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"How exactly does Ecommerce work"?
"How exactly does Ecommerce work"?
This has to be the most-frequently asked question I receive from newbie clients.
They know people are buying online and they know they have to accept credit cards
if they want to stand a chance in all the net-based competition, but beyond that
realization, most are clueless as to how it all works.
I can't blame them, really. It's a confusing online world out there and a lot of
people who are trying to tell them how it works are really just trying to sell them
their own solution. It's kinda hard to trust the validity of what they say when
profit is a huge motivating force behind their persuasive suggestions.
And to be sure, there is profit in this Ecommerce game! Money is to be made at many
steps along the Ecommerce path. With that in mind, let's take a walk along the path
to Ecommerce, and take a look at the signs--or components--that are necessary to
take part in the Ecommerce excitement and potential profits.
1. The Merchant Account:
This really is your first step towards Ecommerce, unless you have chosen to go through
a payment facility and are willing to give up a rather large portion of your sales
in fees. The up-front costs of a merchant account can be hefty for a small business,
but the long-term savings can be substantial.
This is especially true if you are selling big ticket items. For instance, on the
sale of a $300 product/service through a payment facility you could pay between
$20-$45 dollars or more in fees. With your own merchant account it will probably
cost you about $9. With the typical fees and equipment for a merchant account startup
costing about $1,500, you can recoup that cost rather quickly.
A merchant account comes with a merchant identification number. That is about all
it gets you. In order to process transactions you need either a terminal (the little
box that you swipe your credit card through at retail outlets) or software that
runs on your PC and will dial up the merchant via your modem, and then process the
transaction and deposit the money into your bank account.
2. The Shopping Cart:
If you are selling just one or two items on your site you won't have much need for
a shopping cart. A site with a variety of products should use the shopping cart
system because it's the easiest way for your customers to shop. The easier it is
to shop, the more they will spend, which is exactly the psychology supermarkets
use, and exactly how shoppers are similar whether in a supermarket or scanning through
your website. And the nice thing about electronic shopping carts is that the wheels
never go square, and you don't have to send a clerk out after the store closes to
round up all the carts that have been left scattered around the neighborhood. So
shopping carts are good. But how will they work with your merchant account and the
all-important ordering process?
If the orders placed on your site are to be processed with the customer's credit
card as a sale through your PC or swipe erminal, then there doesn't have to be any
compatibility between your cart and your merchant account. The two will work completely
independently, each doing their part of the job.
If, on the other hand, you would like all of your incoming orders to be automatically
processed for you as the customer hits the submit button, you will need what is
called "real time processing."
3. Real-Time Processing - Almost every website company I talk to would like to have
their orders processed for them (the vision of the owner of a website company turning
on the PC and then stretching out in a hammock, watching the orders get processed
on the screen, comes to mind). However, most web company people, upon learning the
cost involved, take my advice to wait until they have a steady flow of orders coming
in before they use real-time processing. If you're on a tight budget the extra fees
involved in real-time processing might be better used to aggressively advertise
and drive customer traffic to your site. Processing a few orders per day doesn't
take very long and until you find it to be more time-consuming to process the orders
yourself than you like, you are probably better off processing such orders manually.
If you are starting with a healthy budget and an aggressive promotion plan you will
probably be better off implementing real-time processing right from the start. Changing
order-processing methods can sometimes result in system hiccups and you don't want
anything to slow down your momentum once you've started. You'll also save money,
not
having to set up your ordering system twice.
4. Web Hosting - The web host who is hosting your site can sometimes make a difference
in how compatible your entire site and ordering system are with each other. I say
"sometimes" because for those of us not using real-time processing, it doesn't matter
who your host is or where your merchant account is located. They are independent
of each other. Orders arrive and you process them. No interactionbetween the two
is needed.
Problems can arise when you bring a shopping cart AND real-time processing into
the picture. A shopping cart alone
won't cause problems but the cart you choose to use must be compatible with your
web host. Some carts are designed to run on certain types of servers, so when choosing
one be cautious to make absolutely sure you can use it with your current host. Otherwise
you had better be prepared to find a new one.
If you want a shopping cart AND real-time processing the three (cart, processing,
and host) must work together well. Your shopping cart must be compatible with your
host and the cart must be compatible with your payment processor. With all the different
shopping carts, hosts and payment facilities out there, putting together the right
team can be a real challenge. This is especially true for the newbie who doesn't
understand how it all works and how it all has to work together, or understands
imperfectly but thinks he or she has it all under control when the decisions are
finally made.
One Stop Shops -
The easiest way to find a compatible solution is to choose a provider who offers
all you need under one roof. This is what I have done by partnering with Virtualis
Systems. I am able to offer a great hosting solution along with a compatible shopping
cart that works with almost any real time processor. I have even taken this a step
further by partnering with a rock-solid merchant account provider, E-Commerce Exchange.
Now I don't want to force MY "solution of choice" on you in this article so I have
set up an autoresponder with details on the Ecommerce solution I recommend to all
my clients. Please email our autoresponder at ecommerce@lrsmarketing.com for details.
Your Website Designer:
Asking your website designer to recommend a compatible solution is also a good idea.
Most likely, he or she has successfully set up shopping carts and payment systems
that have worked together for other clients and with that experience can confidently
recommend one that will be right for your specific needs. There is also the added
benefit that your designer is comfortable and familiar with the cart and payment
processing configuration. This will result in less time spent setting up your site,
thus saving you money in design costs.
Who to Choose?
Choosing the right person for this task is perhaps the most important decision you
can make (in Ecommerce, that is. Choosing a dentist, a pet, and which TV show to
watch also rank high in importance). Nobody is an expert in all areas of Ecommerce
because there are so many variables, depending on which configurations of hosts,
carts, and merchants you choose. Find someone with whom you can talk to and who
will listen to YOUR needs with understanding. A web designer who has created sites
selling one product through mail order is NOT the best person to go to for Ecommerce
advice. Just like a web designer trying to create a site that will sell and not
just look good, with no marketing experience, a designer who doesn't know Ecommerce
is going to be hard-pressed to juggle all the components that must fit together
seamlessly and attractively to construct a truly effective Ecommerce site.
The Most Common Mistakes?
I've had clients come to me who have been provided a shopping cart by their web
host but who then have purchased another cart, not realizing they already have one.
They've set themselves up with real time processing and then purchased a terminal
even though they will never swipe one card. They've had SSL enabled on their web
host server even though it's provided at their payment gateway. I have been on the
sympathetic end of many, many more sad tales from earnest folks who have told me
their own personal accounts of throwing hard-earned money away on these kinds of
mistakes.
Why? Cutting through all the technical jargon, it's all because they simply didn't
understand how each component can, should, and must work in conjunction with one
another.
Ecommerce can appear simple (well, almost) once you understand how all the components
work together. A merchant account allows you to accept credit cards, your web host
shows your website to the world, your shopping cart helps your customers order easily
and real-time processing processes the orders in real-time and approved transactions
are credited to your merchant account. All are independent components but they all
function together to make Ecommerce work. Find a designer or webmaster who can bring
all these elements together on your site & watch Ecommerce work for you.
About the Author
Lisa Schmeckpeper of LRS Marketing
and published in their free newsletter, Website Success Monthly. To receive a free
copy of this informative e-zine just send email to subscribe@websitesuccessmonthly.com
or visit their website at www.lrsmarketing.com. Copyright 2000 [LRS Marketing].
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