Shopping Carts – What They Are And How To Choose One

If you sell online, or are thinking about beginning to sell on the web, you’ve probably spent hours puzzling over shopping carts. The field is crowded and it can be difficult to know where to begin.

Before you begin to sort through all the various flavors of shopping carts, ask yourself a few questions. Your answers will determine how robust your shopping cart needs to be.

  • Are you running a full blown ecommerce site with several hundred pieces of inventory?
  • Is your site going to be a retail operation (a la Amazon or Buy.com), or is it really a web site meant to funnel traffic to another location?
  • Will your buyers be using credit cards?
  • Where will you turn for help?

Once you feel you have a realistic picture of your needs, then it is time to look at shopping carts. Your web hosting company probably offers a few open source carts, such as OS Commerce, Zen Cart, and Cube Cart, that can be installed with Fantastico.

Don’t take this “One Click” installation too literally. There is lots of sometimes difficult work to be done after the software is installed. Free carts may still require hundreds of dollars in support.

As you begin to look at individual shopping carts, keep these questions in mind:

  • Does it integrate with your web site
  • Does it integrate with your payment gateway
  • Is it easy to add an SSL certificate
  • Can it grow with your business

PAYPAL

It may be that a standalone shopping cart is more than your web site needs. If your site is a one or two page web site with just a handful of products, you may find that Google CheckOut or PayPal’s Buy Now buttons are all you need.

However, do keep in mind that the average shopper will not view your site as a professional web site if they are only given the choice of PayPal or Google Checkout. That may be perfectly OK. But you should try to analyze the buyer psychology dispassionately. If you are offering items worth more than $25.00 or $50.00, shoppers may be unwilling to trust a site that cannot take credit cards or that does not have a security certificate.

You can lose sales without being aware of any problems.

On the internet, a rival storefront or alternate seller is only a click away. Buyers can leave your site for someone else half way around the world with less trouble than it would take to walk out a shop door and drive two miles to the nearest mall.

You will have to assess buyer behavior with few clues beyond the abandoned shopping cart rate and the conversion rate of your page. Don’t be defensive. Lost sales are not character flaws – they are an opportunity to fine tune your site and sales. Research them, analyze them, and then do better.

If you’ve worked through your pre-decision checklist and you’ve decided that all you need is PayPal, shopping cart software is irrelevant. In fact, if I were just accepting PayPal, I’d use PayPal’s shopping cart. Despite resistance from non-eBayers, PayPal is safe and secure and you’ll have almost no administrative overhead. Lost sales may be less than the administrative expense of a merchant account.

If you want to accept Visa and MasterCard as well as PayPal, but your sales figures make a true merchant account unprofitable, look into PayPal’s Virtual terminal. For an additional $30.00 per month, you may have everything you need to make money on a small web site.

A SHOPPING CART IS NOT A PAYMENT PROCESSOR

Don’t confuse the shopping cart – which is a way to aggregate and display product, track inventory, and offer alternative options like different sizes & colors – with a merchant account (needed to accept Visa & MasterCard) and the payment gateway (needed to authorize the credit cards) and the security layer needed for consumer confidence (your SSL certificate).

These are all different services which must be melded together seamlessly. Your buyer should not be aware of any of them, except the security symbols (the padlock and the “https” URL that indicates it is safe to use a credit card).

Some shopping carts, like PayPal, Google Checkout, or even e-Junkie, integrate lightweight inventory tracking with payment processing. I’m not going to get into a “But PayPal accepts Visa!” discussion – except to note that from the buyer’s point of view, which is the only one that matters, PayPal and Visa are very different things and do not go together.

Many buyers want to pay by credit card. If you want to offer Visa & MasterCard in a secure environment, you need more than just a shopping cart.

MERCHANT ACCOUNT

You need a financial institution that can turn your credit card payments into cash.

The typical real world store has a merchant account through their bank. Even though they are largely cash only establishments, the lowliest dollar store in a strip mall can process a credit or debit card purchase. If you don’t accept credit cards, you lose business. Period.

Online, things may be a little different. If you’ve been an eBay seller operating without a business license, for instance, you may not have a business bank account. Your cash has flowed from PayPal to your personal bank account.

In this scenario, getting a merchant account may be difficult. Banks are unwilling to risk charge backs and the high incidence of fraud associated with internet only businesses. You can eventually find an online only credit card processor, but expect to pay very high fees.

