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  1. #1
    Freelance Web Designer KeithMcL's Avatar
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    Setting up an ecommerce site!

    I'm thinking of setting up an ecommerce website that sells tech gadgets like PDAs, digital cameras, mp3 players, camcorders, md players, etc.

    I've absolutely no experience whatsoever when it comes to stuff like this. Would I be better off:

    1. Getting web hosting with SSL enabled, purchasing a digital certificate from the likes of Verisign and then getting a payment gateway provider and merchant account.
    2. Using a 3rd party CC processor like 2CheckOut, PayPal or PaySystems.

    I've read loads and loads of articles about setting up an ecommerce website, but I'm still not sure which to choose. Some of the articles mention that if you think you'll process between $1000 - $1500 a month then you'd be better off with a merchant account. Seeing as the products that I plan on selling aren't cheap, it's quite possible I could process that amount a month.

    The thing is... I'm not sure if can really afford to get a merchant account straight away. Would I be better off starting off with option 2 and then switching to option 1 a few months down the road (providing things are going well)?

    The kind of site I'm looking at creating would be very similar to www.goldengadgets.com, using either osCommerce or X-Cart.

    Also, if you know of any sites that offer the resale of the products I mention, please let me know.

  2. #2
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    You want to consider PayFlow via Verisign - as you can have all of the processing done on their secure side - while only needing an ssl and your cart setup on your side. Their costs are more reasonable from a start-up perspective. They have several nice online tools for you to private label their pages for your site - however - the overhead and sophisticated setup is handled by them. May be a good "meet in the middle" compromise between your two options. I believe the up front costs with them are a few hundred dollars.

  3. #3
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    Keith

    Listen to others who are unbiased before you listen to me, but for all start-ups, I would recommend getting a 3rd part processor rather than a merchant account. You will become more familiar with the process, and you will be able to put that valuable capital (few hundred dollars) into marketing. Your success online will be a direct result of your marketing success, and I would suggest putting the dollars there at this stage in the game.

    If you make a decision to go with a 3rd party processor, I will be more than happy to get you set up. Regardless of which option you choose, feel free to contact me with questions...ocassionally I have been known to know what I am talking about.

    Cheers
    James
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    james

  4. #4
    Serial Publisher silver trophy aspen's Avatar
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    You can open a merchant account for as low as $25 (plus monthly fees).

    However that is beside the point, the advice I'll give you is to not do this at all.

    The products you want to sell are not good products to sell for a small business.

    First of all there are huge online stores that already sell those products, the chance of you being able to beat them on price, shipping, marketing, or customer service is almost zero.

    Those products can also be found in many brick and mortar stores.

    Secondly those types of products depreciate in value faster than cars. What happens when you order a bunch of mp3 players that don't sell? 6 months later they're no longer worth what you paid for you and now you have to sell them on ebay for dirt cheap and take a loss on the product.

    For a small business starting out you need to maximize your profit margins and try to only pick products with a high chance of success.

    The following traits make a good product to sell online:

    • Collectible
    • Hard/impossible to find locally
    • Fairly expensive
    • Niche or Unique


    Generally you want to stay away from things that can be bought on Amazon or Walmart. You want to stay away from cheap things since you'll make less in profit per sale and have to thus sell more products and keep more in stock. Also people are more willing to pay for shipping on expensive items than on cheap items. For instance for something small shipping can almost double the price of the item. You want to find things that are collectible/niche/specialized/unique.

    For instance I sell collectible swords, many of which are limited edition. The average price of probably around $140 makes them expensive enough that I can make a good profit on each sale and it means shipping only adds like 10% to the cost of the item. Additionally you can't buy swords locally in most locations (or if you do they're way overpriced) and you definitely can't find them at Walmart (or whatever big chain retailer you have in the UK).

    The best advice I could give would be to find something unique that is manufactured in your area. If you can buy a product from a local manufacturer you'll have better margins and you might just stumble onto something that is a gold mine.
    Chris Beasley - I publish content and ecommerce sites.
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  5. #5
    Texan at Heart Corey Bryant's Avatar
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    Most hosting companies offer SSL in their packages. And most gateways will also offer SSL to capture the CC data.

    You can always choose a third party processor & then "upgrade" later, but of course you will have to re-program the back-end to connect to the new gateway since most third party processors use their own gateway as well as the CC processors.

  6. #6
    Freelance Web Designer KeithMcL's Avatar
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    Thank you to those that have replied so far. Chris' post has me questioning my choice of products! Trying to sell something that can't be found on Amazon or Walmart really limits the choices available. I understand what you mean about choosing a product though.

