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Handling Payments
Ever since eBay purchased the payment service PayPal in 2002, payments on eBayhave been an easy matter—in theory, at least. PayPal is convenient and well integratedwith eBay. You can jump to your PayPal payments directly from My eBay, and youcan print shipping labels by clicking on a link in My eBay that takes you to theappropriate part of PayPal’s website. To be sure, PayPal has had its share of serviceglitches; it was offline for several days at one point, and at the time I was writing thisbook, it was forced to admit that it had mistakenly double-charged a few of its debitcard users. And PayPal doesn’t come cheap for merchants—it’s frustrating to seeseveral dollars being deducted from a payment that a buyer has sent to your PayPalaccount.
PayPal has more positives than negative points, however. The big asset is thatPayPal is so well established as a payment system that most of the marketplacesprofiled in the book include it among their suggested payment options for sellers.Nevertheless, it is to your advantage to accept other payment options as well, whetheryou’re selling through your own website or through an auction site.
In this chapter, you’ll learn about the different payment options available to youwhen you sell outside of eBay. You’ll learn how to add PayPal to your website, howto obtain a merchant account so you can receive credit card payments directly, andabout the pros and cons of other options such as money orders, checks, wire trans-fers, and—shudder—cash.
Using the Easiest Option: Piggyback onto YourMerchant’s Payment System
If you don’t want to have to determine the types of payments you’ll accept from yourcustomers once you move away from eBay, there is one option that doesn’t require
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any work on your part: taking advantage of your merchant’s existing payment system.The primary examples here are Amazon.com and uBid. Anyone who wants to buy orsell on such sites must register with these sites beforehand. As part of registration,you are required to submit a credit card number. All payments are deducted fromthat number. No other option is allowed. It’s a transparent and easy-to-use systemand one that doesn’t require any overhead on your part. In return, you’re free tofocus on creating listings, shipping out your merchandise, and other tasks.
Note: Other marketplaces that have their own payment systems includeLiquidation.com (which lets buyers submit credit card payments).
Working with Online Payment Services
Because you’re used to selling on eBay already, you’re familiar with the speed andconvenience of electronic payment systems. They enable a buyer to make a charge toa credit card account or a debit from their checking account. The funds are thentransferred to your own account with the payment service—after the service deductsa fee for receiving a payment, of course. The two options in this area are PayPal andEscrow.com.
Using PayPalThe fact that eBay owns PayPal might make it seem like only eBay members can useit. But anyone can sign up for an account and use it for any auction service. On anon-eBay marketplace, you just don’t get the convenient level of integration you areused to with eBay and PayPal; you can’t jump from your personal home page onAmazon.com to PayPal, for instance, and you can’t print shipping labels from yourpage on your My iOffer page. Nevertheless, it makes sense to accept PayPal forauction purchases no matter what marketplace you use. Most online shoppers expectto pay using PayPal. And PayPal can handle the virtual ‘‘card swipe’’ (the submissionof customer purchasing data) and the verification of customer information. The cus-tomer can use a credit card number to make a purchase, and PayPal debits the cus-tomer’s credit card account and transfers the payment to you.
Adding PayPal to Your WebsitePayPal isn’t just for auction and personal payments. If you sell on a website, PayPaloffers three types of merchant tools. These tools give your customers various ways to
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pay you using their credit cards or by making debits from their checking accounts.You can find the options described at https://www.paypal.com/us/cgi-bin/webscr?cmd(cid:4)_merchant. They are:
•
PayPal Website Payments Standard. If you already have a shopping cart inte-grated into your website, PayPal provides the back-end functions that enable custom-ers to pay you. You add a PAYPAL SECURE CHECKOUT button to one of your catalogor shopping cart pages. The customer fills out a form on PayPal and transfers pay-ment to you. If you don’t have a shopping cart, you can install one provided byPayPal itself. You pay no setup fee, but you are charged a 1.9 to 2.9 percent transac-tion fee and $.30 per transaction.
