Sean from Transfs had a customer contact them asking when would it be time to leave Paypal for a true account that goes through actual underwriting. Sean made the comment that the downside to using Paypal is the user must finalize the payments off the merchant’s site and will go to Paypal’s site to complete the payment. This would result in a less than professional image and may hinder conversion ratios, which would affect your bottom line. This was totally true for many years until Paypal introduced their API service earlier this year. That means merchants can now integrate their web site or shopping cart seamlessly. The API eliminates this issue, so why wouldn’t you go with Paypal? I can think of several reasons. Their reputation, level of customer service (will you be able to get a hold of someone if you need service), no personal service from an assigned account manager and greater chances of issues with their risk department for they never do any underwriting. When you do not underwrite for risk, you will have a tendency to give your merchants greater trouble as you operate on a business practice like “approve first, ask questions later.” He suggested to leave once you are processing over $5K a month in revenue. I suggest doing it as soon as you can afford to.
A comparison shopping site is definitely a new concept for the merchant account service industry. Sean, its founder, formed Transfs as a comparison site for merchants that want to easily obtain quotes from multiple companies. The whole site is based on Interchange plus pricing quotes. The merchant enters some basic information about their business and the processors bid for their business. At the end, the merchant selects the processor that have chosen to do business with. Only at that time, the processor will see the merchant’s contact information to finalize the deal. I spoke to Sean about their service and it seems to be doing quite well for them. He mentioned that have had very small merchants doing 20K a month to merchants doing over 2 million a month use their service.
A successful business person has recently donated 20,000 meals to the needy for the holiday season. This businessman has several companies with one being a firm. All the donations come from him personally. With his generosity, it has enabled him to become even more successful by developing key relationships with other local businesses. Last year he donated 8,000 meals which this year is a big increase over last year. I think it is great when other business people share what they can when they are able to. It helps make the word a better place. His credit card processing firm is called Global Electronic Technology. Personally, I have never heard of them, but I am assuming the company must be doing very for the owner to be able to afford to give 20,000 meals to people in need.
A recent report showed that there is a decline in the number of cards being issued that are tied to cash back offers. Back in 2005, there were over 40 cards and now less than 15. It appears many of them are going to other forms of rewards, such as points and airline miles. All of these cards are known as rewards cards. Merchants essentially pay for the rewards are the Interchange is higher for these types of cards. The future may shift on these types of cards due to the economy, changes in people’s spending habits and possible government regulation in the future if that day does come. Reward cards have become a bigger expense for merchants and a profit area for some companies. Many processors charge merchants heft fees when they process reward cards. The downside is if reward cards disappear, overall credit card usage would decline as many consumers simply use credit cards as a convenience and pay the bill off every month. A larger percentage than you may imagine do this actually. I personally am a firm believe behind this philosophy, only using credit cards as a convenience and nothing more.
A few CEOs have shared their strategies for the holidays that I thought was helpful. The CEO for Barefoot Books brought on a new management team, new web site and a new focus. Instead of mailing out 150K catalogs like normal, they are relying on social media to do the selling this year and hopes it works out. The CEO of Daddies Board Shop ordered 10% more of their inventory than last year and have already had to reorder some products. She mentioned the discounting was very tough last year and they are not getting into it this year. Instead they are selling on the quality of product, that it is new and just arrived and worked on their sales presentation. She also believes consumers are tired of seeing sale signs. The CEO of Gourmetgiftbacks.com has introduced a new line of baskets in the $20 range, but is being careful not to steer away from their core sale in the $60 range. Introducing lower in products can have a big impact on your sales, but you must also consider your costs on those transactions as well if your margins are very slim.
Lets say you get up one morning to go to the donut shop to grab something to eat. You find out you don’t have any cash on hand but plastic. Your bill came out to $2.25 and you hand them your card. They then point to a sign that says $5 minimum purchase for credit card transactions. You get upset and may or may not complete your purchase. But you wonder, is this allowed? The answer is no, even though many merchants enforce this policy. It is against Visa/MC rules. There are other things you can do such as a cash discount, but you can not refuse a credit card sale regardless of the amount.
