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Design Tip:
Ecommerce Part 3 - Web Hosts And Payment Methods
by Larisa Thomason,
Senior Web Analyst,
NetMechanic, Inc.
Now that you've made the big decision about your shopping cart system, it's time to find a Web host and merchant account provider. The success of your business depends on finding reliable, affordable service providers. We'll show you how to locate and evaluate them.
This Is Only A Test
Since most Web hosts offer access to just one off-the-shelf shopping cart system, you need to find at least three good hosts that support yours. They should all offer approximately the same services at a similar cost. You may need to move your site on short notice if the first host is unreliable. A good, reliable host is critical.
Your first contact with the prospective host is a great opportunity to evaluate how responsive they are to problems and questions. Call and see how long you're on hold. Email a list of questions. Look elsewhere if you don't get a personal response within 24 hours.
Before they get your money is the nicest, most responsive they'll ever be!
Time For The Interview
Prospective Web hosts should be able to answer the following questions quickly and completely. You can probably get most of this information from their Web site's service description and FAQ's, but don't use that online research as a substitute for personal contact.
- What types of technical support are available and when? Email-only tech support can be extremely frustrating for you if the host doesn't respond promptly. Telephone support means you can talk with a live person, but long distance charges can quickly pile up without a toll-free number to call. If the host promises 24/7 support, test it! Place a late-night call or send an email on a holiday weekend and see if anyone responds.
- What is the total cost per month? Besides the basic monthly fee, you could incur additional charges for account activation, multiple email addresses, extra site traffic, database support, etc. Make sure the host is quoting you the cost for all the services you'll need.
Ask about the host's billing cycle. Some hosts bill monthly, but others may require quarterly or even annual payments up front. Good hosts offer a 30-day money back guarantee, but most don't refund the set-up charges. Some Web hosts offer a discount of up to 20% if you pay in advance, but ask how that affects their money back guarantee.
In general, it's best to pay as little as possible up front with a new host at first. Wait to see if the service is good before you lock yourself into a long-term contract.
- What security protocols do you have in place? Request a detailed description of the host's security protocols and make sure they are adequate. Be sure the service you're buying includes Secure Socket Layer (SSL) encryption: you must have a secure connection to transmit credit card data safely.
- Are there download limits? What if I exceed them? You naturally want to attract tons of visitors to your Web site, but success could cost extra if the traffic exceeds what your Web host allows for your account. Some hosts advertise unlimited downloads, while others limit your monthly allowance to a certain amount and charge you extra if you exceed it.
Be sure your account level has the capacity to handle all the extra traffic you'll receive once Search Engine Power Pack gets you to the top of the rankings!
- What other services does my account include? You should have access to multiple email accounts, your server log files, an auto responder to automatically reply to emails and orders, and an online account management system.
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Put together a quick checklist or spreadsheet to track the various Web hosts you're considering. That will make it easier to identify the best three options when you complete your research.
NetMechanic's Server Check Pro will determine if you're getting the level of service the host promised. If not, bail out while you're still under the 30-day guarantee window and move on to your second choice.
Risky Business
Every business that accepts credit cards has some kind of merchant account. The fees can represent a significant expense for small retailers. Online retailers may get charged even higher fees - if they can get a merchant account at all.
That's because a lot of Merchant Account Providers (MAP) view online transactions as inherently more risky because you don't have the actual credit card to scan. That increases the probability of credit card fraud and chargebacks. With more risk comes higher fees -sometimes a lot higher.
If you have a good relationship with a local bank, talk with them first about an online merchant account. If that doesn't work, do some research to locate reputable providers. Internet.com has reviewed several different ecommerce payment systems. OnlineOrders.com has a Merchant Account Provider directory with links to 83 online merchant account providers.
Nothing For Free Here
Expect to pay some sort of fee for every service your MAP offers, including:
- Monthly Account Fee: This is a charge you pay to keep your account open. You pay it whether you actually sell anything or not.
- Transaction Fee: A fixed charge for each online transaction - usually less than 50 cents. A lot of small transactions can really hurt your bottom line.
- Discount Rate: A percentage of the total sale. Fees can range from a 2-3% of the total sale to 10% or more, depending on what product or service you sell.
- Chargeback Rate: A percentage of your total sales that the MAP holds in reserve to cover returns or fraud claims.
- Chargeback Fee: Some MAPs charge an additional fee for each chargeback transaction. You lose twice here: the amount of the sale and a $20-50 chargeback fee paid to your MAP.
- Application Fee: The cost to process your application and tell you whether or not you're approved. You may spend several hundred dollars - only to be turned down. The fee usually isn't refundable. Sometimes you can have this fee waived if you apply to a MAP who has a relationship with your Web host or shopping cart provider.
- Gateway Fee: Gateway providers link your shopping cart system to your bank account. Many shopping cart systems (even the expensive ones) only work with select gateway providers. Make sure you know which providers your system supports. Check with your MAP too, because they may require a certain gateway.
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Some MAPs tack on unexpected extra charges like a $5 monthly statement fee. Be sure the MAP representative gives you a complete list of all fees that you could incur. Use it to estimate the yearly cost of your merchant account.
Merchant Account Alternatives
If you really can't afford a merchant account or can't qualify for one, some companies will process transactions for you. This is called factoring. When your customers get ready to pay, they're taken to the factoring company's Web site and enter their personal data and credit card information there. The factoring provider typically charges you between 7% and 15% of your total sale, a transaction fee, and chargeback fees. Even if you're desperate, this is not a good option.
Instead, consider opening an account with PayPal and receive the benefits of factoring without the huge transaction fees. You can set up a business account for free and use it to accept and send money online. A credit card isn't even necessary; PayPal can also deduct money from a checking account.
The fees are miniscule compared to other MAPs - you pay a small transaction fee, but no monthly minimum charges, set up fees, gateway fees, or application fees! However, your customers must have a PayPal account before they can buy from you. Although setting up an account is easy, the extra steps required may drive away some customers. Online shoppers have a bad habit of abandoning their shopping carts; each additional step in the transaction only gives them more opportunity to leave.
In spite of that, PayPal is a good payment alternative for extremely small retailers. You can test the waters for your product before committing to the high monthly cost of a MAP.
Wrapping It Up
Test your account thoroughly before your site goes live. One of our newsletter subscribers reported that she lost her first $500 in sales before she discovered that her site wasn't connected properly to the gateway provider. While her customers received their merchandise, she never got paid.
Once it's tested, you're ready to start taking orders. But will you get any? Yes, if customers can find you.
You have a lot of fixed monthly costs with an ecommerce site. Now the site has to generate the revenue to pay for them. To do that, you need a promotional strategy to help you generate a lot of site traffic. Use NetMechanic's Search Engine Power Pack to get your site listed with the top search engines. We'll give you valuable tips to help you boost your site to the top of the ranking.
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