•
PayPal Website Payments Pro. This solution lets you control the paymentprocess yourself. Buyers aren’t directed away from your site to PayPal’s in order tocomplete the transaction. You process the payments on your site and PayPal handlesthe transfer in the background. You pay a $20 setup fee and transaction fees from 2.2to 2.9 percent plus a $.30 per-transaction fee.
•
PayPal E-Mail Payments. You send your customer an invoice by e-mail; thecustomer clicks on a link and is directed to the PayPal website to complete thetransaction.
With all the warnings about clicking links in e-mail, the third option might turnoff some customers. The best option is the second one, which keeps the customer onyour site at all times. The longer you can keep customers in your domain, the morelikely they are to make subsequent purchases or to interact with you in other ways—bysubscribing to an e-mail newsletter or mailing list your might offer, for instance.
Joining PayPal’s Online ‘‘Mall’’I had been using eBay and PayPal for quite a while before I realized that PayPal hasits own online shopping mall called PayPal Shops. You click the link SHOPS in the setof links at the bottom of virtually any PayPal page or go directly to https://www.paypal.com/us/cgi-bin/webscr?cmd(cid:4)_shop to visit the mall.
If you already have a PayPal account and accept PayPal, you can register to jointhe mall. You also have to upgrade to a premier or business account, verify youraccount, and sign up to earn Money Market interest on your PayPal account. Onceyou meet those qualifications, you can enter your website as one of the stores inPayPal Shops. You check off boxes that describe what you sell, and choose salescategories for your merchandise. Both are important; they control how shoppers willfind what you have to offer when they do a search on the site. It’s not clear to me
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how many people go to PayPal to browse through the PayPal Shops area; however,when someone pays you for an auction or other purchase, they are sent a notice thatencourages them to visit your website as listed in the mall. This kind of referral isinvaluable; it encourages shoppers who have already shown interest in what you haveto sell and enough trust to actually buy something to return and shop for more.
Using Escrow.comEscrow.com has been around about as long as PayPal, but it has never received therespect given to PayPal. That might be because it holds money in a way that buyerswould love but sellers who are used to eBay would not:
1. The buyer agrees to purchase the item.2. The buyer electronically transmits the agreed-upon payment amount
to
Escrow.com.
3. Escrow.com ‘‘verifies’’ the payment—a process that can take two days forcredit card and PayPal payments or ten days for checks or money orders.4. Escrow.com reports to the seller that the payment has been received and noti-fies the seller that the item should be shipped—but holds on to the paymentwhile shipping occurs.
5. After the item has shipped and the buyer has had time (the exact amount oftime is agreed upon by both buyer and seller when the buyer agrees to thepurchase terms) to inspect the merchandise to make sure it is in acceptablecondition, the buyer notifies Escrow.com.6. Escrow.com releases payment to the seller.
This sort of system safeguards both buyer and seller. But sellers who are used toreceiving ‘‘instant payment’’ notices from PayPal only minutes after one of their itemshas been purchased will probably find it difficult to put Escrow.com in charge oftheir hard-earned money, if only for a little while.
Becoming a Credit Card Merchant
One of the best reasons for selling on your own website is simplifying payments foryour customers and avoiding the fees charged by your marketplace of choice. One ofthe best reasons for becoming a credit card merchant is the ability to process creditcard transactions directly from your customers—you don’t have to get PayPal involved
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in the mix, and you don’t have to accept PayPal’s fees. You do have to pay fees toyour credit card transaction company, but if you operate both brick-and-mortarstores and online stores, you can use your credit card payment system for bothvenues.
