Using the Shopify / Yahoo Stores Business Model

Hey everyone, I have posted in here once in a while on a feature we have been trying to tackle over the past couple of years. It was not high on our priority list until now, and is one of the last big features we would like to add as we are now large enough that it would generate a lot of revenue for us.

Basically our site lets people create free and easy to maintain and customize websites. We are creating a storefront / shopping cart system as well as allowing credit card payments on our current custom online form system. This is where the Shopify / Yahoo Stores model comes in, which we are looking to emulate.

If anyone has experience on setting this up, or just insight into some of our questions, I’d greatly appreciate it. We have a few ways to approach this. One is to set it up so that all the payments go to us and then we issue bi-weekly checks to all our customers. Would this be considered factoring or more of an affiliate system? Customers could in theory sell anything they want through the stores. If it is factoring, how do Yahoo and Shopify get around it? The main downside with this that it will probably take a good amount of time to issue checks each time and update each customer’s account bi-weekly. We currently have approximately 5,000 websites, and I assume we would have 100-500 sites with active stores and payment forms. We would probably add a charge of 1% of each transaction, and with the volume we anticipate, we would be getting decent rates through our gateway and merchant account service, so sellers would be charge a small rate overall.

Another way to approach it is to let users use their own Google, PayPal or Amazon Checkout service, but require them to have a credit card on file with us, and we would charge a 1% processing fee for each item that people purchase through their storefront. The downside to this is that sellers would have to sign up for an extra service if they don’t have one, and then we would have to create a system for users to enter and edit their credit card info (would probably just use Authorize.net’s customer information manager.) As well, we would probably charge them bi-weekly or monthly to cut down on the processing fees, but that’s 2-4 weeks where we have money that is technically ours sitting in limbo until we charge them, and there is more potential to abuse the system to avoid paying us.

So if anyone has any experience, or suggestions, I’d love to hear them. Keep in mind that we are a free service, and we cater mostly to sports teams, so most users would not be interested or able to create their own merchant accounts, and instead are looking for inexpensive turn-key solutions.

Yep, I’m sorry if I wasn’t clear in my other posts - we are long time developers and have mostly finished our own custom software that allows our customers to create their own separate online stores. We are just trying to find the best service or best method to earn commissions on our customers’ sales in the same way that Yahoo and Shopify do.

We do appreciate the input, thanks!

Thanks for sharing. But as far I see this service is for developers, they have API etc.

Do you plan to integrate it with your ecommerce store yourself?

Just to clarify, we aren’t actually using Yahoo or Shopify, we’re just using their business model. So right now customers create stores with them, and then Yahoo or Shopfiy charges a monthly fee and a percentage of each transaction in addition to whatever fees your gateway and/or merchant accounts charge. We are building our own custom shopping cart system and looking to do something similar, but without requiring users to purchase a merchant account somewhere. Yahoo actually uses FDMS Nashville payment gateway as their gateway system for Yahoo Stores, which you can see here: http://smallbusiness.yahoo.com/ecommerce/features#cs_payment_processing

Sporg (RegOnline) is a competitor of ours - checking out their pricing plan you can somehow use their merchant account ( http://www.regonline.com/__docs/en-us/rolpricing.pdf ) and then they pay you monthly.

Again, most of our customers would not be interested in purchasing their own merchant account as most are small volume sellers and would probably lose money or in the long run with the monthly fees.

So in summary it looks like Yahoo and Shopify bill you monthly for your transactions, which you set up using your own merchant account or a third party processor, which is definitely separate from factoring. You can do the same with RegOnline, but apparently you can somehow use their merchant account as well, and whoever they use doesn’t consider that factoring.

Depending on your business model, yes it would be factoring. I would stay away from Yahoo because if you need to change it will be very difficult to make that change to another shopping cart.

Yahoo is a payment gateway and uses another company for the merchant account provider. Most providers will not allow you to charge 1% either on the transactions.

My suggestion - partner with a merchant account provider and then require them to sign up with that provider. You can then easily integrate that into your website. And the merchant account provider will then give you a cut of their fees.

Now, reading more, I see sports teams. Check out www.sporg.com - they might be able to help you out.

From what I’ve been able to find, Amazon’s FPS Marketplace seems to be the only real contender. This model is basically what we are looking to implement.

You should definitely allow your users to connect their own payment processing because you simply cannot offer a solution that fits all (unless you’re Plimus). Individual stores’ audiences differ very much and they need different payment processing.

You can then offer a choice: either they pay you a % of each transaction or a flat monthly/yearly fee.