Cheap Start-Up
Shopper's Guide to Shopping Cart Programs

This article contains older information. Go here for newer information on shopping carts and transactions.

You're having difficulty obtaining a merchant account or don't want to invest in a merchant credit card account or a payment gateway at this time. You want to get your feet wet in e-commerce without making a big investment until you see how it will work for you.

I don't look down on a cheap start-up. There's a time to do a "proof of concept" without investing a great deal. The important thing when you're starting cheaply is to make sure that your presentation of the product is compelling. You must anticipate -- and answer -- every one of the possible objections that your customer may have that might prevent him from completing the order.

There are several good systems:

1. PayPal*(www.paypal.com) is my first choice for many. They have a simple shopping cart system with a built-in payment gateway and no need for a merchant account for only 2.9% discount rate (percentage of every transaction), plus a 30¢ transaction charge. If you compare that to the typical 2.5% discount and transaction fee that most merchant accounts charge, it is very competitive -- and no set-up charges.
   However, some internationals can't easily withdraw money from PayPal to their bank accounts, so they'll need another approach.
2. 2Checkout.com* (www.2checkout.com) also includes a simple shopping cart system with no need for a merchant account or payment gateway. Costs are $49 set-up and 5.5% discount rate with a 45¢ transaction charge. For legal purposes, they act as the retailer, "buying" the products from you at the time of the sale, and then commissioning you to ship the products for them. A couple advantages of 2Checkout.com are that their system can be installed as the payment gateway in any shopping cart system that accepts Authorize.net -- and that's practically all of them. So there's an easy upgrade path. You can sell both softgoods (digital products) and tangible goods. Merchants are paid twice a month. US and Canadian merchants can have money transferred to their accounts via ACH at no cost. International merchants can have payments mailed (at no charge) or wired to them.
3. CCNow* (www.ccnow.com) is the original of which 2Checkout.com is the copy. Differences are that CCNow limits sales to tangible products. There's no set-up fee, but they do charge a monthly minimum of $9.95 (US) or $11.95 (internationally). Fees are 9% of the total for US merchants, 11% for international merchants, with no transaction fee.
4. ClickBank* (www.clickbank.com) is for digital goods only. They charge a $49.95 one-time activation fee, plus 7.5% of the sale, plus $1 transaction fee. There are no monthly fees. They have an excellent affiliate program with a lot of active affiliates.
5. Kagi* (www.kagi.com) allows both digital and tangible products, but they specialize in the sale, delivery, and registration of digital products such as software. Charges are on a sliding scale. On sales of $25 and under they charge 5% plus $1.25 transaction fee. For sales of $25 to $100, it's 10%. Greater than $100 is 5% plus $5 transaction fee. There is no set-up fee.
6. iKobo (www.ikobo.com) is another option for taking credit cards. They use a debit card account and an ATM card to transfer funds to the merchant.

Of course, there are others, but this will get you started. For all of these you'll need a website on which you post product information. Each of these serves as an ordering backend.

Once you're receiving about $1,200 to $1,500 per month in revenue, you're money ahead getting your own merchant account and payment gateway. But since PayPal's discount rate drops from 2.9% to 2.2% for more active merchants, their price is very, very difficult to beat. The savings comes in being able to automate your system more easily, since most carts and order management systems are able to handle credit cards more easily than PayPal payments.