Economic Issues

I’m curious as to how the economy is affecting small dropship retailers. My two stores are fairly young, so they are growing, although not tremendously. I’m sure in a stronger economy, I’d be doing better, but I’ll take what I can get right now.

So does a weak economy help or hurt us small retailers? I guess there are two sides. On one hand, Americans in general have less money to spend on stuff. So depending on what you sell, your customers have less income to buy your goods. So certainly we’re not in great shape in that regard. The price of everything is going up, so manufacturers will have to start raising prices. This causes your costs of goods to rise, and in turn, you may have to raise prices. No body likes this, and your customer will be unhappy. Two strikes. Finally, shipping costs are on the rise which may cause shopping carts to be abandoned once they see how much shipping will cost. Three strikes, ouch.

On the other hand, all retailers are facing these same factors. At least we don’t have large facilities to man, or pay rent on. We don’t have big inventory issues or have to worry about cutting jobs as the brick and mortars do. Secondly, fuel is the main reason that shipping costs are going up. So customers do have to choose between spending money on shipping, or putting gas in the van to drive to the mall. For me personally, I’d still rather order from my computer than run around town. Finally, the economic stimulus checks are coming, so maybe things will jump up soon.

I want to hear from you. What are your thoughts? How is the economy helping or hurting your business?

Paypal As A Merchant Account

I’ve been asked about using Paypal and Google Checkout as a method of payment in a store. I’m happy to give my thoughts, but first a disclaimer. I’ve never used Google Checkout, so I don’t have any comments about it. I would assume that many of my thoughts about Paypal would also apply to Google Checkout, but I really don’t know.

As I’ve mentioned before, I own and run two separate online stores. Both of them have Paypal loaded as a payment option in addition to a regular merchant account. Here’s an interesting tidbit, my first store, which has been open for almost three years, gets a Paypal payment almost every day. My second store, which has been open for around six months, has never gotten a Paypal payment. I have no earthly idea why this is. Both stores are hosted by Yahoo, have the same checkout procedures, and sell similar (but different) product. It’s very interesting to me that customers would use Paypal on one, but not the other. Any ideas?

I think that having a Paypal option on your site is really important in this day and age. EBay and Amazon both offer it, so why not you? It’s free and simple to set up a business account. Plus it gives consumers a little more confidence as they don’t have to type in their credit card number into your site.

I don’t notice much difference between the fees of Paypal versus my merchant account. One drawback is that Paypal does not automatically deposit funds into your checking account like your merchant account does. If you want that money moved to your bank, you’ve got to manually do it. Not a big deal to me, but some might find that to be a pain.

Paypal gives consumers the option to verify their shipping address, and their bank account; plus they protect the merchant if you sell to consumers who have taken the time to verify both. Unfortunately, many consumers fail to complete these processes even though they are terribly easy. Many complete one and not the other. This gives you a decision to make. If they’ve failed to verify anything, I handle it just like an AVS mismatch on my merchant account. If they’ve done one, I usually look at the order and make a decision.

There can be lots of hassles and paperwork involved in setting up your merchant account, in which case Paypal can be a great alternative if your store is new and you just want to get your feet wet. However, I do feel that it is a mistake to use Paypal exclusively for the long haul. An overwhelming percentage of my customers DO NOT use Paypal for their purchases. So I feel I would miss out on a great deal of purchases by not offering a credit card option.

All in all, I think Paypal is a great service. It’s certainly mainstream, and can lend some credibility to your store. Just make sure it’s a payment option, not a requirement, if you want to be a serious retailer.