    Anyway, put the product(s) aside for the moment. Thanks James for the offer of helping me get setup, but I have decided that if I do go with a 3rd party cc processor it will most likely be 2checkout and not paysystems. I realise 2CO's rates are slighter higher than yours, but I prefer their 3 month rolling reserve than your 6 months (see, I have been reading up ).

    The hosting company I'm thinking of using has already said I could their shared self-signed certificate free of charge or that they can sell me a ChanedSSL certificate for $34.95/year. I've no idea if that is cheap or not (yet).

    Corey, if I was to change from option 2 to option 1 at some stage, how easy/hard is it (do you know) to re-program the back-end to connect to the new gateway using either osCommerce or X-Cart?

    bwarrene, I had a look at PayFlow from Verisign and I don't think I'll go with that system.

  7. #7
    Serial Publisher silver trophy aspen's Avatar
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    $34.95 is pretty cheap for an SSL cert.

    With OScommerce is is extremely easy to switch payment processors (unless you've done some backend hacking).
    Chris Beasley - I publish content and ecommerce sites.
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  8. #8
    Freelance Web Designer KeithMcL's Avatar
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    Thanks Chris.

    If I was to invest around $500-$750 at the start, do you think I could make that back easily enough providing I marketed the site well and had good products to sell?

    How did you decide upon swords as your product for cbswords.com? And was it easy to find a supplier? My mum resells Cutlery sets, Knife sets, stainless steel pots & pans, etc from a supplier near us and they are quite popular. You wouldn't be able to find them in any lcoal shops. I wonder if they would be worth trying to sell online. The part that worries me the most is getting the products from the supplier and shipping them.

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  10. #10
    SEO Link Building Master I, Brian's Avatar
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    The trouble with 3rd party processors is that you are getting exactly what you pay for.

    2Checkout was reported down for 3 days a couple of weeks back, and PaySystems has got a horrible achilles heel that means that you can be easily scammed. As for Paypal - heh, heh, just do a search for "paypal sucks".
    Internet Business Forums - free business help & advice

  11. #11
    Freelance Web Designer KeithMcL's Avatar
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    Is WorldPay a 3rd party cc processor or an actual merchant account provider? I've heard nothing but good things about them. They are slightly dearer I know, but I'm sure it's worth it in the long run.

  12. #12
    He's No Good To Me Dead silver trophybronze trophy stymiee's Avatar
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    Quote Originally Posted by Chronicles
    PaySystems has got a horrible achilles heel that means that you can be easily scammed.
    I've not heard of this before. What is their achilles heel?

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    Quote Originally Posted by KeithMcL
    Is WorldPay a 3rd party cc processor or an actual merchant account provider? I've heard nothing but good things about them. They are slightly dearer I know, but I'm sure it's worth it in the long run.
    If your heading down the merchant account route I'd recommend either WorldPay or Barclay’s ePDQ.

    I've setup clients with both in the past and although i can't comment on their application procedure - to integrate them into a site was very straightforward.

  14. #14
    Serial Publisher silver trophy aspen's Avatar
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    Quote Originally Posted by KeithMcL
    Thanks Chris.

    If I was to invest around $500-$750 at the start, do you think I could make that back easily enough providing I marketed the site well and had good products to sell?

    How did you decide upon swords as your product for cbswords.com? And was it easy to find a supplier? My mum resells Cutlery sets, Knife sets, stainless steel pots & pans, etc from a supplier near us and they are quite popular. You wouldn't be able to find them in any lcoal shops. I wonder if they would be worth trying to sell online. The part that worries me the most is getting the products from the supplier and shipping them.
    I like swords, swords are a good product, I'm familiar with them.

    The cutlery might be a good idea -- but you can buy cutlery (if not the specific brand) all over the place.


    I use UPS to ship. I print out labels online and they come for a pickup every day. My suppliers ship to me via UPS, Fedex, and sometimes just by semi.

    Being in Britain this will probably be different for you.
    Chris Beasley - I publish content and ecommerce sites.
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  15. #15
    Freelance Web Designer KeithMcL's Avatar
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    Quote Originally Posted by Chas
    If your heading down the merchant account route I'd recommend either WorldPay or Barclay’s ePDQ.
    So WorldPay is a merchant account provider. Funny that some of the sites I've visited that review 3rd party cc processors had WorldPay on their lists.
    Quote Originally Posted by Aspen
    I use UPS to ship. I print out labels online and they come for a pickup every day. My suppliers ship to me via UPS, Fedex, and sometimes just by semi.
    Thanks Cris. So you have the swords shipped to yourself and then you send them on to your customers from there? Is that right? Is there not an easier and quicker way than that?
    Quote Originally Posted by Aspen
    Being in Britain this will probably be different for you.
    I'm from Ireland btw, but I doubt there's much difference there

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    Quote Originally Posted by KeithMcL
    So WorldPay is a merchant account provider.
    Yes - they offer an internet merchant account which if I understand it correctly is a card holder not present account and differs from a standard "bricks and mortar" type merchant account.

