Learn when to use third party processors like paypal and when to use other online merchant processing systems. Different online merchants have different needs.
Copyright 2006 B Hopkins
Every day, a growing number of people venture into the world of online commerce, or ecommerce, in order to sell their goods and services online. When merchants first venture into the online realm, they can get in over their heads by using solutions that are too costly, too complex, or just have way too many features than what the merchants truly need.
The good news is that there are solutions that allow the first time online ecommerce merchant the opportunity to sell their products and services with much less committment and cost on the part of the merchant. Solutions such as Paypal offer the first time ecommerce merchant the opportunity to go into the online realm and get their feet wet without drowning. One must follow the standard safety precautions associated with solutions such as Paypal and they can be on their way to earning an online income.
The next section will go over what you the merchant, will need to consider if you think a payment processing system like Paypal will be work for you or not.
1. Low monthly business volume on your ecommerce website
If you don’t have a lot of sales on your ecommerce site, and especially if they are low ticket items, then you may want to consider using a pay-as-you go type of merchant account system such as Paypal. Usually these types of payment processing solutions have a higher percentage rate that they charge the merchant. Sometimes it can be as high as 15% of the price of the item being sold by the online merchant.
Typical merchant accounts usually have a monthly charge associated with the account, whether you sell anything online or not. They also have a lower percentage rate they charge the merchant, so for higher volumes, the merchant will end up saving money with this solution.
When deciding what type of merchant account you should get, you will want to determine the costs associated with merchant processing based on estimated monthly sales volumes. For instance, if you expect to sell 15 items that cost $25 each on average, then determine how much a third party processor like Paypal would charge you for that, and then how much a standard merchant account processor would charge you for the month based upon the same volume. You will find that in going through this excercise, you will discover a break-even point at which you will pay less using a standard merchant account as opposed to the third party processor such as Paypal.
2. You are new to the whole ecommerce concept
If you are new to selling your product or service online (ecommerce), then it may make sense to use a 3rd party processor, such as Paypal to handle your online payments. This way, you aren’t forced into any long term contracts, and can discontinue using it if your business isn’t working. In most cases you can do this without having to continue to pay additional fees, such as a monthly service charge, to the this type of merchant account processor. With Paypal, it is easy to start up the online processing again without any additional costs, if you choose to give your online business another try.
3. You sell your items on Ebay
Ebay is one of the largest selling platforms on the Internet today. Ebay became so successful, they even purchased Paypal. Ebay does accept payments through other means besides Paypal, but they set it up so that it is easier to perform your transactions through Paypal than other methods.
If you are doing a huge number of transactions through Ebay, it may make more sense to use your own merchant processing account as you will save a lot of money. However the average Ebay seller usually doesn’t have the volume to justify using their own online merchant account unless they are already using it for another online business.
Different needs for the ecommerce merchant require different solutions. By no means is there a “one size fits all” type of solution. Merchant processing solutions that work well for one online merchant, may spell disaster for another. The best thing an online merchant can do is to determine their expected sales volume, and their needs, and then find a solution that best serves them. For merchants who are new to ecommerce, and don’t expect to generate a lot of volume, Paypal can be a good solution to get them started.