Traditionally, obtaining a credit card merchant account from a bank or a savingsand loan association is a time-consuming and difficult process. But a number ofservices are available to streamline the process. Typically, credit card services like 1stAmerican Credit Card don’t have a brick-and-mortar presence; they are dedicatedsolely to serving online merchants. If you don’t use PayPal or another service likeWestern Union BidPay or Escrow.com that enables buyers to pay with credit cards,it’s a good idea to obtain your own merchant account. Online shoppers are used tobuying on impulse, and many of them want to be able to hand over a payment assoon as possible so that they can receive what they have purchased as quickly aspossible. You do have to complete a series of steps, however, including the following:
Getting Approved
Whether you apply to a bank or online-only credit card company, you need to beapproved. Any financial institution that grants credit is going to want to know thatyou are a real business entity. You’ll probably have to submit your checking account,and you might also need to provide your tax ID number and some business referencesas well. A bank can take days or weeks to review and approve your application for amerchant account. Other merchant account services will take much less time.
Learning About Fees and Rates
If you apply for a merchant account from a traditional financial institution, you maybe charged an application fee of $300 to $500 or more. Online companies like Mer-chants’ Choice Card Services (http://www.merchantschoice.usa.com) do not chargean application fee.
The institution that provides you with credit and processes transactions for youhas to make money somehow, of course. All merchant account companies makemoney on the transactions they facilitate by charging a fee called a discount rate. Thisfee usually costs from 1 to 4 percent per transaction. You’ll also probably be chargeda monthly fee for the service, too. Even though 1st American Credit Card Servicecharges no application fee, you are still charged the following if you sell through theInternet:
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• A discount rate fee of 2.32 percent• A $.25 per-transaction fee;• A $9 monthly statement fee• A minimum charge of $20 per month
Note: Most merchant account companies enable transactions throughthe Visa and MasterCard networks. If you want to give your buyers theability to use their American Express or Discover cards as well, you needto file an application with each of those credit card companies separately.You become an American Express merchant by going to the AmericanExpress Merchant website (http://www.americanexpress.com/homepage/merchant.html). You become a Discover Card merchant at http://www.discoverbiz.com.
Understanding Credit Card Transaction Software andHardware
How does a transaction actually take place on the Internet? You need to have anumber of elements in place, including the following:
•
A Purchase Form. A form that buyers fill out to provide you with their name,
address, and credit card number.
•
A Secure Server. A secure server encrypts information sent to it to protect
buyers’ identities and financial information.
•
A Way to Connect to the Credit Card Network. You need software or hardwarethat is configured to transmit the customers’ purchase information to the bankingnetwork. This is what normally happens when a cashier swipes your credit cardthrough a piece of hardware called a terminal. Both options carry their own fees. Thesoftware used by 1st American Credit Card, which is called PC Charge Express,requires merchants to either purchase it for $295 or lease it for $22 to $34 per year.The hardware used to process credit card information, which is called a terminal,costs anywhere from $17 or $26 per month or purchased for $229.
•
A Way to Verify Customer Data. Credit card fraud frequently occurs whendishonest individuals use stolen credit card numbers to make purchases. The address
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associated with the card number is different from the address that the thief uses toreceive the merchandise. (For example, a credit card number stolen from the owner,who lives in Illinois, might be used by a thief who lives in Bolivia and asks the sellerto ship to an address in that country.) Many credit card merchants prevent suchtransactions by checking the credit card holder’s address against the purchaser’s ad-dress to make sure the two addresses match. You can pay a verification service to dothe checking for you for a monthly fee, or you can do the checking yourself manually.
Tip: ICVerify is software you can purchase from http://www.icverify.com. PCCharge by Go Software Inc. (http://www.gosoftinc.com/products/index.htm) is software that also allows you to verify credit carddata yourself.
As you can see, there are many elements and fees involved with setting up amerchant account. It’s quite natural to ask why you should consider going throughthe effort at all, when PayPal or BidPay is much simpler. One reason is that yourcompany has many different locations, including brick-and-mortar stores. Anotherreason is that you want to be in charge of security, and not depend on PayPal orother services to perform the verification for you. (Fraud does occur on PayPal and,as many sellers discover, PayPal does not always provide reimbursement when itoccurs.) At any rate, it’s a step you should consider carefully, and only undertakewhen your business is well established and you have lots of credit card purchases toprocess.
