"How exactly does Ecommerce work"?
This has to be 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 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 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 Ecommerce path. With that in mind, let's take a walk along path to Ecommerce, and take a look at signs--or components--that are necessary to take part in 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 long-term savings can be substantial.
This is especially true if you are selling big ticket items. For instance, on 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 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 merchant via your modem, and then process transaction and deposit 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 shopping cart system because it's easiest way for your customers to shop. The easier it is to shop, more they will spend, which is exactly psychology supermarkets use, and exactly how shoppers are similar whether in a supermarket or scanning through your website. And nice thing about electronic shopping carts is that wheels never go square, and you don't have to send a clerk out after store closes to round up all carts that have been left scattered around neighborhood. So shopping carts are good. But how will they work with your merchant account and all-important ordering process?
If orders placed on your site are to be processed with 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 job.
If, on other hand, you would like all of your incoming orders to be automatically processed for you as customer hits 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 owner of a website company turning on PC and then stretching out in a hammock, watching orders get processed on screen, comes to mind). However, most web company people, upon learning 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 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 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 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 interaction between two is needed.