Setting up Shop Online: The Good the Bad and the Ugly

I am starting this thread because I am working on an article about setting up shop online and I want to get some input from people who sell online and what has - has not - worked for them. I also hope that this discussion will benefit Startup Central members looking to go online who have not yet.

One thing I learned when I started to sell online was that all of a sudden I was getting into a new business - the shipping business. So not only did I have to think about how I was going to sell and get paid (credit card processing, shopping cart) I had to create a shipping area and figure out where to get supplies from, how to pack efficiently and cost-effectively - and as environmentally sensitively as possible; I also needed to pick a shipping company and then try to integrate all these different systems with the small business bookkeeping system I kept promising I would set up each new tax year.

Answering all these questions can take a lot of time and mistakes can cost a lot of money. What has worked for you?

Did you go with an online shopping cart or buy software and build your own?
PayPal or a merchant account for accepting payments?
UPS? USPS? FedEx?
Packaging supplies and charging for labor for packing.

:: Clay

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Replies to This Discussion

Permalink Reply by Mike Flynn on June 25, 2010 at 3:49pm

Hi,
I'd also like to add my comment that this a very timely discussion as i have just started to design my website - i should also say that i am a new startup.

PayPal and other Payment processors.
Do these companies charge a transaction fee for each order / payment processed? If they do then i guess i need to factor this into my costs.

Domestic & International shipments
Is there any difference in terms of packaging for an international / long distance shipment? would you have to consider this if shipping by plane. Also does anyone have any experience with using DHL - they would be bigger in Euopre than Fexed or UPS

Permalink Reply by Andy Ciordia on October 4, 2010 at 9:42am

Merchant services usually charge a percentage + a transaction cost. With Paypal, Amazon, & Google the fee is stated and flat between tiers of amount processed ie: 0-1000, 1000-2000, etc. Other merchant service vendors will charge a floating percentage based on the card type--business cards will cost you more, debit cards cost the least (although they're getting wise to the heavy usage of debit). It's part of the cost of doing business and while you should factor it, it shouldn't weigh too heavily in your head. The quality question is, 'would I be doing this level of business without these services?'

Not of real help to you on international special requirements. It's going to cost a fortune to get it there in short order and depending on your products delicate qualities that could be a great issue.

Permalink Reply by Clay Gordon on October 4, 2010 at 11:48am

Credit card processors ALWAYS charge fees to process cards - the get a fixed fee per transaction and a percentage of the sale. The fees are based on a number of risk factors. For example, if you process numbers obtained over the phone (called "card not present") the fees are always higher. One example is a company that charges $.15 per transaction + 2.75% when you swipe a card or $.20 per transaction + 3.5% for card not present. Keep in mind that this is in addition to monthly gateway and reporting fees, which can easily exceed $50/month. You do need to factor these costs into your pricing structure.

While PayPal's transactions costs are not the lowest, they do have the advantage of NOT charging monthly fees - so for small volume processors PayPal can end up being comparatively inexpensive.

One new option to look into is a company called SquareUp. They offer decent rates and their card swiper attaches directly to an iPhone/iPad or Android Smartphones. The swiper is free and there are no monthly fees. Plus, as volume grows you can negotiate better terms (including how long it takes for money to be deposited into your bank account).

I saw one of these in use in the Ferry Building in SF recently on an iPad. It was gorgeous, and on an iPad you can create a simple POS system complete with keys for commonly-purchased items. One thing about this kind of setup is that the terminal can be in use in a retail location (and moved, obviously), while the account can be accessed from another computer, enabling someone to monitor sales remotely.

As for DHL - they are owned by FedEx. I do MOST of my shipping via USPS Priority Mail. One exception is international shipments. Then I take them into my local Shipping Center who handles USPS, UPS, FedEx, DHL, etc., and ask them to find the best rate possible - their POS software does that. I don't do a lot of international shipping so this is the way that works best for me. A couple of times a year I have an odd shipping requirement and I pay them to do that for me, so they know me and are happy to help me out.