As an e-commerce merchant, you should be aware of any practice that might increase online shopping conversion rates. One small, but often overlooked best practice is to offer multiple payment options to your customers. Imagine if you’re selling online and you’re getting a significant number of visitors to your site with American Express and Discover Cards who want to buy your products but you’re only offering MasterCard and Visa as payment options. What if they are students who don’t have a major credit card? Maybe they have a PayPal account and want to pay with money from their checking or savings accounts? What happens to them? Where do they go?

One place they are likely to go to is to your nearest competitor and that is the last thing you want to happen. You need to maximize conversion rates and not waste such good opportunities. You don’t want to be losing sales just because you didn’t get around to setting up an account to accept alternative forms of payment beyond the most common, MasterCard and Visa. There are plenty of people who want to pay with American Express, Discover, PayPal, Diner’s Club and more. If you’re not willing to accept their payment in those forms, that is a potential sale that you are losing. E-commerce merchants who have begun to accept additional forms of payment are seeing sizeable increases in their conversion rates and ultimately their sales revenue.

CyberSource, an e-commerce payment solutions provider, has found in a recent study that e-commerce websites in North America that offer four or more payment methods are achieving average shopper conversion rates of 72%. They also found that e-commerce sites offering three payment methods receive average conversion rates of 71%. Those rates are 20% higher than those Web sites offering just one payment method. For this study (found at http://www.cybersource.com/news_and_events/view.xml?page_id=1272), shoppers are considered as those who have visited a web site and have already added items to their shopping cart.

Many successful merchants offer and accept just about every form of payment method, letting the customer decide which one they want to use. The logic is that it makes no sense to try to be restrictive when the opportunity cost is very low and the barriers to entry are very low. As an e-commerce merchant, offering to cover all the major credit card providers: MasterCard, Visa, American Express, Discover and Diner's Club is a great start but that should just be your first step. Offering additional payment methods like Invoice, COD and PayPal can only help to increase your sales.

If you're selling online, it’s pretty obvious that you'd be losing a tremendous amount of orders by not accepting major credit cards, especially Visa and MasterCard. To try to run a successful online business without allowing these payment options is definitely a mission in swimming upstream. One option is to use person-to-person payment services but that alone can seriously limit and restrict your sales because those services usually require not just the merchant but also the buyer to have signed up an account and to be a member of their service. If someone is shopping your site, adds an item to your shopping cart and goes to check out, you want to make the checkout process as simple as possible for them to checkout and complete the purchase, not create barriers to the sale. One could hardly imagine a bigger barrier to a sale than to require the buyer to first go to another site, enter all of their personal information, sometimes including social security number, bank account numbers, credit card numbers and more. It surely isn't the most efficient approach. The easiest and most efficient approach is to use a merchant account provider and a payment gateway to provide major credit cards options to your customers. For more info on payment gateways, see our article in Nexternal Nexus v.3.06 at http://nexternal.com/nexus/ezine.asp?Newsletter=13#gateways.

With regard to choosing a payment gateway, there are a number of factors you should consider. First, consider what you sell. If you sell inexpensive items that are less than $5 each, a merchant account that takes a percentage, say 2.4%, plus a flat fee, say $.30, per transaction might not be as good for you as a merchant account that charges a higher percentage, say 3% but without a flat per-transaction fee. So, keep this in mind as you shop.

Example A: $5.00 - 2.4% = $4.88. $4.88 - .30 = $4.58
Example B: $5.00 - 3% = $4.85

Similarly, bear in mind that merchant accounts often charge an additional monthly statement or maintenance fee. Again, a high monthly fee combined with a low percentage of transaction cost might actually cost you more than a higher per transaction cost and a lower or no monthly fee. Only you can decide what is best for your business. The best way is to simply put your revenues into their model and determine how much it will cost you at the end of the month. Be sure to consider the bottom line price as it affects you, not just the percentage of the transaction.

Another factor to consider is large upfront costs versus monthly maintenance costs. Again, business models vary from one business to the next but consider the long-term costs associated with your choices.

Consider the security precautions taken by your merchant account provider. Ask what security measures they have taken to safeguard the sensitive data sent to them by you and your customers. Choosing a cheaper system that cut a few corners in the security arena might end up costing you quite a bit more in the long run.

One thing to be sure to do is choose a merchant account provider that can work with your website and/or shopping cart provider. The last thing you would want to do is sign up for a merchant account only to find out that it is not compatible with your shopping cart software. Your best bet is to check with your shopping cart software provider and ask which merchant account systems are compatible with it. This provides for ease of integration and a smoother transition out of the gate.

Last, but certainly not least, call them and get a feel for their responsiveness and overall approach to customer service. Do they take the time to listen to your problems and offer real solutions or do they send you into phone-menu hell or pawn you off on misinformed help desk employees who are more concerned about their lunch break than your problems? These are questions you should consider as it is inevitable that you'll need to call them at some time during the relationship. Be sure to make the right decision. As always, careful planning and forethought can prevent future problems from occurring.

E-commerce merchants are seeing black and lots of it. According to a recent Shop.org/Forrester Research survey, 79% of e-commerce merchants had positive operating margins in 2003. What is making them so successful?

Shop.org found that successful e-commerce operations have the right mix of products, sales and marketing practices. Important factors include having a professional looking website, powerful e-commerce software that will provide the best shopper conversion rates possible, marketing tools to drive traffic and management tools to run online businesses as efficiently as possible. Combining these tools with knowledge of customers’ shopping habits will allow for significant profitability growth.

Choose your technology partners carefully and your online business will flourish. E-commerce will continue to grow as a sizeable percentage of the total economy and is the path to significant profitability for many merchants.

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