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Feb 21, 2008, 16:16 #1
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Which is better: Being a merchant reseller or just charge a service fee?
My company currently provides users with free & easy to build websites & social networks for sports teams (we're about 8 months old and have about 750 sites & 1,000 networked users). Our next feature that we're building out is an online store that users can place on their individual sites (or a user registration, such as for summer camps, sports leagues, classes, etc).
Rather than charge customers a yearly fee for advanced features like the store (such as DoodleKit.com), we'd rather keep the site completely free and tap alternate revenue streams. One of which is charging a small % or fixed fee from each sale a website makes.
I am currently looking into three options. Has anyone done the following, or have any insight into how to best approach them? We're looking for ease of use, and the least cost in terms of time and support for us (we're on a very tight budget time-wise).
1. Become a merchant account reseller, and keep a % of each transaction from each user. This would require any user who wants to add a store to create a merchant account.
- Pros: Minimizes transactions. Stores sensitive payment data on the company's website and not ours (I hope). No fees are visible to the end-user making the purchase (they just see one transaction on their CC)
- Cons: more time & support intensive.
2. Require the user to have a merchant account or something similar (such as Authorize.net, a paypal account, etc. We'll probably offer a few gateway integrations) but require the user to include a credit card in their account which we will charge a % or small non-refundable fee every time a purchase is made.
- Pros: No fees are visible to the end-user making the purchase (they just see one transaction on their CC). Less support time (can automate CC verification, etc)
- Cons: Stores sensitive CC information in our database. Less streamlined workflow for users creating their store (requires merchant account & CC info). Requires 2 transactions for each purchase.
3. Require the user to have a merchant account or something similar (such as Authorize.net, a paypal account, etc. We'll probably offer a few gateway integrations) and charge the end-user making the purchase a small non-refundable service fee (similar to some of the travel sites like Orbitz does)
- Pros: Less support time (Just need to verify user's merchant account info). No sensitive data stored except user's merchant info
- Cons: adds inconvenience to end-user purchasing item. Requires 2 transactions for each purchase.
I'm leaning toward option #3, but if anyone has any suggestions, or other options I may be overlooking, please post them! Thanks. I figured this may help out a few other users designing social networks or website builders.
Feb 22, 2008, 06:04 #2
Well it could be quite simple. Most merchant account providers offers an affiliate solution. You could make an agreement with a PSP and earn some money on the referral (the money earned is different from PSP to PSP of course).
Reseller would be probably be a bit to much for such a setup I would think, as you also mention it would include some extra work from your side.
Basically you could discuss with a merchant account provider, and see what you could figure out.