Product Review: FreeMerchant.com

For a "free" shopping cart and ordering system, FreeMerchant.com includes an impressive set of features. You can set up a store at FreeMerchant.com for no charge whatsoever. The only cost comes when you want to process credit card payments in real-time.

Store Builder

The Store Builder feature allows the merchant to set up the look and feel of the webpages with headers and footers for the main page of your site, as well as for each section. You can enter text or HTML into the boxes provided, as well as upload a graphic for the header, footer, and the content part of each page. The program also allows you to choose from a couple dozen different type styles for the section name. The system is structured so that any page can carry either products or links to other pages. This allows you to build a huge hierarchy of webpages for different categories, subcategories, and sub-subcategories, populate them with products, and configure them as you like.

Edit Catalog

The Edit Catalog feature enables you to enter information about categories, subcategories, and products. Product information includes: Product name, visible (Y/N), orderable (Y/N), minimum orderable quantity, stock number, price, retail price, weight, gross shipping cost (used if you charge a shipping cost by product rather than by weight), taxable (Y/N), on special (Y/N), description, ordering options, and image. These fields give the merchant a great deal of flexibility in displaying and merchandizing products.

Ordering options allow flexibility, too. You can have one or several drop down menus for color, size, etc., as well as the capability for a text box for lettering or initials, such as on a garment or gift. The options, however, must all be the same price. The system has an easy way to show subproducts (accessories) or up-sell products. The catalog can be kept up-to-date via a database upload from a variety of formats (Excel, Paradox, Lotus 1-2-3, dBase, or FoxPro). The system also has a way to keep track of inventory. When items are placed in stock, the total number is entered. Then, as items are sold from the online store, the inventory is decreased. At zero in inventory, the store no longer gives the shopper a "Place in Cart" button.

Ordering System

The shopping cart program seems to work well, and shows the color and size options selected on the product pages. Order notification to the merchant can be made via e-mail or fax, or viewed on a web interface.

Tax is handled by tables that FreeMerchant updates monthly. The merchant inserts her state and ZIP code, and FreeMerchant takes it from there. Shipping is rather sophisticated. It can be calculated (1) by a flat fee associated with each product; (2) left for the merchant to calculate at the time of shipping; or (3) calculated for US destinations by actual costs (plus a merchant-set fee for packing and handling costs) using plug-ins provided by the US Postal Service, FedEx, and UPS.

Payment can be made by check, money order, C.O.D., or credit card. Credit card numbers can be accepted manually; real-time authorization is not required, though it is available via Authorize.net and IntelliPay. Even if you don't use a payment gateway, the card numbers are received over a secure server and are checked for entry errors using the standard 10-mod checking formula. Pre-confirmation of each order is automatically e-mailed to the purchaser, even though the credit card transaction may not have been processed yet. The confirmation explains that the order was placed through FreeMerchant, and invites your customer to set up a store there.

Order Processing

The merchant can view orders over a secure web interface according to order status. For example, orders that have not been confirmed and shipped are designated with a red X, those shipped by a black truck, etc. I was impressed with the merchant tools for communicating with the customer. The confirmation message can give information about shipping method and a tracking number, an individual message to the customer, and a place to show the actual shipping costs and taxes (if the merchant hasn't set these up automatically). The merchant can also make changes to the invoice, adding an item, deleting an item, applying either a percentage or dollar amount discount, or changing shipping or tax amounts. This system is one of the finest online order processing systems I have seen in a store building program.

Extra Features

For a free service, I found FreeMerchant rich in some extra features. There is a built-in feature that allows the merchant to easily submit products to eBay, subject, of course, to eBay's posting fees. This offers a good source of exposure for the small business without much duplication of effort. In fact, eBay sellers may enjoy the ease of use in setting up and maintaining products on FreeMerchant better than eBay's tools. I was especially impressed with the ability to take coupons which can be e-mailed to customers to entice them back to shop again. FreeMerchant also allows easy export of invoices, product data, and customer lists to QuickBooks using .iff files. While FreeMerchant shows hits to various sections of the catalog, it offers a pretty crude tracking system compared, for example, to Yahoo! Store. FreeMerchant also provides facilities for merchants to send e-mails to 500 customers without any special permission. (FreeMerchant is trying to keep this tool from being used for spamming.)

