Trusting Consumers And Risk-Averse Merchants Help Explain Online Sales Growth

VeriSign reports that, despite a rise in threats, online commerce continues to thrive.
VeriSign Inc. on Monday reported that online commerce rose 88% during the holidays last year, with almost $12 billion in sales from Nov. 1 through Dec. 31, compared with $6.4 billion during the same period a year earlier.

In its Internet Security Intelligence Briefing, VeriSign attributes this growth to several factors, including increased customer confidence in shopping online, greater broadband penetration, wider availability of cheaper goods online, decreasing tolerance of crowded malls, and a rising number of rural consumers seeking goods unavailable locally.

Security threats appear to be on the rise as well. VeriSign, which sells security services, says that in the fourth quarter it observed "a record number of new exploits, worms, and viruses, often appearing on public networks within days or hours of the release of proof-of-concept exploit code."

While the company doesn't offer specific statistics to support its claim, other security companies and organizations have said as much. The Anti-Phishing Working Group, an industry association focused on eliminating identity theft and fraud arising from phishing and E-mail spoofing, reported last week that the number of unique phishing sites jumped 47% in one month, from 1,740 site in December to 2,560 sites in January.

Fraser Smith, product manager in payment services at VeriSign, contends that rising online commerce despite the concurrent increase in security threats means consumers are prepared to patronize merchants they trust. "More and more people are aware of fraud and how to protect themselves against it," he says.

The report finds a decrease in the number of transactions automatically accepted by fraud-screening technology, from 90% in 2003 to 88% in 2004. Yet, in 2004 merchants accepted 84% of transactions flagged for manual fraud review, a significant increase from 2003 when only 70% of manually reviewed transactions passed muster as legitimate sales.

Smith interprets this to mean that risk-averse merchants are taking more care to review the rising number of transactions for possible fraud. "Merchants as a whole have become more aware of fraud and identity theft today," he explains, suggesting that online businesses are increasingly relying on human oversight to evaluate suspicions raised by automated fraud-detection systems.

One curious finding is that the biggest shopping day of the year is not the same online and off. For traditional retailers, the biggest shopping day of the year remains the Friday after Thanksgiving, a holiday for many. For online shops, however, the year's biggest shopping day is a work day, the Monday after Thanksgiving. "Our statistics show that for Internet merchants, the Monday after Thanksgiving is the biggest shopping day, and it's been that for the past three years," Smith says.

The report doesn't indicate whether shopping that day occurs during office hours or off hours. He muses, "I think a lot of work environments would like to know that."

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