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Implementing E-Commerce for Your Dot-Com
by Brian Chmielewski
Web companies are coming to grips with the idea that the new economy functions a lot
like the old one, where only the strongest are likely to survive in a crowded
marketplace. It's no longer sustainable to have 200 companies with the idea of each
taking in only 1 or 2 percent of the profits in their industries. This makes it
glaringly clear that a lot of companies are going to fail. So, how do you avoid being
one of those companies? There are as many theoretical answers to that question as there
are unique challenges to small businesses.
E-business today is more than putting a dot-com behind your name and having a Web site.
Site owners have to look at the culture of their business, the structure of their
business and the very way they interact with their marketplace. They also need to
enable a simple solution for accepting a myriad of payment demands.
Merchants realize that to become e-commerce enabled means to increase the level of sales
from their Web site and facilitate market growth. So, what does it take to become
e-commerce enabled, how much does it cost to do so and is it worth your time and money?
The answers to these questions are crucial in making your Web site more effective for
What are the components of e-commerce?
A Web merchant faces many challenges when setting up his or her first online store. To
join the electronic commerce generation, you need five crucial items:
1) WEB SITE
Obviously, you must have an online presence to connect your business with prospects and
customers. While there are several services that offer "free" web sites, this is not the
best option for forming your Web-based business. Free site services often require you to
display banner advertisements on their behalf and are limited on the amount of disk
space and custom programming that you can install to make your site more interactive.
It is better to choose an original domain name that reflects your business and host it
on your own. Registering a domain name costs, on average, $70 for two years of
licensing. Virtually hosting your site with a legitimate, full-service hosting company
starts at $29.95 per month for basic plans and can expand all the way up to $1000 per
month for your own dedicated server. Most businesses can start with a basic plan and
reevaluate their needs as the business grows. Smaller hosting providers like
USA Domains tend to go the extra
yard in meeting the hosting needs of new and small businesses.
Let's not forget the layout and graphic design of your site. This is potentially the
most critical component of your business, since image, reliability, ease-of-use and
trust are major factors that visitors discern from the look of your business Web site.
If your site does not reflect the image of a professional, legitimate business, you
WILL NOT receive orders no matter how great your products or services. If you are
serious about doing e-business, do your research on what site navigation and layout
is successful, learn Internet programming languages like HTML, JAVA and PERL, or hire
a professional Web developer or designer to build your site for you.
2) MERCHANT ACCOUNT
Just as important as your Web site is your ability to quickly accept payment from
customers. If you're planning to only accept cash or checks, you're bound to lose
money. Since the average cash or check sale amounts to $9.00 while average credit
card sales are $40.00, successful companies know that accepting credit cards
increases revenues. There may be a few exceptions where credit card payments are
inappropriate, but a majority of customers prefer to pay by credit card when making
Jupiter Communications, a respected New York research firm, reports that 88% of online
transaction revenue comes as a result of credit card transactions. Their studies
indicate that accepting credit cards will:
Establishing a Merchant Account at Your Web Site
- Capitalize on customer impulse buying and customer loyalty
- Improve your business' competitive edge and your Web site's credibility
- Make money while you sleep
- Make it convenient for your customers to buy
- Level the playing field - compete with "the big guys"
- Expand your market - accept orders worldwide
- Offer customers peace of mind with secure payment options
Before establishing a merchant account, the smart businessperson will determine company
needs, examine resources, ensure security and thoroughly research all options. Begin by
considering the nature of the products being sold. If they are large and expensive, seek
a merchant account that offers a higher flat-rate transaction fee and minimizes the
discount rate. Even a hefty $1.00 transaction fee will be far lower than a 2.5
percent deduction from the charge. If you rely on small, high-volume sales, even a
30-cent transaction fee can erase your profits.
That's right, merchant account providers have various rates and fees associated with
their services. All merchant account providers have a discount rate, a transaction
fee and a monthly statement or management fee. Some providers also charge additional
fees, such as a batch header fee, a monthly minimum fee and an application or set-up
fee. So, what should you look for?
Most merchant accounts charge somewhere between 20 cents and 50 cents per transaction
with a 1.5 to 3.0 percent discount rate. Add to this a few hundred dollars for set-up
costs, another $50 to $80 for leasing a terminal or transaction software, and $20 to
$50 monthly sales minimum. Be sure to cover any additional expenses like charge back
fees and programming charges when talking with your merchant account representative.
