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How_exactly_does_Ecommerce_work
| 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 interaction between 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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