Buying Is Believing

Forget the adage: “You can’t get something for nothing.” Today’s teens are showing not only can you get nothing for something, but when given the opportunity, they are willing to spend plenty to acquire what is seemingly an Internet version of the Emperor’s new clothes.

That is in no way intended as a criticism of the wildly popular Habbo site or its creator Sulake Corp. of Helsinki, Finland. Actually Habbo has set a new standard for online communities, showing that not only is a virtual world a great place for teens to visit and play, it’s also an ideal setting for retail to flourish.

The original Habbo.Fi launched in 2000 in Finland. The following year it expanded to the U.K. with Habbo.Co.UK, and in 2004 the domestic site opened at Habbo.com. Last month, there were 80 million registered Habbos. An average of 75,000 new members join every day, roughly 2.2 million new users a month.

The concept is universal: Visitors create a fully customized Habbo character that becomes their online alter ego for visiting Habbo hangouts, playing online games and connecting with friends. All of this activity is free of charge.

To further express their Habbo selves, they can obtain a Habbo hotel room, also free of charge. However, when they want to furnish that room in line with their individual Habbo personality, there is a wide assortment of virtual products available for purchase.

Although 90% of Habbos use only the free services available at the online community, the 10% who purchase products spend an average of $14 per month. Parent company Sulake has nearly doubled its annual revenues each year since inception and grew revenues from 13.7 million euros in 2004 to 38.5 million euros in 2006.

For the most part, retail management at Habbo is minimal and inventory management is a breeze. Out-of-stocks are a non-existent issue, given that nothing exists beyond the imaginary Habbo world. However, there are unique promotional opportunities to purchase “rares,” those limited-edition furniture or room accessories that are available for short periods of time. (Yet another stroke of retailing genius translated to the virtual world.)

The one area where reality surfaces is checkout: Even the emperor had to pay for his new clothes with real money. Habbo provides multiple-payment methods including credit cards, prepaid cards, online banking, direct ISP billing, ClickandBuy accounts, and most recently, Bill2Phone options.

Bill2Phone, introduced earlier this year by San Antonio-based Billing Services Group (BSG) Clearing Solutions, is a real-time payment solution that enables online merchants and e-wallet providers such as ClickandBuy the ability to process electronic payments to the consumer’s local telephone bill. Payment through an existing account, such as the telephone bill, expands the demographic reach of online merchants to include consumers who don’t have credit cards or who prefer not to use credit cards.

A spokesperson for Sulake told Chain Store Age that Habbo “has seen a small lift in usage” since adding the Bill2Phone option. However, he also noted that Habbos are “very loyal to the payment methods they have used” in the past.

BSG’s Bill2Phone payment mechanism includes services such as e-mailed purchase confirmations, e-mailed statements of accounts, recurring-payment options and risk-management controls. The company’s “URU” authentication service verifies the identity of a consumer by using the last four digits of the individual’s Social Security number.

“The requirement for the last four digits is certainly a deterrent to potential abusers of the system, as well as helpful for parental consent,” noted the Habbo spokesperson. “We have payment limits on each payment method and only allow users to bill a certain amount per month.”

The primary demographic at Habbo is 13-16 years old and is fairly evenly divided by gender, with 49% male and 51% female. The typical user spends 32 minutes a day on the site, and visits seven days a week. Habbo communities exist in 30 countries on five continents. The majority of traffic is from European countries, representing 52% of visitors, and the Americas, which account for 43%.