Tony Sarno20 February 2007, 8:50 PM
Anyone contemplating the setting up of an online store needs to know how a cart actually functions. We set up an ezimerchant Professional cart from On Technology.
A shopping cart hosted on your own server gives you complete control over your online shopfront. As part of our investigations into e-commerce options, we examined closely the ezimerchant Professional shopping cart from Australian company On Technology. It's a good example of a cart that can be managed directly by the merchant.
Ezimerchant Professional already comes with pre-built links to transaction severs and payment gateways, so it doesn’t require the merchant to have programming expertise to set these up (as you would on an open source cart).
If you would like to test it yourself, go to On Technlogy's site and download the ezimerchant cart, which comes with a free trial subscription to a payment server. This will enable you to create a product catalogue, publish it to a web site of your choosing (you host the cart software) and even sell to customers for the trial period (if you choose some of the free payment processing systems supported by the cart).
But first some theory. Shopping carts are run by a surprising variety of businesses. Achim Schiller, the managing director of On Technology, says ezimerchant cart customers range from home based merchants (that sell arts and crafts products) to small businesses selling everything from computer gear and jewellery to performance car parts. For most businesses, the online store provides a second income stream, but for many, says Schiller, the revenue generated online is enough to be their only source of income.
Business requirements
There is no legal requirement to have an ABN (Australian Business Number) to sell products online, but you’ll need one if you want your online store to receive credit card payments through the traditional credit card processing system, since that requires merchant account with your bank. If you’re prepared to receive credit card payments through a service like PayPal, (which will do all the credit card processing for you) you can get away with not being a business. If you don’t already have access to a web server, (usually the one that’s hosting your web site) you’ll also need a hosting package and a domain name to host the online store
What to sell
According to Schiller, the best sales figures are achieved by online stores selling niche products instead of widely available mass market goods. Even if the product you want to sell is from a popular category such as wine or jewellery, it may sell well if it’s from a niche in the category. Schiller points to a long-time ezimerchant cart customer, a jewellery retailer who specialises in silver jewellery as an example of someone doing this successfully.
How the shopping cart works
The first part of the shopping cart is the product catalogue that you generate on your PC with the ezimerchant cart software (and then upload to a server of your choice). The second is the checkout function, where the customer pays for the goods.
With the ezimerchant cart, the latter is not hosted on your server, but on ezimerchant's. Your cart’s checkout pages sit instead on the ezimerchant Global Transaction Server, the secure environment that processes the customer’s payments. When customers hit the checkout button on your cart, they are transferred to the GTS server.
The creation of an ezimerchant cart (as with similar carts) is a wizard -driven process that’s easy to follow once you fire up the software on your PC. It lets you add product categories and photos, descriptions and prices of individual items you want to sell online. For the catalogue’s appearance, you can use templates provided by ezimerchant or customise them to get the look you want. When you’ve finished, the software uploads it to a server, so it will be publicly accessible.
Payment methods
Payment methods for your store are an important decision. ezimerchant offers several (you pick them during the installation process), including: credit card, cheque, direct deposit, cash on delivery, pickup, customer account, money order, PayPal and Paymate (an Australian equivalent of PayPal).
If you want your store to receive credit card payments, the ezimerchant cart will ask you whether you want to process them manually or in real time.
Manual processing of credit cards is exactly the same as used in any bricks and mortar retail outlet: you manually input the credit card details received from your online customers through a physical EFTPOS terminal. You need a merchant account with your bank for this, but it’s the same type as used by traditional retail businesses. If you have a retail store you already have the facilities to receive a credit card payment manually via the net.
What actually happens in online manual processing on the ezimerchant cart is that when customers complete the checkout their credit card details are encrypted and stored on the ezimerchant payments GTS server. When you download the customer’s order, the credit card details are made available for entering into an EFTPOS terminal.
Schiller says the bulk of ezimerchant’s customers use manual processing because it’s cheaper than real-time credit card processing, and because many already have the capability through their existing bricks and mortar stores. However, manual processing doesn’t cut it if your online store is selling lots of product.
The better option here is real-time credit card processing, which gives your store immediate access to the credit card processing networks. You also need an internet merchant account, which is different to the one required for manual credit card processing. To issue you with one, the bank will need your ABN and will want to see the store’s business plan and projected revenue.
If you choose real-time credit card processing, ezimerchant’s software will ask you to select a payment gateway. In real-time credit card processing customers supply their credit card details and the ezimerchant GTS server sends these to the chosen payment gateway. In turn, the payment gateway communicates with the credit card processing network where the customer’s funds are checked and a confirmation is sent back to the GTS server for the customer’s funds to be transferred to your bank account. The links to the payment gateway don't necessarily have to go through the shopping cart provider as with the ezimerchant example - you can set up a cart with direct links to the payment gateway, but this is a much more complex process that requires some programming skills.
A dropdown menu of payment gateways supported by ezimerchant includes eWAy, DirectOne, NetRegistry and several others. While they have different features and pricing, Schiller says the criteria for choosing the right one often comes down to how each charges. Some, like NetRegistry, have a flat monthly fee, which works out better if you’re selling high volumes of products. Others have per-transaction fees, or combinations of both.
It’s important to note that the payment gateway and your internet merchant account will have their own establishment costs and monthly fees. These are in addition to what you would pay your shopping cart provider to host your e-commerce store or to provide you access to the payments server.
In the ezimerchant example, if the ezimerchant cart is $29.95 per month (which gives you access to the payment server), you also looking at around $20 a month for your payment gateway account, plus transaction fees of up to 2% of the value of the goods sold. And a similar deal is required for your internet merchant account. Payment gateway and net merchant account establishment fees range from $200 to over $500.
By far the simplest and cheapest payment method if you don’t want to bother with ABN’s, bank internet merchant accounts and payment gateways is a service like PayPal.
On Technology recommends that anyone just kicking off a simple online store should go with a PayPal –style service. When the online customers go to the checkout on your site, their payment data is collected by the ezimerchant GTS and used to prefill part of a PayPal form, on which the payment is then finalised by the customer. Alternatively, you can just stick a “Buy Now” button which takes them out immediately to a PayPal form.
The advantage of PayPal is that there are no setup charges, flat monthly charges or gateway fees. You pay per transaction, with fees ranging from 1.1% to 2.4% plus $.30 per transaction. Generally this is more expensive per transaction than credit card payment systems, but there are no big setup fees or monthly charges, so for a small business not selling a high volume of goods, it’s a far better option.
NEXT: Designing the store