  17. #17
    Texan at Heart Corey Bryant's Avatar
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    Quote Originally Posted by Chas
    Yes - they offer an internet merchant account which if I understand it correctly is a card holder not present account and differs from a standard "bricks and mortar" type merchant account.
    Chas, you are correct. An internet merchant account is card not present. And a brick and mortar one is card present. Usually the brick & mortar is about 1.55% & the internet in the US is about 2.30-2.40%.

  18. #18
    Freelance Web Designer KeithMcL's Avatar
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    Guys, neither of those two last posts made any sense to me. Corey, re-read your quote whilst pretending to not have a clue about merchant accounts.
    An internet merchant account is card not present. And a brick and mortar one is card present.
    See what I mean?

    Can you explain what it means or point me in the direction of somewhere that will explain it to me? Thanks so far for your replies.

  19. #19
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    "Card not present" is industry parlance for phone and internet orders where the merchant does not handle the physical credit card. Since there is a higher incidence of fraud, the rates are higher. "Card present" indicates that the merchant has swiped the card through a card reading terminal.

  20. #20
    Texan at Heart Corey Bryant's Avatar
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    Sorry Keith - I was just confirming Chas information about an Internet account & a brick and mortar account.

    When you sign up for an account - you tell them where most of your sales are coming from. If it is the internet / telephone - then you get that type of account. The processing fees are higher because there are more risks involved.

  21. #21
    Freelance Web Designer KeithMcL's Avatar
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    Thanks guys for explaining it to me. I understand now.

  22. #22
    Serial Publisher silver trophy aspen's Avatar
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    Quote Originally Posted by KeithMcL

    Thanks Cris. So you have the swords shipped to yourself and then you send them on to your customers from there? Is that right? Is there not an easier and quicker way than that?

    I'm from Ireland btw, but I doubt there's much difference there
    Thats how retail works. You buy the product, then you resell it. I have my own mini-warehouse in my basement.

    There is also drop shipping, but its hard to find a legit drop shipper that isn't going to charge you an arm and a leg. If you have the storage room keeping inventory on hand is definitely the way to go. Your margins will likely be higher and you can get the product to customers quicker.
    Chris Beasley - I publish content and ecommerce sites.
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  23. #23
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    Worldpay...

    Quote Originally Posted by KeithMcL
    Is WorldPay a 3rd party cc processor or an actual merchant account provider? I've heard nothing but good things about them. They are slightly dearer I know, but I'm sure it's worth it in the long run.

    Hi Keith,

    We've set up a couple of clients with Worldpay, but decided to use our own merchant account for our own CC processing - if it's any use, here are a few pros and cons from our experience:

    Worldpay is cheaper to run in the first year if you have a low turnover because their set-up cost is lower (about £175 I think) with no monthly fees, but their per-transaction cost is high (about 4% I think).

    A "real" merchant with Internet / Not-present options (we use Barclays) is more expensive to run (about £150 set-up & £25 per month rental) but with a lower transaction cost (45p debit / 2.5% credit approx with discounts for higher turnover)

    A rented merchant set-up also provides you with a physical PDQ terminal - useful for us as it allows us to take telephone and in-person payments for our other services (may not be of benefit to you tho).
    You can do this with worldpay using their online "terminal", but it's a bit fiddly.

    Worlpday is easy to integrate with your shop (the osCommerce module is free, takes about 10 minutes to install and configure and seems to work really well) and payments are handled automatically - with a merchant you are limited to manually keying data (very tedious if you get successfull!) or paying extra for a PSP (Payment Service Provider) who makes the automatic link between your shop and your merchant account.

    Another bonus with Worldpay is that you never store card details on your site, so a secure certificate is optional - again, lower set-up costs.

    The biggest down side with Worldpay IMO is:

    1. payment period - at least 60 days before you get your first payment, and then only every 30 days (a merchant payment is in your bank next working day, or even same day if you use your own bank's merchant system)

    2. application - Worldpay are fairly picky when it comes to what you can sell, porn, gambling etc are definitely out (may not be a problem to you) some services are out (they prefer straightforward, sold product X to person Y for Z pounds type business). For us the problem was event tickets which we needed to sell for our own events, and also client events. Worldpay said that because there were some things beyond out control (ie venue restricitions, licences, police, local authority) we couldn't guarantee the events taking place, and that was unacceptable.
    If none of the above apply to what you want to do, then don't worry!


    Sorry for the long post - hope it helps

    Matt

  24. #24
    Freelance Web Designer KeithMcL's Avatar
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    Thanks for the reply Matt, it was a good read. It will definitely help me in my decision on what to choose.


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