Business & Strategy
Ecommerce costs
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4 May 2003
The E-Commerce Times "Hidden Costs of Building an E-Commerce Site" starts out as a good article on costs that catch many new business ownsers by surprise. Merchant account fees, secure certificates, and marketing are things that many first-time entreprenuers fail to include in their operating budgets. Unfortunately, the article glosses over each of these areas and then loses focus entirely, begining to discuss costs and concerns that are inherant in a larger, established business making its first foray into ecommerce.
If you are a small business thinking about adding ecommerce, here are some things to consider.
Merchant Accounts
For the article Lynn Ward interviewed a merchant account provider about the costs involved in accepting credit cards online. What the article fails to mention is that merchant accounts, payment gateways, and banks vary widely in the amounts and types of fees they charge. It is important for a business to evaluate its needs and choose a merchant account accordingly.
If you sell mainly big-ticket items, you will want to shop for a lower transaction percentage but might be willing to accept a higher fixed transaction fee. Sellers who expect lower average order amounts should look for very low fixed transaction costs. If you sell content or services like hosting, you might have a high rate of customers who dispute their charges. In that case, you should consider paying higher per-transaction fees in exchange for lower chargeback penalties.
Like everything else in business, what’s best for someone else might not fit the unique needs of your business.
Secure Certificates
Although the article barely mentions it, Verisign is not the only company from which you can get SSL certificates. There are many companies that provide this service, and Verisign is the most expensive. Thawte has been offering certificates for many years and has services starting at $199 per year.. Comodo’s InstantSSL product works in every major browser released in the last 5 years and can be bought for as little as $49 per year. I’ve used Comodo certificates on several small business sites and they have worked very well.
Marketing
The suggestion that businesses with no experience in Internet marketing hire a professional firm is a good one. But the article goes on to quote rates of $5000-$1 Million per month that will be out of the reach of most small business owners, especially ones that are just starting out. It is possible to market a site effectively for much less than this. I’ve worked with clients who have a monthly marketing budget of much less than $1000 and was able to acheive quality results. How much you need to spend depends upon the business you are in. Some businesses are able to succeed with little or no marketing at all, while others need to devote a good percentage of their revenue towards marketing in order to be successful.
Catalog and Shopping Cart Software
If you are going to run a business online, you’ll need to let people place orders online. Simply listing your products and pricing and asking people to call or email in their orders isn’t going to be very effective. A customer that is shopping online will want usually want to buy online as well, so you’ll need software on your Web site that is capable of taking those orders.
Your options are going to range from simple $5 per month rented carts to the e-commerce software your ISP offers, to more robust software with many options for shipping, customer management, payments, and promotions. Generally, you’ll be happier with the features provided by shopping cart software that you choose than with a simple rented or hosted cart, and it really doesn’t cost that much more. Basic ecommerce software can be bought for only a few hundred dollars, and there are also quality open source ecommerce products that are freely available.
Implementation
With the many choices available, it makes sense to get help choosing your software and planning your ecommerce project. An expert can examine your needs and help you with selecting software, deciding on shipping and payment options, and educate you on customer service issues that are unique to the web. An expert will also help you design and build your ecommerce site, customize and configure your ecommerce software, and guide you through the process of launching a successful site.
An ecommerce consultant can cost anywhere from a few thousand dollars to tens of thousands of dollars, depending upon your needs, their expertise, and the size of your project. As you might expect, a simple site with few products, little need for advanced features, and no integration with other technologies will cost signigificantly less than a larger project that needs to tie into existing warehouse, inventory and point of sales systems.
The best way to get pricing for this aspect of your project is to write down your needs, the features you would like the site to have, and a short summary of your business and vision. This breif can be sent to companies and consultants who will often be able to provide you with a ballpark estimate of the overall cost in implementing your site.