When You Absolutely, Positively Don't Want It Stolen

By David Lincoln Ross Sunday, Sept. 15, 2002
    • When the venerable outdoor-clothing maker Woolrich began selling online three years ago, it moved more of its signature red-and-black buffalo-plaid woolen hunting gear than ever before. Today its website is its fastest-growing sales channel, gaining rapidly on sales through catalogs and stores. But the firm, based in Woolrich, Pa., has stopped taking orders from abroad. Overseas online orders proved "nonprofitable," says Bruce Heggenstaller, vice president of operations and distribution. "We experienced credit-card fraud, mail fraud and hidden shipping and duty fees."

    Merchants and credit-card companies report some progress in combating credit-card fraud in the U.S., but the problem appears to be growing across a wide swath of the developing world, where the spread of Internet access combines with petty official corruption to create a breeding ground for digital crime. Lately, credit-card fraud has been joined with often ingenious forms of postal and shipping fraud, moving more and more U.S. companies to refuse to ship goods to such countries as Indonesia, Russia and other former Soviet republics.

    Large merchants as well as individuals who sell via online auction giant eBay often refuse to ship goods to Indonesia, Romania and Ukraine. Buy.com has completely overhauled its overseas-shipping practices. Citing fraud, the discount e-tailer last year closed its export operations run from offices in Britain, Canada and Australia and instead built a more secure export system run through its shipping partner in Florida.

    According to an annual e-tailer survey to be released in October by Gartner, a research and consulting firm based in Stamford, Conn., the percentage of U.S. e-tailers surveyed that have stopped accepting foreign transactions has more than doubled, to 12%, since the last survey was published, in September 2001. "For some merchants, fraud for international transactions was 2 1/2 times higher than for domestic," says Avivah Litan, a Gartner vice president.

    The U.S. Postal Inspection Service estimates that combined domestic and international postal fraud now costs as much as $1 billion a year, up from $500 million in 1993. "International fraud is certainly an area where we are putting a lot more effort," says Tom Brady, the assistant postal inspector in charge of the Southwest division in Fort Worth, Texas. In May, Brady helped launch the Business Mailing Industry Task Force, an alliance between merchants and government agencies.

    Julie Fergerson, a vice president at ClearCommerce, a supplier of sophisticated risk-management software for retailers, acknowledges the growth in international e-commerce fraud but urges online merchants to fight rather than quit: "U.S. e-tailers are leaving a lot of revenue on the table." The firm's proprietary GeoLocator and Risk-Scoring software screens incoming orders to separate the frauds from the real prospects.

    Other firms are also finding business opportunities in helping U.S. e-tailers sell safely abroad. United Parcel Service, in conjunction with its wholly owned retail mail subsidiary, Mail Boxes Etc., has forged a partnership with DoUWantIt.com , a global shipping-services firm based in Hallandale, Fla. DoUWantIt.com will soon be renamed Comerxia.) Under the deal, Mail Boxes Etc. acquired a minority interest in DoUWantIt.com , which in turn makes its proprietary risk-management and transaction-processing software available to UPS and some 1,000 Mail Boxes Etc. locations overseas. This partnership creates a secure system of guaranteed pricing in local currency and guaranteed secure delivery and pickup, plus merchandise returns.

    Here's how it works: Let's say that an online shopper in Bogota, Colombia, clicks on Amazon.com, an e-tailer that works closely with UPS and DoUWantIt.com . When the shopper selects merchandise and goes to pay, the software causes a window to pop up on the computer screen that details a guaranteed price, including fees for shipping and handling, insurance, duties and taxes — all quoted in Colombian pesos. The shopper pays by credit card. Once the charge is cleared and approved by DoUWantIt.com , Amazon.com sends the order via UPS to the Mail Boxes Etc. location in Bogota that is nearest the customer. Finally, via e-mail, DoUWantIt.com notifies the customer that the package is ready to be picked up, and instructs him to bring along two forms of photo identification and the credit card used to purchase the order.

    The UPS- DoUWantIt.com alliance is operating in nine countries in Europe and South America, with plans to expand to four more by the end of the year. Under a separate deal with Buy.com , DoUWantIt.com reaches about 30 countries. Indonesia is not among them.