Finding a Secure ServerMost Web servers are not secure because they don’t encrypt information that is sentto and from them. Information as sensitive as credit card numbers has to be protectedfrom thieves who would be only too happy to get their hands on legitimate creditaccounts they can then use to make fraudulent purchases on other websites. To pro-tect the information as it is sent from the buyer’s Web browser to the Web server thatprocesses the information received from filling out the form, it must be encrypted.
Most e-commerce hosting services charge an extra fee to give their clients theoption of using a secure server to retrieve payment data, but there’s really no otheroption; buyers just don’t feel secure (and in truth, they shouldn’t feel secure) unlessthey see the ‘‘closed lock’’ icon at the bottom of their Web browser window, whichindicates that they are connected to a secure site. If you want to receive credit card
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payments directly from your buyers using a merchant account, you’ll definitely wantto find a Web host that protects your business and your customers by allowing youto use a secure server. Ask your host whether a secure server is available and, if so,what extra charges apply.
Note: The standard method of encryption used in most secure Webservers is called Secure Sockets Layer, which uses long encrypted blocksof alphanumeric characters called keys to protect data.
Processing the Credit Card PaymentsTo submit the credit card information you receive via your secure server connectionto your bank or credit card company, you need to obtain point-of-sale (POS) hard-ware or software. The most common type of hardware is a terminal—a plastic box ofthe sort you see in your local retail store. The software is a program that contacts thebank through a dial-up modem or through your high-speed Internet connection. Ineither case, the requested purchase information is authorized and the data is transmit-ted to the financial institution you use. The financial institution deducts the appro-priate fees from your account, and—most important—deducts the purchase price fromyour buyer’s credit card account.
Note: You can hire a credit card processing company like VeriFone, Inc.(http://www.verifone.com) or AssureBuy (http://www.otginc.com). Bothof these companies facilitate automatic credit card processing online. Thebuyer’s shipping address is compared against the shipping address associ-ated with the credit card and, if the addresses check out, the purchase isimmediately processed. Keep in mind, though, that because automatictransactions take place so quickly, the client can make a purchase andthe financial part of the transaction can be completed whether or not youhave an item in stock. If the item is on back order and the buyer hasalready paid for it in a matter of minutes, he or she can become verydissatisfied with the delay. To prevent this type of customer dissatisfac-tion, some online sellers choose not to use automatic processing, andprefer to assign staff people to process each transaction themselves.
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Accepting Other Forms of Payment
Because this book assumes that you are already an experienced eBay seller, you havean advantage over online merchants who are novices. You already have the answersto basic questions such as: Is it safe to accept personal checks? How long should Iwait for checks to clear? How long should I wait for money orders to clear? Whatshould I do if a customer wants to wire transfer the money? The basic rules associatedwith eBay sales apply to other venues as well, and they are described in the sectionsthat follow.
Accepting Personal ChecksThe good thing about accepting a personal check is that an escrow service doesn’tdeduct any fees for it. You get 100 percent of the payment. The bad thing is thechance that the check might bounce. How do you know that a personal check won’tbounce? Conventional wisdom tells you to deposit the check in your bank accountand to wait for seven to ten days. At the end of that time, if a notice of nonpaymenthas not been sent to you by your bank, you can release the merchandise and ship itto your customer.
Conventional wisdom falls short in several respects. Some buyers don’t under-stand that you have the right to wait a week or more to see if the check is going tobounce. They are likely to complain to you after only a few days—or at least inquireto see where the shipment is. The truth is that a check can take up to a year tobounce. You can’t tell even after a week or ten days if the check is ‘‘rubber’’ or not.Many sellers simply check the buyer’s feedback to see if there are any complaints orevidence of nonpayment. If the buyer has good feedback, you can safely ship the itemimmediately after receiving the check. But many marketplaces don’t have as well-developed a feedback system as eBay does; most of their members simply don’t havelarge quantities of feedback. If you sign up with a marketplace where most users don’thave feedback—or that doesn’t have feedback ratings at all—you may want to eliminatepersonal checks from your approved payment list altogether.
