Digital River 2002 Annual Report Download - page 12

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In addition to fulfillment through electronic delivery, we offer clients physical distribution services. We have contracted with third-party
fulfillment agents globally that maintain inventories of physical products, generally on consignment from our clients that select this option, for
shipment to end-users. We also communicate orders through integration into many client-specific third-party fulfillment agencies for physical
fulfillment. In both cases, we provide notifications to end-users of shipments, shipment tracking information, inventory updates and order status.
We believe physical fulfillment services are important to our ability to provide a complete electronic commerce outsourcing solution.
Transaction Processing And Fraud Screening. We process payment transactions generated by end-users ordering products through our CNS.
We support payments made via credit card, but also an expanding set of non-credit card payment methods such as wire transfers, purchase
orders, money orders, direct debit and checks which are being used with more frequency internationally. The fraud screening component of the
CNS uses both rules-based and heuristic scoring methods to make a determination regarding the validity of the order, end-user and payment
information. As the end-user is entering the order, up to 580 data reviews are processed in real-time. Depending on the contractual agreement,
we can provide the use of our proprietary fraud screening to clients for their own processing and screening or completely shift the fraud
screening and risk responsibility to us. When a transaction is completed and approved, and the ordered product has been delivered, we process
the order for payment.
Customer Service. We offer both telephone and email customer support for products sold through our CNS on behalf of our clients. We provide
end-user assistance on order and delivery questions on a 24x7 basis, in multiple languages. We have invested, and continue to invest in,
technology and infrastructure to provide fast, efficient responses to customer inquiries, and to provide self-help options to customers online. We
also provide archiving services to the end-users that purchase digital products.
Merchandising And Analytics-Based E-Marketing Services. We offer a broad range of merchandising and analytics-based e-marketing services
to our clients helping them drive additional store traffic and revenues. Clients are provided with detailed analyses of their Web stores covering
sales, product, transaction, customer behavior and campaign dimensions. The CNS captures all Web page visits, campaign tracking information,
product banner and pricing information and other data that can be used by our clients to perform their own web-based reporting and analyses.
We also offer advanced merchandising services to assist clients in increasing response rates for their marketing efforts. These services include
targeted and segmented email campaigns for special promotions, upgrade notification programs and the presentation of complementary products
and bundled products or other programs designed to increase average order size based on a targeted end-user profile. In addition, through
analytic services, we analyze transaction and customer history to test and refine new merchandising techniques and promotional approaches.
Clients
As a provider of comprehensive electronic commerce outsourcing solutions, we are able to serve two distinctive client groups: (1) software
publishers and online software retailers and (2) manufacturers, distributors and physical good retailers with one common infrastructure.
Through our software and digital commerce services, we distribute software products through a network of software publishers and online
retailers. Online retailer clients include traditional store-based and direct mail retailers with a Web presence, online retailers dedicated to online
commerce, as well as high traffic or niche Web site operators desiring to add electronic commerce functionality. In a typical online retailer
contract, we are responsible for: (i) a payment to the online retailer based on a percentage of net sales of software products that we distribute
through the online retailer’ s Web site; (ii) the processing of payments made by end-users; (iii) the delivery of the software products to end-users;
(iv) fraud screening and the payment of applicable credit card transaction fees; (v) the collection, payment and returns filing of applicable sales
taxes; and (vi) the distribution of a report to the online retailer detailing related sales activity that we have processed. While most software
publishers use our entire suite of electronic commerce services, including Web hosting services, certain software publishers use only our
“channel services” whereby the software publishers are provided with distribution and digital fulfillment capability through our extensive
network of online retailers. In a typical software publisher contract, we are responsible for: (i) the maintenance of master copies of software
products in a secure format for distribution to end-users; (ii) a payment to the software publisher for the cost of software products that we
distribute through either a retailer’ s Web site or through the publisher’ s host Web site; (iii) fraud screening and the processing of payments made
by end-users; (iv) the delivery of software products to end-users; (v) the payment of applicable credit card transaction fees; (vi) the collection,
payment and returns filing of applicable sales taxes; and (vii) the distribution of a report to the software publisher detailing related sales activity
that we have processed. As of March 1, 2003, we had approximately 14,000 contracts with software publishers and online retailers.