If yourcompany finds out, they will immediately terminate your account and it may be impossible to ever get one again. So I highly recommend against this practice, it just doesn’t work out overall to benefit the merchant. How many customers will you alienate in the process? I totally agree that it can be difficult to manage the cost when dealing with such low transaction sizes, but consider this. That same customer may come back or is a regular that will spend a lot more next time when he has his family with them.
Mike from allbusiness.com is troubled by how many retailers that do not have a presence online. Many customers will visit your online store long before they will drive to a retail location. They also use web sites to find out what kind of products you carry, research your pricing & product info and if they can find any special deals offered online instead of in the store. However, it changes when you are dealing with younger adults. Many of them shop exclusively online and wont ever walk into your retail establishment. So do you already have an online store? If not, what are you waiting for? It is 2009, it is time to get with the program. Open up your store, setup your shopping cart, get your integrated and start selling!
Amazon is starting to release its sales data for sales on Cyber Monday. They are reporting a 44% increase in visitors compared to 2008, which is great news for the ecommerce world. This doesn’t indicate sales, but gives you an idea that things may be looking up. Among the top retailers, they received over 15% of all US shoppers which is a big market share. My personal favorite store, JCP, only received 2 1/2%. Amazon’s success may have been because of the price wars between them & Wal-Mart which generated a lot of buzz. Amazon also reported nice numbers for the third-party marketplace on their site, some sellers seem to have done nicely for Cyber Monday. This should also be positive news for the credit card processing industry as our revenues are all tied to how much merchants process. We will know for sure in January, but I’m feeling good about things already.
Many merchants contact GrooveCommerce during November but are afraid to touch their store until after the holidays. They don’t want to make any changes and hurt their potential holiday sales. This may be true, but it also works the other way around. If they do not make any changes, then they could be giving up a lot of extra sales as well. Site load time – us consumers are more impatient when looking online than ever before. With most users on high speed Internet, we expect everything to happen instantaneously. Studies show that you only have a few seconds for your site to load or many of your visitors may leave. So it is very important to have a fast loading web site, which all comes down to your web host. Shipping schedule – it doesn’t matter if you are solely an ecommerce store or not, you need to prominently display your holiday shipping schedule so shoppers know when they should expect their package and if it will arrive in time. Lastly, check your site for errors. Go through your site like a shopper and see if you can find any errors that may present issues for your customers. Such as add an item to your cart, check out and leave some information blank like email, phone, address, etc. What kind of error message does it give you and is it descriptive? This also includes your shopping cart and integration.
A new site called Square, has been valued at 40 million and it hasn’t even launched yet. One of its creators is the founder of Twitter. This may be a big part in their success in funding an evaluation, but my response to that is this. You have a guy that was lucky and founded a site like Twitter that took off. He hasn’t done anything in my opinion to demonstrate that he is a great entrepreneur. Twitter has yet to make any money! The concept of the site is to a be a credit card payment service similar to Paypal. They promote that anyone can accept a credit card. Whether it is for some t-shirt sales nor a one-time event. All you need is a phone that has an audio input jack. They also claim you can accept credit cards within minutes.
Being in thebusiness, I was a little concerned about this once I started reading the article. After reading all of it, I received the impression that this service will be targeted to merchants on the street that have their customers in front of them. There will not be any online sales like Paypal, so no worries in that area. I also don’t see much of a concern with regards to merchants wanting to take payments in-person. I only see very small merchants that would be attracted to this type of service, ones that process so little or infrequently, that they are not profitable merchants. The article also gave the impression it would focus on consumers that simply need to take a payment or two, not merchants with real businesses. The big concerns would be security and it being embraced by consumers. I don’t think many consumers will be comfortable with the setup but time will tell. Either this will turn into a profit or it will sink fast. I give them a year before we see the final fate of this company.