Accepting Cashier’s Checks
Cashier’s checks seem more secure than personal checks. However, you still need toallow several days for a cashier’s check to clear, just as you would a personal check.You probably won’t get many cashier’s checks, however, because many banks chargeas much as $3 to process them.
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Accepting Money OrdersMy eBay advisors (PowerSellers whose opinions I value) tell me not to worry aboutmoney orders. I haven’t had any problems with them myself. When a buyer obtainsa money order, he or she has to pay a fee to obtain it. Because of the effort involvedin going to the post office or other institution to get a money order, and the fee, youcan feel reasonably secure that the buyer can be trusted.
You may also receive money orders from Western Union BidPay; this service isparticularly reliable because, again, the buyer has to pay for the money order, notyou. Western Union then prints a paper money order and snail mails it to you. BidPayalso notifies you when the payment has been sent.
Working with Wire TransfersWestern Union wire transfers are in direct contrast to Western Union money orders.Wire transfers are notoriously insecure, and they have been the source of many In-ternet scams over the years. It’s quite possible that the request you receive to accepta wire transfer is legitimate, but there are many other options for payment and youshould encourage buyers to use one of them instead.
Accepting CashConventional wisdom says no, because if the payment is lost in the mail or stolen,it’s gone. You can claim to your buyer that it never arrived, but your buyer has noreason to trust you, and no way of recovering the payment (a check can be stoppedor a money order cancelled). Some buyers insist that they are more comfortablesending cash and have never had a problem with this method, even if it is not one ofthe payment methods you specify in your auction descriptions. Use your judgment.If the buyer’s feedback is good, you may want to let the person send cash if he or sheinsists on it. I have had buyers send me cash and haven’t encountered problems—notyet, at least.
Payment methods become more critical when you leave the friendly confines ofan auction site or other marketplace and start up your own website. A well-designedwebsite can serve as the centerpiece of your online auction efforts; the must-havefeatures and the critical choices you need to make are described in Chapter 16.
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Selling ThroughYour Own Website
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C H A P T E R (cid:3)16
Planning Your Own Website
For a growing number of businesses, eBay is only a ‘‘front door’’—a way to attractcustomers; and eBay serves this purpose very effectively. Although it’s a bit of anexaggeration to say that all 42 million of eBay’s members are going to look at eachof your sales, it’s fair to say that the site does attract thousands, if not millions, ofpotential customers. Once eBay brings individuals to the doorsteps of the businessesI’m talking about, they do everything they can to point shoppers to their websites,where they can sell directly to those customers without having to pay eBay’s fees.
Some sellers list only a fraction of their total sales inventory on eBay. One tech-nique is to put a representative sample up for sale in an eBay Store so that anyonewho makes a purchase can be sent a business card or information sheet containingthe URL of the website. Other sellers put their excess inventory or reduced pricemerchandise on eBay—knowing that, in general, eBay shoppers love bargains—whileputting their new or first-line stock on their own website.
I say ‘‘their own website’’ because an eBay Store or an About Me page is essen-tially a small-scale website that eBay allows you to create with eBay functioning asthe host. In this chapter, you’ll learn how to find your own host and create a websitethat you manage and control—a site where you establish your business presence justthe way you want it to appear, and where you give the customers you’ve met on eBayor on other auction sites a place to interact with you more fully.
Choosing Your Host
It pays to shop close to home. This applies whether you are looking for new set ofdining room furniture for your residence or for a website. The first place to look—especially if you are operating on a limited budget—is the company that gives youaccess to the Internet. That would be your own Internet Service Provider (ISP). Ifyou want more hosting space or extra features, you’ll probably need to sign up for an
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account with a full-time Web-hosting service—a company that focuses solely on pro-viding clients with disk space and software for hosting websites.