A smarter move is to establish yourself as a trustworthy business. Get a business license. Open a business bank account. Carry a respectable bank balance for a few months. Once you’ve established a relationship with your bank, look into a merchant account. (Banks typically trust corporations more than sole proprietors, so take that into account as well, if you want a merchant account right away.)

You will receive many offers – in the mail, in email, on the phone – for credit card processing service – e.g., Merchant Accounts – shortly after you file your business license. Evaluate then carefully. Many will promise lower fees than your bank, but look out for the hidden gotchas.

Money is business. No one is going to do you any favors because you are new. In fact, being new, you are a higher risk and honest financial institutions will want you to prove yourself before lowering fees and rates. So always read the fine print carefully.

THE GATEWAY

Once you have a Merchant Account, you need a way to ensure that the credit card is valid, that it is not stolen, and that it has not been tapped out. In a store, you’d check the buyer’s ID then swipe the card through a terminal that would perform all those checks in an instant and return an authorization code. The code would be associated with the sale and the details would be printed on the receipt your customer got and forwarded to your bank as a deposit to your account.

Hooray! Money changed hands successfully.

Online, you still need to authorize the card, but it is more difficult since you never encounter the card holder. You have no way to compare the picture on a piece of ID with the person standing in front of you. You cannot compare the signature. You cannot check the credit card balance. In fact, even though you have a credit card number and a purchase total, your bank will not accept payment.

To turn credit cards into cash, you need a gateway. The best known gateway, is Authorize.net, although there are others. Joining Authorize.net or another gateway involves a fee (which may be a standalone fee or wrapped in with other services). It will also require the integration of your gateway with your shopping cart.

The gateway is your online terminal. It has access to a secure network where it can validate the card number. It will check the 3 digit security code on the back of a credit card to make sure the person making the purchase has physical possession of the card, not just a receipt fished out of a trash bin. It will check the balance due on the card. Then, just like a physical terminal, it will issue an authorization code and forward the payment to your bank for processing.

Hooray! The money is now yours!

THE SSL CERTIFICATE

The last piece of your payment puzzle is something known as a Secure Socket Layer, or SSL Certificate. When you go to enter your credit card number into an online form with an SSL certificate, a small padlock is displayed in the lower right hand corner of your browser, the URL changes from “http” to “https”, and even the color of browser’s address bar may change. All these visible clues let buyers know that their credit card numbers are being transmitted on a secure, encrypted line. No hackers listening in to the transmission can grab the card numbers and go on a shopping spree.

Most consumers are still leery of shopping online. While large, megasites may have earned shoppers’ trust, a small, relatively unknown site needs to work to establish their bona fides. Get an SSL certificate and make sure your buyers know their data is safe with you.

Again, the SSL certificate needs to be integrated with your shopping cart. You do not want ALL pages on your site to be secured – only those that require the transmission of financial data.

TOTING UP THE COST

The PayPal shopping cart is free.

OS Commerce, Zen Cart, Cube cart and other Open Source carts are free, but you may need to hire a developer to install, configure, and maintain the shopping cart. And, since this is a business and not a hobby, you should hire an established software developer with a good reputation and references. You are dealing with other peoples’ financial information. You owe it to them to keep that information secure. Hiring a kid for $10.00 off Craigslist or a dirt cheap but unknown Russian coder from eLance is risky. If identity theft can be tied back to your site, you stand to lose much more than the cost of a professional web developer.

Some shopping carts, like 1ShoppingCart, have a monthly fee, but they offer support and installation. You’ll have to determine if the fees are justified and if they make financial sense for your business.

Authorize.net, the most frequently used gateway, can cost up to $200.00 or more. Some banks will include your membership in Authorize.net with their Merchant package. be sure to factor this savings in when comparing fees.

Finally, an SSL certificate from GEOTrust will probably cost around $100.00. As with anything on the internet, there are other providers with lower fees. Investigate what they offer. If your business can use a limited SSL certificate, you may find one of these alternatives makes good financial sense while still delivering the security your customers need.

CONCLUSION

A shopping cart can add many hundreds of dollars in overhead to the cost of your web site. Make sure your business will profit from taking this step.

Just remember – the costs don’t tell the whole story. Increased sales and higher profits will balance the ledger. If you want to grow and thrive, you have to run with the big dogs. A shopping cart, merchant account, gateway, and SSL certificate are the price of admission.