FreeMerchant also allows you to use your own domain name rather than the generic storename.safeshopper.com default domain name. Using your own domain name is vital, since it allows you to outgrow FreeMerchant without losing the marketing efforts you have invested in.

Other features include a banner exchange with other FreeMerchant sites. Merchants are also given the option of being paid for banner ads which can be placed on their store pages, though this income wouldn't amount to much at all unless the site experienced a great deal of traffic.

What Is FreeMerchant's Revenue Model?

FreeMerchant, to a much greater degree than its competitor BigStep.com, has set up partnerships with key businesses, which, no doubt, reimburse FreeMerchant for the advertising exposure in some sort of revenue-sharing plan. At this writing, these partners included CompuBank, US Merchant Systems, myGeek.com, and others. The site contains banner ads throughout -- except on the merchant's public online site (and there, too, with the merchant's permission). FreeMerchant members are offered a variety of introductory savings inducements for small business and web marketing services. In the future, I expect to see FreeMerchant offering merchants an enhanced store system for a monthly fee.

What Does Real-Time Credit Card Authorization Cost?

While FreeMerchant can use either IntelliPay and Authorize.net as payment gateways for real credit card authorization, the only links on their site were to US Merchant Systems that provides both merchant credit card accounts and the IntelliPay payment gateway. I am concerned about the costs of this system to small merchants. In order to get real-time credit card authorization, merchants must have a payment gateway AND a merchant credit card account. But the payment gateway seems overpriced to me. (Of course, payment is made to US Merchant Systems, not to FreeMerchant, but I would be very surprised if FreeMerchant receives no money from this deal.)

Let me break down the prices:

• Initial payment. $399 for outright "purchase", or a 24-month "lease" at $29.99/month (totals $719.76), or a 36-month "lease" at $19.95/month (totals $718.20). In other words, the so-called "lease" costs the merchant about $320. Frankly, I am disgusted with leases for services. The "software" is a Web interface, not a desktop program like PC Authorize.
• Monthly payment. In addition to the "lease," the merchant is charged $15 per month "gateway" fee.

This means that the total cost of the payment gateway is $1,258 over three years with a three-year lease, compared to the fees for a similar service through BigStep.com of $24.95 per month or $898 over three years. The price through US Merchant Systems is still more than BigStep's system when you "purchase" the software outright ($399 + $540 gateway fees over 3 years = $939). If you have your own merchant account already, you would be subject to the $399 purchase and $15 per month gateway fee in any case.

On the other hand, the Merchant Credit Card account fees that are packaged along with the payment gateway seem good (if they could be obtained by themselves). No application fee, a 2.69% discount rate plus 35 cents per transaction (subject to a $20 minimum), and a $10 monthly statement fee.

Merchants can also choose to use the Authorize.net payment gateway, http://www.authorize.net which opens up FreeMerchant credit card authorization to merchants outside the US, through Authorize.net's assocciation with PlanetPayment.com. http://www.planetpayment.com For merchants with existing US merchant credit card accounts, you can go directly to Authorize.net to contract for their payment gateway. There is a one-time set-up and licensing fee of $395, plus a $20 monthly gateway fee, and 10 cents per transaction (in addition to any per transaction fees charged by the merchant account). Package deals with merchant credit card accounts and the Authorize.net gateway are available through their agents only.

The Bottom Line

Overall, I am very impressed with the FreeMerchant system. Even though it will cost a merchant more than BigStep to do real-time credit card processing, it offers a number of features that are not available on other systems. I would compare it to Yahoo! Store in its feature set, though it lacks the flexibility of Yahoo! Store in page set-up, digital download capability, and statistical information. So long as you understand the costs associated with real-time credit card processing, FreeMerchant.com is an excellent choice for a small business e-commerce site, and can be used by both US and international merchants.