Merchant account fees and charges are not always fixed rates, so if you'd like to stick
with your current bank, approach them with competitive lower fees elsewhere and they may
lower their fees to keep your business.
Examine your resources
Different merchant account providers also require distinct purchasing procedures at your
site. If you plan to process your orders manually, will a secure Web form be good enough
or will your require extensive modifications to your site, including programming code?
If you don't program or haven't hired a programmer, you may find some card-processing
systems too complex to use. Luckily, a number of providers are now offering simplified,
comprehensive turnkey systems which include a "shopping-cart" program, order
verification and processing, and automated shipping of orders straight to your email
Overcoming merchant hurdles
Merchant providers may have other obstacles besides their fees. Some services will not
accept "high-risk" accounts, a term that usually encompasses adult sites, online
casinos, and sites operated by non-domestic companies. There are plenty of exceptions,
but you should expect to pay higher fees. As a startup firm or individual with a bad
credit history, be prepared to have your financial background probed and know that not
every business owner will qualify for the lowest rates.
With the new evolution of electronic commerce, obtaining a merchant account is becoming
easier than ever for home based and Internet-based businesses. The costs and fees to
accept credit cards are declining and merchant providers are accepting more accounts.
So, if you're in the market for a merchant account, you can probably have one by the
end of the week.
3) TRANSACTION SOFTWARE
The next step is to have an interface for the actual processing of orders. The most
common way for a smaller merchant to do this is offline. That is, you download customer
orders and then manually process them just as in a brick-and-mortar store. Choices
include an electronic terminal or transaction software.
Since it is essential to protect yourself and the authorized cardholder from any fraud,
any software you use should request detailed information such as address, phone number
and of course credit card number. Once entered, your customers' information is sent to
an authorization network, which confirms the validity of the card and billing request
with the address to which the card is registered (called Address Verification Service
or AVS) and returns your request as authorized or declined. It takes only a matter of
seconds for the authorization network to process your request.
Charge backs for credit card fraud or mischievous behavior can affect your rating as a
merchant (and can lead to additional service costs), so it is always important to
verify electronic orders via telephone or email. Beyond being just good customer
service, calling a cardholder may help to signal that a credit card has been stolen,
avoiding any charge back to your account. Expect your merchant account provider to
provide this software to you for a fee at the time you are setting up your merchant
4) SECURE CERTIFICATE / SECURE CONNECTION
One of the most overlooked components of e-commerce is the secure certificate or secure
connection. If you have ever ordered online you may notice that sensitive information
is usually always delivered at a Web address that begins with https://, rather than
the standard http://. The 's' indicates a secure server is being used. This is often
reflected in your Web browser security image (a lock) to move from the unlocked to
the locked position. If you are virtually hosted, you may have the option of sharing
a secure server and a secure certificate. While sharing the secure server helps in
reducing your costs, sharing a secure certificate can confuse your customers and
cause you to lose sales, since the certificate holder name appears on the digital
certificate. If the certificate holder's name is not your company name, the customer
might think that an error has occurred in the transaction and they may revoke their
secure information from being processed.
Verisign is the premier supplier of
What is a secure server?
Secure servers have software programs that encrypt information being sent through them.
The most common encryption being used, 128-bit, keeps ordering data confidential for
customer protection. Computer hackers can intercept data not sent via a secure server.
Secure servers move slower because of the encryption process, so there is nothing wrong
if it takes a few more seconds for a screen to come up or a form to be processed, it is
simply the secure software doing the job. Once order information is securely sent it
arrives to you within minutes via e-mail.
5) SHOPPING SOFTWARE / SHOPPING CART
Shopping cart software is software that allows you to deliver your products or services
to site visitors in a standard interface that looks much like an electronic catalog.
The beautiful thing about this software is that it allows visitors to place multiple
product orders from your Web site. While some minor configuration to your HTML and the
software is required, once in place, cart software automatically calculates and totals
orders for your customers. While there are many shopping cart software programs
available and many ways to install them, most must be installed on the same server
hosting your site or on the secure order-processing server.
Most merchant account providers also provide options for software depending on what
type of system you are running. Good merchant providers also have the capability to
interface the merchant software with any shopping cart on the market. When choosing
a shopping cart software package, look for one that has good technical support, that
comes with a period of free upgrades and that contains additional useful utilities,
such as e-mail auto-responders or report interfaces. Be sure that your customers'
data is held securely somewhere on your local computer or server.