More and more businesses these days are beginning to sell and distribute their products and services via the Internet. It’s a win-win situation – consumers get the best selection at the lowest prices, and retailers get access to markets outside their geographic location. But depending on the type of e-commerce website the business is pursuing, the cost to implement the project could range from a couple hundred to a few thousand dollars. There are some less professional but more cost efficient solutions, as well as some high-end solutions that will have your website rivaling the best e-commerce sites around. In this article I’ll discuss the different options available to website owners as well as the costs associated with those options.
E-commerce on the Cheap
It’s a common misconception that in order to conduct business over the Internet you have to have an expensive merchant account that will allow your customers to pay you by credit card. This used to be the case, but today there are a number of services available that make e-commerce a very affordable option. These services come in the form of third party credit card processors.
A third party credit card processor acts as an intermediary between the customer and your website. Generally, a customer will click on a link to purchase a product and be taken to the third party’s website to process the credit card information in a secure environment. The payment for the purchase is deposited in your account, and the order information is forwarded to you. The only cost to the e-commerce retailer is usually a small fixed fee and / or a small percentage of the sale.
This is a good beginner option for any business looking to make the e-commerce leap because the upfront costs are very low. 2CheckOut (www.2checkout.com) is a good choice for a third party credit card processor – they only require a $49 setup fee, and then $0.45 per transaction and 5.5% of the sale amount. An even cheaper route would be to use PayPal (www.PayPal.com) to receive payment over the Internet. The only downside with PayPal is that the consumer must have a PayPal account in order to use this payment method. The upside of both these products is the fact that they will provide the shopping cart system and associated codes to that are necessary to integrate into your website.
Although using a third party credit card processor can be cheap, it does have its disadvantages. The shopping cart system may not seamlessly integrate with your website because it’s not easily customizable. Also, it looks a little less professional when the purchaser must leave your website in order to enter their credit card information. But, when weighing these disadvantages with the costs associated with building a professional e-commerce website they really don’t seem like a big deal.
Really Taking the Plunge
Opening a fully functional online store with the ability to process credit cards on-site can be a pretty costly production. Here is a list of elements that all need to be integrated: a shopping cart system, secure web server, payment gateway, and a merchant account.
There are some shopping cart systems that are available for free, and many web hosts offer the ability to integrate a shopping cart system into your website. But, if you’d like your system to be fully featured, easy to use, seamlessly integrate with your website, and include advanced functions such as automatically calculating tax and shipping charges, the cost could run several hundred dollars.
The most expensive and difficult part of the process is obtaining a merchant account to process credit card numbers. These accounts usually have monthly and transaction fees associated with them. Fortunately, most businesses already have merchant accounts, and these can be used to process credit cards over the Internet as well. But, in order for the shopping cart system to communicate with a merchant account, they need to be interfaced with a payment gateway. Payment gateways usually require a setup fee of a few hundred dollars and a percentage of each transaction. Lastly, all the communication needs to take place over a secure server. This means that your website hosting package will need to be upgraded to include Secure Socket Layer (SSL) encryption. An SSL certificate is billed on either a yearly or monthly basis, and the cost can total in the hundreds of dollars.
In addition to the extra costs associated with processing transactions right on your website, there is also a significant difference in the price your webmaster will charge to setup the different solutions. Using a third party to process transactions usually just involves inserting a few lines of code into the website which shouldn’t cost very much. On the other hand, implementing a fully functional e-commerce website can easily add another thousand or two dollars on top of all the other costs.
As with any project, it’s probably best to start small before shelling out big bucks for a professional e-commerce solution. And don’t forget, even after you’ve spent thousands of dollars getting your e-commerce website launched, you’re probably going to have to spend thousands more marketing your website in order to recover your investment. E-commerce is not cheap!