By: skylinegridadmin - Published: 5th March, 2015
E-commerce: how much does it cost to sell online?
Selling online, no matter if it's digital goods, or physical items to be shipped from a warehouse, comes at a cost. Opening up shop without an understanding of how much it'd going to cost you, will result in operating at a loss, from the start.
The way the cost of conducting your retail business online ramps up, is usually proportionate to the amount of research you do, prior to signing up for services that may or may not be right for you.
News flash: e-commerce vendors are not there to help you.
They will take your money any day of the week, and without due research, done on your own, don't expect anybody to tell you what you should do with your money, unless that's in their best interest.
This is precisely why, providers of e-commerce services tend to prefer partnerships with lower-tier website builder services. These services assume that users of free sites don't have sufficient knowledge of e-commerce, and the costs involved in doing real business. And, guess what? They are right.
When you sign up for an free site that advertises as "e-commerce capable", the website is free, but in order to enable the e-commerce part you have to pay.
From a developer's standpoint, i don't have the faintest idea why you would have to pay for a service that never changes, and on top of that, a service that you have to manage yourself.
E-commerce provided by services like StartLogic, range from a minimum of $5 per month, to $35 and higher, depending on the type of service bundle advertised. If you have a larger stock, one that could easily require several pages of merchandise, chances are, you will need to pay more. Yes, they charge by number of pages.
If you think that's not much, consider this: your average shared hosting service, complete with advanced features and FTP functionality, without any limitation on "how many pages" you can have, will cost you betwen $70 to around $150 per year, and you get to use any e-commerce solution you want, for the price you want.
How much of these services will you need? The short anser is: not enough to justify the cost, on top of what you have to pay in credit processing fees, and other costs associated with shipping, packaging and manufacturing.
So, let's talk about credit card processing fees:
Most of these services enable transactions with mainstream vendors, like PayPal or Amazon Payments. These services come with a convenience fee of their own, carving as much as 2.9% from every payment you take from a customer.
Do the math, and i bet those 30 bucks a month don't feel so insignificant, all of a sudden.
One could make the case that the IRS will accept those fees as deductible business expense at tax time, but don't fool yourself: they don't give you back as much as you think.
So, let's say you go with a serious credit card vendor, like Authorize.net. This is likely to bring costs down, however, Authorize.net still has a monthly fee, usually in the range of $30 per month, depending on the Authorize.net vendor, with whom you are signing up.
Also, credit card processing fees are subject to PCI DSS Standards that will hike up your rates considerably, unless your site provides an SSL certificate that encrypts all transactions to and from your customers.
SSL certificates don't come free with your "free site", they are an additional cost for which you don't get to shop around. You have to buy whatever SSL they have available, for they price they ask. Either that, or it's time to find another "free site" to be disappointed with.
SSL certificates with most hosting companies are normally available for as low as $50 per year, with the sky as the limit, depending on the size and complexity of the transactions you expect to process. SSL certificates can also be purchased, but the costs are exorbitant, usually in the realm of several thousand dollars and up, for 128bit encryption.
Cost comparison with a custom-built website
Having a simple e-commerce website built by a professional, has several advantages, beyond the initial cost:
- You get to choose the cheapest hosting
- You get to shop for the best credit card processing rates and service, without compromises
- You get a website built the way you need, without having to learn a completely new product
- You get to sell as much merchandise as you want, without pesky monthly fees
Interested in learning more about what you can do to curb your startup costs for your e-commerce plans? Feel free to email me at email@example.com, or if you are in the US, or California, call (408)307-9344 for a free consultation.
As always, if you find this post useful, don't forget to re-share! :-)
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