There are a lot of things to consider when opting to start a new eCommerce website. I often have to ask the same questions to clients looking to expand their business – so I thought I’d make a blog post about it! 🙂
One of the main areas that you need to consider is on-going costs, this is usually in the form of a Merchant Account and/or Payment Gateway.
What is a Payment Gateway?
This service processes credit card transactions on your behalf. Your e-commerce website (or cash till!) will send the customers’ credit card details to your Gateway to authorise the transaction and process the payment. It will be approved only if it matches information on file with the credit card company and passes security. This is via a Payment Processor – the financial institution that work in the background. Then it will transfer the money from your customer’s card account to your merchant account.
What is a Merchant Account?
Merchant accounts are more complicated than Payment Gateways. Basically, they are an online bank account that will temporarily hold your money until it is moved into your actual bank account. You may already have experience of this if you’ve ever sold anything on eBay; PayPal can be a merchant account.
Usually, any money transferred from the customer is held for a few days, then moved on to your actual bank account. Like a temporary holding tank for money from online sales.
A lot of companies now do both. Such as Paypal, Stripe or Braintree payments.
To understand the process you can see the diagram below.
- Your customer makes a purchase using a card on your (merchant) website.
- The request is sent to a Payment Gateway, such as Paypal, Authorize.net, Stripe, etc.
- The information is checked with a Payment Processor, for example, Visa or MasterCard, to ensure everything is genuine, checks for fraud etc.
- The Payment Processor sends a response back to the Gateway to give them the ‘go-ahead’ and ensures payment is settled between you and the Customer’s bank accounts.
By having a Gateway, it can enhance security for both parties involved, and, like PayPal, can help resolve disputes also. It’s pretty much a given.
I’ve put together a chart of some of the well-known providers and their differences in prices.
*prices at the time of Dec 2016.
|Provider||Percentage (per transaction)||Cost (per transaction)||Monthly Fee||Notes|
|Stripe||1.4%||20p||–||For Euro cards. Increased for non-Euro|
|PayPal||3.4%||20p||–||Less than £1,500 sales p/mo|
|Shopify||2.2%||20p||$29/mo||Hosted by Shopify|
|Realex||1.75%||9p||£19/mo||To add to WooCommerce $79 for 1yr subscription|
|SagePay||£19.90/mo||for 350 transactions p/mo|
For those with a monthly fee, like Shopify or Wix, you may be wondering why? This is because they are hosting the website for you and often provide other tools such as Themes or Add-ons that you can use freely too.
The alternative to a monthly fee is to pay for a Website Designer or Developer to build you an eCommerce website. You would need your own hosting so you can shop around for prices that suit your budget.
Popular platforms are WooCommerce in conjunction with WordPress, and Magento.
Some questions you are likely to be asked by a Website Designer or Developer may include the following – and often helps you to plan your eCommerce setup;
- What type of products are you selling?
- Will you be selling digital products?
- Will you be offering subscriptions?
- How much stock do you have to put online?
- Will you require stock control?
- Which payment methods will you accept – cash on delivery, cheque, BACS, credit card?
- What forms of postage do you use? How much is it to send?
- Where do you offer delivery to?
- Do you need to add VAT to your products? Would you like it to be inclusive or exclusive?
- Do you offer vouchers or coupons?
- Do you need to integrate with any software, such as accounting, CRM?
- Do you have photos of your products, or do you require a photographer?
- Would you like product reviews?
- Are you looking to build an email list from customers?
- Are you looking for custom sales reports?
- Do you require integration with marketing such as Google Ads?
- What is your returns policy?
- How do your customers contact you?
E-commerce is rapidly evolving and businesses are trying to adapt to these changes. If you are a business owner and selling products or services online, you should keep these legal aspects of eCommerce in mind.
What do you think?
I’d love to hear your thoughts or experiences about this subject, if you can leave a comment below, I’m sure fellow merchants would much appreciate your input!