The impact of identity theft and a fear of online shopping caused retailers to miss out on $21 billion in online sales in 2008, according to new study released by Javelin Strategy & Research. The study found that 12 percent of fraud victims report they no longer shop online, while 25 percent said that the frequency of their online purchases has decreased, and 19 percent say they now spend less money when shopping online.

Security is not the only issue online retailers face. The survey also uncovered that less than half of online shoppers (45 percent) are satisfied with their purchases when it comes to on-time arrivals and quality expectations. These customer service issues and negative perceptions are eroding consumer confidence with online shopping. Specifically, 28 percent of shoppers found their purchases did not meet their quality expectations and 37 percent stated their items arrived later than expected. The dissatisfaction was highest among 18-34 year olds.

How Retailers Can Address Consumer Security Concerns

When it comes to increasing consumer willingness to shop online, Javelin found that merchants can motivate the overwhelming majority of consumers to make additional purchases by assuring that personal information is processed safely, offering stronger security measures and by guaranteeing price, quality expectations and reimbursement.

Specifically, the top five motivating factors that would convince consumers to shop more frequently are:

1. Assurance that information is being processed securely (83 percent)

2. Offering Zero liability against identity theft (81 percent)

3. Stronger security at the store website (80 percent)

4. A guarantee that the purchase will match quality expectations (80 percent)

5. A guarantee for the best price online (79 percent)

"Online retailers are leaving business on the table by not communicating their security and customer service policies clearly to consumers which is something that no business can afford to do in today’s economy," said James Van Dyke, president and founder of Javelin Strategy & Research. "To recapture these missed revenue opportunities, merchants need to reassure consumers that their information is being processed securely and that they have recourse should they become the victim of identity theft. These survey results show that simply by making security and privacy policies more visible on their sites, merchants can begin to win back the trust of wary online shoppers."

Other notable survey findings include:

- Negative Perception of Merchant Online Privacy Practices – Of consumers surveyed, 39 percent believe that online stores will sell their information and 50 percent believe that they will receive junk mail and spam if they shop online. To address these concerns, retailers need to clearly communicate their data privacy policies.

- Smaller Merchants Suffer Most – 40 percent of online identity theft victims now only purchase from well known sites such as Amazon.com. By highlighting security and customer service commitments, smaller retailers can counteract this trend.