Archive for August, 2010

Multi-Pay versus Single-Pay Shopping Carts

Thursday, August 26th, 2010

People setting up multi-vendor shopping carts are asking me a similar question: “What is the best way to accept payments from customers?” For the uninitiated, a multi-vendor shopping cart allows several (or many) companies to sell their products on a single web site. The web site may be set up such that each company / vendor has their own store and shopping cart, or it may be set up such that vendors share common pages and a single shopping cart.

The question on people’s mind seems to be whether the customer should pay each vendor individually, or whether the web site operator should act as payment collector and then distribute the proceeds to each vendor who participates in the sale.

There are three players who have an interest in this: the customer, the web site operator, and the vendor. There are also several issues at play. convenience, timing, trust, and after sale service.

Convenience

From a customer’s perspective it’s easier to deal with a single payee than multiple payees. Contrarily, from a web site operator’s perspective, it’s easier if customers pay vendors directly (it removes a step in their ‘shop -> buy -> pay -> ship’ order process). The vendor, as far as convenience is concerned, probably doesn’t care. It’s no harder to receive a payment from a customer than it is from the web site operator.

Something else to consider: Most multi-pay systems rely on an outside payment source (like Paypal). Why, because these multi-pay systems can’t efficiently accept credit cards. If a multi-pay system were to accept credit cards, it would be a nightmare. Can you imagine a customer’s frustration of having to go through two or more payment authorization cycles on a single order? Customers would probably abort the cart before ever completing the purchase. Conversely, in a single-pay environment, it’s easy for a customer to use Paypal or a credit card.

Timing

The critical issue here is how quickly the vendor gets paid. Obviously the vendor wants to get paid as soon as possible. In a multi-pay environment, the customer pays the vendor immediately, and the vendor then ships the product. According to best practice, however, vendors shouldn’t get paid until after they fulfill the order (this practice is strongly encouraged by credit card companies, who don’t like dealing with irate customers who have already paid but are still waiting for their order).

Paying upon order fulfillment, and not order receipt, is a good idea. It encourages the vendor to ship quickly, and in cases where they’re out of stock (or have to delay shipment), don’t have to deal with irate customers, credit reversals, etc. In a single-pay system, the web site operator controls when each vendor gets paid. This means that vendors who ship product get paid even as vendors who haven’t shipped product (on the same or different order) don’t get paid.

Trust

It’s always nice to minimize the number of steps in any process. Doing so keeps things simple. From a customer’s perspective making one payment is simpler than making multiple payments. However, in a single-pay environment, the web site operator has, for at least a short time, the vendor’s money. Therefore, there is an element of trust between the vendor and the web site operator.

The trust also goes the other way. If a customer returns a product, the web site operator must get paid by the vendor so they can reverse the customer charge.

Trust is a two way street, but needless to say, an untrustworthy business won’t stay in business for long.

After Sale Service

In a multi-pay environment the web site operator is implicitly telling the customer that if there are any problems, they should talk to the vendor(s). After all, the customer paid the vendor directly. In a single-pay environment the web site operator is implicitly telling the customer that if there is a problem, the customer should contact the web site operator.

Certainly, from a customer’s perspective, they’d rather deal with a single entity than multiple entities. However, there are other issues at play, specifically, dispute resolution. If it’s the web site operator’s practice to let customers and vendors ‘patch their differences’, it will only be a matter of time before a single vendor poisons the whole well. If nothing else, the customer should be able to appeal to the web site operator if they don’t get satisfaction from the vendor.

While some web site operators may not like the idea of inserting themselves in a customer-vendor dispute, it is actually an advantage. It allows the operator to learn about the customer’s complaint (which may actually be a complaint about the web site, and not the vendor), and to understand how well the vendor is responding to the complaint. It’s this kind of feedback that leads to better web site design, better content, better policies, and happier vendors and customers.

Conclusion

There is no one right answer. The answer really depends on your business model and your business philosophy. I, for one, favor a single-pay system. It gives me more control, more flexibility (credit card and Paypal), and more information. It also allows me to act as a buffer between the customer and the vendor, when necessary. Most of all, it’s easier for the customer.

For a time (and perhaps this is still true…I honestly don’t know), E-Bay had a problem with a few bad vendors spoiling their multi-pay business model. After losing some sales and some customers they implemented some very restrictive policies to get their vendors under control. E-Bay was big enough to with-stand the storm (although at great loss in market share and reputation). E-Bay’s experience shows that multi-pay versus single-pay is an important decision, cutting to the core of a business model. Make the decision carefully.

Web Malls and Multi-Vendor Shopping Carts

Tuesday, August 17th, 2010

It’s often difficult for small business to get the attention they want on the internet. Sometimes the reason for this difficulty is that the small business doesn’t carry many products. Consequently, there aren’t many pages in the web site. From a search engines perspective, there isn’t much content, and content is what search engines crave.

To be sure, small business can and often do succeed on the internet. This is usually the result of specialized products, good SEO techniques, excellent content, and sometimes a few good back-links.

Still, for most small businesses, it’s difficult.

One way small business can increase their presence, and profits, on the internet is by teaming up with other small businesses. These partnerships are useful because they broaden the product base, increase web site content, and distribute maintenance and marketing costs.

From an e-commerce software perspective, small business partnerships create a few challenges. Security is the most mundane but the most important of these challenges. Without an e-commerce system that was built to manage multiple businesses (i.e.: vendors), it’s very easy for one company to either purposely or mistakenly change (or delete) the data that belongs to a partner company. This problem is multiplied as more companies become part of the partnership. Imagine 10 companies working in the same system with each company having unrestricted access to the data of every other company. In a matter of days the situation would become untenable.

