) and Visa (Verified by Visa) require you to add a password or secure PIN to your credit card. In addition to entering your credit card number as usual, you’ll be prompted for your SecureCode PIN or Verified by Visa password when you’re shopping at participating stores. These verify that you’re the authorised holder of the credit card. If you don’t enter the password or PIN, your transaction won’t be finalised.

To find participating stores, look for logos on websites or contact your card issuer.

Always at risk

No matter which payment option you choose to use, there’s always some element of risk – online or offline. It’s good practice to:

• always check your account statements carefully. If a transaction doesn’t look familiar, raise the issue with your provider
• only shop at websites that use a secure payment facility indicated by a locked padlock in the right-hand corner and https:// in the address line
• read emails from your bank, credit union or a third-party payment service carefully. These organisations don’t ask for account details via email
• never tell anyone your passwords or PINs.

Extra costs of buying abroad

If you’re buying from an overseas website, don’t forget to factor in the extra charges associated with foreign financial transactions, or you might be shocked when you see the final cost on your statement.

Exchange rate

The first thing to calculate is the exchange rate. Some sites may list the US or UK price, probably the most common foreign currencies you’ll use, and the price in Australian dollars. You can also use an online currency converter such as www.xe.com to give you a rough idea of the cost.

Your bank or financial institution will convert the amount into Australian dollars using the exchange rate on the day you made the transaction. Using a formula more complicated than The Da Vinci Code, each bank sets its own rate, although the end result is usually quite similar.

Conversion costs

You’ll also pay a foreign currency conversion fee, which is a percentage of the sale price. For example, a CD from a UK website that costs £16 will be converted to about $AUD40 and then a conversion fee of, say, 2.5% will add another $1. So the £16 CD actually costs you nearly $41.

It may seem like a small figure, but it can quickly add up if you’re making large or multiple transactions. You should also consider overseas delivery costs. Some sites may give postage discounts or even wipe the costs all together, but you may need to spend hundreds of dollars to qualify.

If you regularly shop online, it’s worth checking with your bank or financial institution about the conversion rate — it may be more relevant than the interest rate, especially if you pay the balance in full each month.

Do I have other options?

Third-party payment services, like PayPal, allow you to send money to anybody with an email address. Other online payment services include Paymate which offers several ways to transfer money to overseas accounts online.

You can also transfer money online using a credit card with Western Union, but we don’t recommend you use it to transfer money to people you don’t know. It’s also pretty expensive — for example, a $25 payment to the UK will incur an additional charge of $20 in transfer fees. And watch the details! Western Union sets the exchange rate and any difference between the rate given to customers and the rate received by Western Union is pocketed by the company.

Checking out

When you’re confident you’ve found a trustworthy site and you’re ready to buy, follow these steps.

• Check the description of the product, price — including delivery costs, currency and taxes — and warranty details. Good shopping sites should give you the opportunity to confirm or reject your order before you pay for it.
• Choose a payment method — credit card, cheque, money order, PayPal etc. In most cases it’s safest to pay by credit card because they won’t hold you liable for undelivered goods or unauthorised transactions.
• Confirm the site has a secure checkout— Secure Sockets Layer (SSL) software is the most common technology used to secure shopping sites. It encrypts or scrambles your personal information as it travels over the web. When you move to a secure web page, you might see a pop-up box that says “click OK if you’re happy to proceed”. If you don’t get the pop-up, you can tell if a website has secure shopping facilities by looking for a locked padlock on the browser’s status bar.
• Use encryption. Check to see that the website uses at least 128-bit encryption. You’ll often find this information on the site’s FAQs or ‘About us’ page. Other less common security protocols include Transport Layer Security (TLS) and Secure Electronic Transaction (SET).
• Check if and where your details will be stored later — some online businesses store them on a secure server or destroy them once the transaction has been processed.

Delivery problems

Delivery problems are one of the most common complaints reported by online shoppers, with goods taking weeks to turn up, arriving damaged or not getting to you at all.

As a precaution, try to make sure your item is in stock and check the expected delivery time before completing your transaction. Most good retailers will notify you via email when your order’s been received, as well as when the item is shipped or if there are problems or hold-ups.

• Late delivery. If your item doesn’t arrive on time, contact the retailer to check the status of your order and, if you’re planning to cancel it, find out whether they’ve already charged you for the purchase – some companies process your payment even before the item’s been shipped. You should be entitled to a refund.
• No delivery. If your product never arrives, put your complaint in writing and try contacting the retailer more directly, by phone or in person if possible. Have the details of your order handy and remember that you’re entitled to a refund. If problems continue, file a complaint with the department of fair trading or consumer protection in your state or territory and inform your credit card provider.

Read the fine print

While standard consumer rights apply to most items bought online (except through auctions), it can be difficult to achieve redress in the virtual world. Taking precautions early on can save you hassle down the track.

Before buying, check all the terms and conditions including:

• delivery costs
• if your item’s in stock
• whether you’re entitled to refunds or repairs
• if the company accepts returns and cancellations – our guide to online returns has more on this.

Find out how a company handles complaints or disputes. Reputable online retailers often have processes to solve problems quickly. If you’re not confident there’s a clear procedure to follow, look for another retailer.

Maintaining your privacy

It pays to check the privacy policy of all websites you visit, even those that aren’t shopping sites. Many websites collect information about you and your surfing habits using cookies – small files that store information such as your IP address (the number that’s used to identify your computer on the internet) and the login name and password you use for that site.

If you have to provide personal details in order to access a site or buy anything, think carefully about the information you give away. In most cases, you don’t have to fill in every field – mandatory ones are usually indicated with an asterisk.

Keeping track

For the same reasons you keep receipts and invoices in the real world, it’s important to keep track of online transactions. A good website should send you an email confirmation of your transaction, as well as provide the opportunity to print your order.

For future reference we recommend keeping a hard copy record of all correspondence with retailers, as well as a copy of the returns policy that’s current at the time of ordering.

For further help

• See our online shopping checklist to help avoid hassles when buying online.
• Australian Competition and Consumer Commission’s shopping online guide.
• www.econsumer.gov for international consumer advice and cross-border complaints.