eCommerce Explained: How to Sell Online
eCommerce is, of course, the process of buying something via a website. Almost everyone has bought something online at some point. Although the process may vary slightly, digital shopping closely parallels its virtual counterpart: you add the items you want to your basket and go to the checkout to make your payment. Instead of dealing with a cashier or shop assistant you enter your payment details—including your credit or debit card—into a web page and the transaction is complete.
Buying online is simple; selling online is a different matter. Below you will find eCommerce explained: How to sell online.
To conduct automated sales online you need a payment gateway. This is a way of taking your customers’ card details and sending them to a bank for processing. If you use a payment gateway you have two options: you can use a third party payment processor or you can use your own merchant account.
Third party payment processors
Third party payment processors let you use their merchant bank account instead of your own. PayPal are perhaps the most famous example of a third party payment processor. When the payment is made they collect the money on your behalf and then you collect it from them. This may sound like a convoluted way of doing it but there is good reason for this—and it will be explained in due course.
Using your merchant bank account
Using merchant bank account means that funds from your website sales go directly into your company account thus eliminating the need for a third party. All sales on your website are the same as taking card payments over the phone and entering them into your card machine (i.e. cardholder not present).
Which one is right for your website?
To accept payments directly into a bank account you need a special kind of account known as an Internet Merchant Account (IMA). Banks do not hand these out to anyone and they are only available to businesses and sole traders. Even if you do operate as a business your accounting history will usually be scrutinised by the bank before they give you an IMA. For this reason it is very difficult for startups to get one.
Third party payment processors are available to most people including personal users. So if you’re a hobbyist trying to sell a few items in your spare time this is the option for you. They usually carry with them less commitment and responsibility and so are useful for businesses testing the water or startups with no credit history. They do charge higher fees though and sometimes you have to wait a certain amount of time to collect your money.
IMAs are harder to obtain and the onus of chargebacks (a refund forced by the bank) is on you. But they are cheaper long–term and the money goes straight into your account.
Taking credit card information on your own site
If you do decide—and are able—to use your own merchant account you then a further decision to make: do you take credit card information on your own site or use a third party site (not to be confused with a third party payment processor)?
Taking cards on your own site requires further responsibility. You will need to make sure all transactions are secured via industry standard encryption (SSL certificate) and that your website’s server is safe enough to be used is this way (PCI audit/compliance). While this allows for a more seamless checkout process it will cost more time and money to build.
If you use an external site to take payments the onus of security is completely taken away from you. Most visitors are comfortable with this method but it means there is less consistency in the checkout process.
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