This is how most e-commerce systems operate today. These systems have been written with the assumption that there is only one supplier in a given e-commerce store. While that is certainly reasonable for most companies, some companies would benefit by sharing their web site (and shopping cart) with other companies.

Fortunately, multi-vendor shopping carts come to the rescue. Multi-vendor shopping carts assume that a given web site may sell products from multiple vendors. Consequently the system is designed such that vendors have access to their data only. To accomplish this, each partner/vendor is assigned a unique user id and password. Their user id and password authorizes them to manage their data, and their data only.

Some multi-vendor shopping carts allow partners to share common web pages. In this way, a shopper may buy products from vendor 1, vendor 2, and vendor 3 on the same page. The shopper would never know that their order will be fulfilled by three different vendors. In other cases, the shopping cart may allow the partners to set up a virtual (or web) mall. In this case the shopper goes from page to page (or vendor to vendor) shopping for products knowing exactly who they’re buying from. Some multi-vendor shopping carts offer both.

In any case, multi-vendor shopping carts allow businesses to pool their resources, add to their product base, create lots of search engine content, and spread their administrative and marketing costs. It’s a great idea and many small businesses can benefit from it.

Configuring a Multi-Site, Multi-Store Shopping Cart Environment

Wednesday, August 11th, 2010

If your company is investigating multi-site, multi-store shopping carts, it’s important to understand how web sites, web stores, and shopping carts all fit together.

Consider the diagram below:

Multi-Site, Multi-Store Shopping Cart Configuration

Here we have a multi-site, multi-store installation supported by an e-commerce engine. In this installation, two web sites contain three web stores. Supporting the web stores are two shopping carts, one for each web site. Web Site 1 contains two web stores. These web stores share a single shopping cart. This means that a consumer can buy products from both stores, and use a single shopping cart for check out. Importantly, each store looks and is branded differently.

Web Site 2 contains a single store with its own shopping cart. Since this site is using a different shopping cart, the rules that govern its functioning are different than the rules that govern the functioning for the shopping cart in Web Site 1.

Note again that there is only a single e-commerce engine. In other words, the engine supports multiple shopping carts. The engine also supports the fact that each shopping cart has its own business rules, and each shopping cart supports different web sites, with one of these web sites having more than one web store.

This means that a company can purchase a single e-commerce engine to spawn multiple shopping carts, with each shopping cart supporting multiple on-line stores. Also note that there is a single database. The database supports a single product catalog that can be shared among all web sites/stores. Furthermore, the product catalog can be customized for each web site, such that descriptions, prices, etc. are unique to each site.

Now let’s add a bit more complexity to the diagram:

Multi-Site, Multi-Store, Multi-Vendor Shopping Cart Configuration

In this diagram we’ve added a vendor component. More exactly, a multi-vendor component. In a traditional e-commerce system, the web site operator maintains the product catalog, inventory levels, shipments and returns. In a multi-vendor shopping cart environment, vendors (or partners) can maintain their own product catalogs, inventory levels, and shipments/returns.

In a multi-site, multi-store, multi-vendor shopping cart environment, individual vendors can be assigned to multiple web sites. These vendors have visibility into their own inventories and orders for those web sites. Vendors can ship products to customers, process returns, and tweak the product catalog, all without the participation of the web site operator.

It doesn’t take much imagination to see how a multi-site, multi-store, multi-vendor shopping cart can vastly change the strategy of an on-line e-commerce business. Think about it for your business. Then check out a few more shopping cart configuration options. Which is the right one for your business?

Understanding the difference between a Multi-Site Shopping Cart and a Multi-Store Shopping Cart

Thursday, August 5th, 2010

Some e-commerce software companies are starting to offer multi-site shopping carts and multi-store shopping carts. Unless you’re steeped in the lingo, differentiating between the two can be difficult. The difference between the two, however, is profound, and buying a multi-store shopping cart when a multi-site shopping cart is really needed (or vice-versa) can abruptly prevent a retailer from growing its on-line business. After all, the purpose of both types of carts is to allow retailers to expand beyond the traditional equation that one e-commerce web site equals one shopping cart.

A multi-site shopping cart uses one software installation (that is, one copy of the code base and one copy of the database) to support an unlimited number of e-commerce web sites. Each web site comes with its own shopping cart. The rules of the shopping cart are specific to the web site. One benefit of this type of system is that a retailer can add e-commerce sites without growing their software infrastructure. More important benefits are that a retailer can share their product catalog between all their web sites, and each shopping cart is customized to the needs of the shoppers that frequent that web site.

A multi-store shopping cart allows retailers to create multiple stores, with each store using the same shopping cart. This type of system allows a shopper to pick an item from store 1, a different item from store 2, and then check out once. The rules for the shopping cart are the same across all stores. However, the look and feel of each store is different, just like the look and feel for each web site is different.

A multi-site shopping cart is best for businesses who want to operate multiple sites, with each site operating completely independently from its ‘sister’ sites. A multi-store shopping cart is best for companies who want to operate something akin to a web mall. That is, allow shoppers to visit lots of stores, put items they want in a single basket, and check out once. Very convenient, but each store has to play by the same set of rules when it comes to sharing the shopping cart.

Of course, if a retailer can get an e-commerce system with multi-site and multi-store capabilities, then they have complete flexibility in configuring their on-line business (perhaps the Holy Grail of multi-site e-commerce management).

In conclusion, if a retailer caters to multiple customer segments, carries multiple product lines, or has a need to create web sites that serve specific functions (i.e.: sell discontinued goods), then a multi-site shopping cart is probably the way to go. If a retailer is all about offering a broad array of products (perhaps from different vendors/brands), convenience for their customers, and minimizing the check out process, then a multi-store shopping cart might be the way to go. It all depends on what the business is trying to achieve.