This is the final discussion in a 4 part series that provides an introduction to ecommerce.
- In part 1, we looked into the “in’s and out’s” of ecommerce.
- In part 2, we answered another important question “Should I build an online store?”
- In part 3, we answered the question “Do I have the Expertise?”
Finally, in part 4, we will address the cost of ecommerce and how to realistically consider these expectations.
An Introduction to Ecommerce: What Are the Costs Behind it?
Behind every ecommerce project lies the biggest question of them all: Will this ecommerce store cost me an arm and a leg? And, what hidden costs might there be? An introduction to ecommerce would be lacking if this was not addressed. These are important questions, as it helps determine if it is worth taking the hit in terms of cost, time and risk in building an ecommerce store.
The answer? Only you can determine this. But, as an advisor, Convergent Studio can help you make the best decision in determining whether it will be worth the costs of taking on such a task.
At Convergent Studio, we help you make this decision with knowledge. In particular, we let our clients know of five key costs:
- Web Development
- Web Hosting
- Banking Fees
- Your Time – Up Front
- Your Time – On going
Let’s briefly look at each of these.
Covered in the initial client proposal, “web development costs” typically includes the design, programming, and set-up of the website from the project start until it is “live” to website visitors. More specifically, we define the stages of the project (and the costs involved) for the following:
- Project consultation
- Site architecture
- Licensing Fees
Defining these key project milestones and the costs involved ensure that you know what you are looking at and that there are no surprises at the end of the project. It is important to note, though, that there are a few items that a proposal can not estimate with complete accuracy. Some of these include:
- Data Entry
- Changes to the project scope
We typically try to avoid using particular hosts (i.e. – GoDaddy) and instead ask our clients to go with the web hosting companies with which we know through experience to provide the best hosting. Why? It eliminates the time and cost of not having to deal with bad hosting! And, believe us when we say there can be significant costs involved with bad web hosting, including site downtime, lost sales, and added maintenance fees and troubleshooting.
In terms of costs, all hosting packages are quite variable. The package price is dependent upon multiple factors such as hosting size, the number of email accounts, bandwidth needs, and contract length. Taking the time to find the best package up front will save time and aggravation down the road.
Additionally, you will need an SSL certificate for security purposes… This is a re-occurring cost each year that typically runs in the $75-$150 range. We also suggest that these be purchased directly form the host instead of a cheaper third party (again, see GoDaddy). We have run into project delays and complications going this cheaper route… You always get what you pay for!
The biggest area of confusion for our clients usually come from the banking fees associated with ecommerce. However, it is quite simple once explained. We do so by breaking these fees into two “easily understandable” components… Merchant account fees and gateway fees.
Merchant Account Fees
Merchant account fees are typically those that a bank charges someone in return for the service of taking credit card transactions. We have found that most clients prefer to use their own bank as their merchant for reasons of convenience… They already have an account with their bank, so why not consolidate these services? Makes sense.
The costs range widely from bank to bank, but typically are in the following range:
- Set-up Fee: $99.00
- Monthly Fee: $20.00
- Transaction fee: 2.9 % + $0.10
Note that you can also go for an all-in-one solution (such as Stripe, Authorize.net, or PayPal) which will handle both services for the client. Some larger banks even offer both merchant and gateway accounts, so definitely consider this scenario.
Gateway Account Fees
Gateway accounts seem to always trip up our clients. “Why are paying for a gateway account when we already have a merchant account?” The answer is quite simple. The gateway allows your ecommerce website to talk to your merchant account… It acts as the go between in handling transactions.
The most common gateways are:
- Google Checkout
- PayPal Pro
The fees vary, but typically fall somewhere in the following range:
- Set-up Fee: $99.00
- Monthly Fee: $30.00
- Transaction fee: 2.9 % + $0.30
The Client’s Time
The old saying that “time is money” is true with ecommerce sites as well. You should have a realistic expectation of how much work it is to both set-up and run an ecommerce store! We try to make this easily understood by splitting up our client’s time into two phases: Up front time and on-going time related costs. Again, an introduction to ecommerce would be found lacking if it did not include the cost associated with your time!
Up Front Time
Many do not think through all that is needed to set-up an ecommerce store, while most simply don’t know. But, it is import to understand what you are facing when building the store and what you will need to provide. This will help avoid both project delays and frustration!
Among other, you will need to provide the following:
- Gateway and merchant account set-up
- Shipping methods and account set-up
- Knowledge of tax rates and laws
- Fulfillment service set-up
- List of store categories
- List of products
- Product photography, descriptions, and variations (cost color, size, etc.)
- The input of products and respective data
- Training time on how to use the ecommerce store and admin area
Seeing all this will be quite overwhelming! But, it is better to know up front then get hit by all this further down the road.
On Going Time
It is easy to forget that there is quite a bit of work to be done even when the website is live. “Live” never means “done”!
Unless you are building an integrated ecommerce solution using fulfillment services, you will typically need to check the ecommerce store daily in order to keep inventories up-to-date, fulfill orders, change products, set-up sales, and more. And, this does not even take into consideration the marketing efforts needed to drive traffic to the store and make all this worth it in the first place!
Of course this only touches the tip of the iceberg. But, Convergent Studio has found that by informing our clients of all costs in terms of both time and money, project delays are avoided, you are better informed of what to expect, aggravation is avoided, and – best of all – you come away much happier at the end of the project.
Thank you for reading through this four part series on an introduction to ecommerce… We hope you have gained insight on the “ins and outs” of ecommerce projects!