Beginner's Guide to Ecommerce
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Whether you call it Internet commerce, or ecom, or ecommerce, or immerce, it means essentially the same thing. These terms mean buying or selling something electronically, and the time has never been better to jump in.
If you have something you'd like to sell on the Net, new technologies have opened up an array of ecom options -- there's one to suit every need and requirement.
Most importantly, ecom is safe. Experts tell us that online transactions are every bit as safe as face to face transactions-- although neither can be guaranteed to be 100% risk free. You're just as likely to be mugged on your way to the Bank Machine as you are to run into security problems with Internet commerce!
But ecommerce can be a confusing subject and many of us need a little help sorting it all out. If the jargon is confusing, read on and Iíll explain some of the basic concepts. This document contains three categories of information:
Definition of Ecommerce Terms
Facts About Accepting Credit Cards Online
Before you can accept credit cards (either online or offline), you must have a Merchant Account, which is a special arrangement with a banking institution. Small and home businesses often experience difficulties qualifying for a merchant account, and Web based businesses run into even more problems.
The situation is this: Online transactions donít take place at the point of sale (POS). They are considered to be "non-face-to-face" transactions. Since there is no way of ascertaining the customerís identification, there is no way to be sure that the customer is the legitimate card holder. Therefore, financial institutions are leery about the high potential for fraud.
Moreover, the major credit card companies offer their card holders the right to contest charges on their statements that may be the result of theft, fraud or error. A contested charge is referred to as a chargeback. When a chargeback occurs, the merchant will end up paying the charge to the issuing bank, in addition to a chargeback fee that can be as high as $30 or more. For example, if you sell a book for $20 through a credit card transaction, and the cardholder later contests the sale, you will end up paying your bank the $20 PLUS a chargeback fee of $10 to $30 dollars.Consequently, many banks require a reserve fee when issuing merchant status. Typically, face to face sales have a chargeback rate of 1% of all sales. The potential for chargebacks is greater when it is an online sale, so the risk to both bank and merchant increases.
To minimize their risks, most banks have stringent requirements that a business must meet to establish eligibility for merchant status. Factors considered include cash reserves, length of time in business, tax returns, credit history, debt load, refund policies, volume of business, cost of item being sold, and other sources of income.
High Risk Processors are merchant acquirers that specialize in high risk business. They offset their risks by charging you higher transaction fees and higher rates. In the US, the Electronic Card Systems Inc. and Card Service International are two of the better known examples. Merchants living outside the US will be required to find a service that works with their own banking institutions.
Other Associated Expenses
The chargeback expense is the first and foremost concern for a merchant hoping to acquire a merchant account. Chargebacks can result in serious financial loss to the would-be merchant. Also, merchants who encounter too many chargebacks are at risk of losing their merchant account.
However, there are other charges and expenses to factor into the budget as well. Merchants will need to investigate hidden equipment costs, setup fees, line charges, bank transactions fees, holdbacks, and discount rates, etc. These vary considerably among service providers, so compare, compare, compare!
Ecommerce Solutions Compared
There are dozens, perhaps hundreds of businesses and organizations eager to assist you sell your product online. Basically, they fall into four categories: credit card transactions, digital cash transactions, electronic fund transfers and telephone billing systems. No solution is perfect and each comes with its own set of pros and cons. The right choice for you depends upon your specific business requirements.
1. Merchant Internet Accounts.If you have a merchant status, you will need to consider the following factors:
2. Electronic Cash Transactions
Electronic money is an arrangement whereby the customer pays for the merchandise using electronic money. Examples of this are the well known DigiCash, CyberCash, etc. As consumers become more comfortable providing credit card information over the Net, these methods are less utilized.The Pros
3. Electronic Fund Transfers
Funds are transferred electronically from the customers bank account to yours. (This is a highly simplified explanation, and is accurate in the most general sort of way. However, the bottom line is that the customer buys, and at some point the funds are removed from his or her account and ultimately deposited into yours.)
The best known method is the issuing of electronic checks Customers pay for merchandise by writing an electronic check that is transmitted by email, fax or phone. The "check" is a message that contains all of the information that is found on an ordinary check, but it is signed digitally, or indorsed. The digital signature is encoded by encrypting with the customerís secret key. Upon receipt, the merchant or "payee" may further indorse by encoding with a private key. When the cheque is processed, the resulting message is encoded with the bankís secret key, thus providing proof of payment.Pros
4. One-Stop Shops
More recently, with the huge interest shown in ecommerce, a multitude of services and products have become available. It's now a possibility to find a service that will broker your Internet Merchant Account, as well as providing web site storage, a template for designing your site, shopping cart software, a form generator, a secure line for safe online ordering, and more. IBM, ICAT and Vantage are examples of businesses offering these all-encompassing services. They are excellent starting points for the entrepreneur who wants to delve into ecommerce.
If you are looking for a one-stop shop that makes everything fast and easy for you ... from building the site to submitting to search engines to providing an ecommerce solution and a whole lot more, then check out Site Build It, a hugely popular product from the SiteSell family.
|If you found this free document useful, then I'd also invite you to check out my other helpful business documents or visit the Internet Marketing Center for the absolute best tips on Internet Marketing that you're likely to come across.|