Note: If you have a high-speed Internet connection on a fast computerwith several gigabytes of storage space and a Web server application suchas Apache, you can set up your own Web server in your home or office.Nevertheless, this option is for advanced users only; along with greatercontrol, you also gain responsibility for the problems and configurationduties that go along with running a Web server.
Hosting with Your ISPThe company that provides you with access to the Internet almost certainly gives youe-mail and Web server space as part of your account. It is to the company’s advantageto do so, because it wants you to be happy with its level of service and it wants youto spend your money with it. Even if the company does not charge extra for e-mailservice or Web hosting, it hopes you’ll upgrade to a more robust level of service atsome point.
The popular ISP Earthlink (http://www.earthlink.com), at this writing, providescustomers with basic high-speed Internet access for $19.95 per month for the first sixmonths ($39.99 per month thereafter). This package includes eight e-mail address,Web-based access to e-mail, and 80MB of Web storage space (10MB for each e-mailaddress you use). You also get to use the interactive Site Builder utility, a Web-basedform you fill out to create and format your pages. This is everything you need forcreating a commercial website. My friend Betsey Means hosts her Womanlore(http://www.womanlore.com) website shown in Figure 16-1 with Earthlink.
In the beginning, Betsey didn’t pay anything extra for her site. She had a URLassigned to it by Earthlink. Such URLs look like this: http://hosting.earthlink.net/(cid:5)betsey/index.html. For an extra monthly fee, she gets e-mail service and domainname support as well as Web hosting. That means she purchased her domain name‘‘womanlore.com’’ from a domain name registrar (in this case, Network Solutions,http://www.networksolutions.com) and associated it with her Earthlink website. Sheis also able to create e-mail addresses that end in the domain name womanlore.com:Betsey@womanlore.com, info@womanlore.com, and so on.
Note: You don’t need to use Network Solutions to search for and pur-chase a domain name. It may be the oldest and best-known domain name
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registrar, but it’s far from the only game in town. Shop for a domain nameregistry that has been accredited by the Internet Consortium for AssignedNames and Numbers (ICANN) and that has authority to sell names inthe domain you want (.com, .net, .biz, and so on). You’ll find a list ofregistrars at http://www.icann.org/registrars/accredited-list.html.
Figure 16-1. You can use your ISP to host a beginning-level website that supports your auction sales.
(cid:2) Betsey Means Wills, owner of Womenlore, Inc.
Finding a Full-Time Web HostIf you are planning a commercial website or a site that contains a substantial level ofcreativity such as forms, audio, or video, you should sign up for a full-time Web-hosting
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solution. A full-time hosting account gives you a wide range of features needed to runa website.
You don’t necessarily have to sign up with a new company (a company otherthan your ISP) to obtain a full-time hosting account. If you turn first to your ISP,you’ll probably find that, by paying a nominal additional monthly fee, you can havethe ISP give you its hosting account for full-time commercial websites. In my owncase, I pay my ISP an additional $9.95 a month for a hosting account that includes:
••••••
500MB of Web space10GB of monthly data transfersThe ability to use my domain name of gregholden.comTen e-mail addressesThe ability to run my own Perl, PHP, and other scripts on the serverStatistics that let me track visits to my site
Although your own ISP gives you the most convenient option for a full-timehosting account, you might find a better deal by shopping around. Where do you findWeb hosts? A few directories gather detailed profiles of Web hosts and ISPs and sortthem by geographic location and other qualities. Two of the best known are TheList (http://www.thelist.com) and Providers of Commercial Internet Access (POCIA,http://www.celestin.com/pocia). You might also consider some of the following typesof Web hosts:
Finding Free and Almost-Free HostsA handful of sites provide users with free hosting—at least, the account is free interms of the amount of money being charged. In reality, you end up paying in otherways. You may have to display advertisements on the Web pages you create; you mayalso be required to view pages as you use the hosting service’s Web editor; or youmight ‘‘pay’’ in the sense that you have less disk space and fewer features than othertypes of accounts. Examples include Yahoo! Geocities (http://geocities.y