Setting Up An Online Store, Pt 1
Dear Fred: Thank you for a great newsletter. I think I have subscribed ever since, I think the closing of, was it "Windows" magazine?
I have a feeling a lot of your subscribers run small businesses, as I do. And I'm sure a lot of those are thinking about being able to accept Visa payments on-line. Your payment process is very painless and effective. Perhaps you could give us all some advice on the best way to do it in the newsletter sometime soon? ---Julian
Here's a quick overview of how the process works: First, you have to collect data from customers--- what do they want to buy, in what quantity, and for how much? For security purposes, most credit card companies also ask for a customer's billing (physical) address, as a way to make sure that the person ordering is the actual card owner.
When the customer clicks "order" or "submit," the charge information is transferred in real-time to the appropriate credit-card company. Most small businesses use a "gateway" service (e.g. http://www.authorize.net/ ) that lets you have one contact point for all the different credit card companies you want to deal with: You send the information to the gateway company, and it sends the information to the appropriate credit card company, gets the response (purchase approved or denied) and then transmits that information back to you. If the charge is approved, the order can be marked as complete; and you, the merchant, then can fulfill the order.
Finally, the major gateway companies settle up at the end of each day: They tally the orders and collect money from the credit card companies on your behalf. The credit card companies make their money by skimming a few percent from each transaction you send in. The fees vary, with Amex and Discover being the most expensive for a merchant to use, and Visa and Mastercard less expensive. The gateway company also needs to be paid, so when it collects money from the credit card companies, the gateway company takes a little for itself and sends the (diminished) balance by wire transfer to a known-good bank account you've previously set up for the purpose.
There are three main ways to handle all the above: There are turnkey systems that handle almost everything for you: You sign up with a web site that handles all the back-end processing for you; they provide a front-end storefront or ordering forms or software; they manage the gateway services; and sometimes, they communicate directly with the credit card companies. PayPal is one such system: Everything happens on the PayPal site, and PayPal handles security, the semi-customizable storefront front-end software, fraud detection and prevention, the gateway functions, payment to the merchant, refunds to the customer, and so on. PayPal is actually very easy to use, and its fees--- while not cheap--- are reasonable.
2CheckOut.Com illustrates another kind of turnkey storefront: It operates much like PayPal, except that it's not designed to hold the merchant's money in a spendable form. Rather, they transfer payments to the merchant via wire automatic transfer after a couple of days. They're a high-cost service, but have the advantage of being pretty good with international orders, which can get complicated.
Another benefit of turnkey systems is immediacy: PayPal takes just a couple days to fully set up an online merchant account; a place like 2CheckOut takes even less time.
At the other end of the spectrum are roll-your-own approaches that you do on your own website. You sign up with a gateway company and, once you pass their security and financial screenings, they'll guide you through the process of becoming an authorized merchant with whatever credit card companies you wish. Each credit card company has its own set of forms and procedures; the amount of initial paperwork will remind you of doing your taxes. It'll take at least a couple weeks for all the gears to turn; but then you can build your own front end using whatever "shopping cart" software you wish. This approach gives you the most control over the look, feel, and features of your online store, and it's the least expensive to run, but takes a lot more time to set up and operate.
In between, there are hybrid options such as EasyStoreCreator.com . If you already have a merchant account set up with a gateway service (and through it, have become an authorized merchant for whatever credit card companies you wish); then you can use their secure front end software to build a simple storefront and to collect orders. If you don't have a merchant account with a gateway service, they can set you up. Generally, hybrid services are easier to get going than roll-your-own, but not as easy as a turnkey; they're not hugely flexible; and the costs are in-between, too.
Before this item gets too long, let's break it into a separate sections for better readability. (See below.)
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