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E-Commerce Explained
03/16/2008
THE VAST MAJORITY OF BUSINESSES WHO INVEST MONEY INTO SELLING ONLINE GIVE UP BEFORE RECEIVING THEIR FIRST ORDER.
The process for selling online can seem very complicated, which tends to discourage most merchants and businesses from selling over the Internet. This article is an attempt to provide a resource you can refer to when dealing with your webmaster and other professionals in the process.
Product Directory (what’s on the shelf)
It’s just your products page, the things you’re trying to sell, with names, pictures and pricing, and a link or button to “BUY NOW”. It doesn’t matter how you build it. If you have just one or two products or services you’re trying to sell, then just creating it manually is probably best. On the other hand, if you have a number of products, especially if there are frequent changes, then you should use a service that lets you enter your products online.
A Product Directory service will include a login that you use to get into your web site to change the products you are selling. You can add or remove products, change their names and descriptions and update their prices. When you save your changes, your web site updates immediately.
Shopping Cart (a buyer’s tool for purchasing)
The “BUY NOW” links or buttons found in your Product Directory (above) send your customers to the Shopping Cart. The Shopping Cart is another service that creates the orders for your products. It collects all the items a customer wants to buy, adjusts the quantities, and then it takes all their shipping and billing information. It also takes their payment information, but it doesn’t process payments. That has to be done by an outside party, called a Merchant Gateway.
Merchant Gateway (an electronic credit card terminal)
This is NOT the credit card processor. A Merchant Gateway is the service that feeds your customer’s payment information to the credit card processors (aka Merchant Services). What most people don’t realize, and which your Merchant Services providers sometimes fail to explain, is that this a Gateway is independent of Merchant Services. You can mix and match gateways and merchant accounts in almost any combination to ensure you get the best service.
You shouldn’t select a Merchant Gateway based on what your Merchant Services sales rep says. In fact, it’s just the reverse:
1) What gateways will work smoothly with my Shopping Cart?
2) What merchant service will work smoothly with my gateway?
Merchant Service
Merchant Services, also known as credit card processors, is completely different on the Internet than for doing business in person. If you already have a Merchant Service for your business where you swipe cards, that’s fine, but it does not apply to selling from your web site. Whether you choose the same company to provide online Merchant Service or go with another company, you most likely still have to have a separate service and contract. In fact, an Internet merchant service costs a little more. The upshot is that it’s possible to use the Internet service to do both.
If you make your Merchant Services work with your web site, you’ll be better off in the long run and less likely to get stopped on the road to selling online. The field is wide open, and you don’t have to believe everything you hear.
1) Get recommendations from your webmaster.
2) Consult a broker and compare services.
3) Choose a service that will work with your Merchant Gateway.
4) NEVER sign up for a long term contract.
5) Avoid proprietary services, like “First Data”.
What about PayPal?
If you’re on a budget, PayPal can provide your Shopping Cart, Merchant Gateway, and Merchant Service all in one. It’s very cheap to setup, and the fees are quite reasonable. It’s a great way to get started. Some buyers actually prefer PayPal.
The downside is that PayPal will discourage some of your customers. PayPal is difficult to use for buyers who don’t already use it. Some don’t consider it a legitimate service. So if you feel you have a viable product, then you should upgrade to a regular Merchant Service ASAP. You can retain the PayPal service afterwards to be sure to serve those who want it.
The Bottom Line
What does it cost? Selling online can easily double the size of your Internet budget. A full installation of a Product Directory, Shopping Cart, Merchant Gateway and Merchant Service will typically add $1,500 to you web site’s construction, most of which is in getting your products set up. Monthly fees, depending on your volume will cost in the range of $100 + percentage fees from your Merchant Service. A PayPal installation will cost about half of that.
There are services on the Internet that claim to provide all these services combined for a minimal cost. Just be aware that you usually get what you pay for there. Typically these companies have good sales but poor support if something goes wrong. Many have been abused by SPAM’ers who see an easy target, so they are on the e-mail blacklist. Their whole service resides on their web sites, so it’s more difficult to control the appearance of your products or your customer experience.
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