break even point

[Guest]

Hello,

 

a friend has asked me to set up a e-commerce site for his record store. I was looking at other posts about people using direct mechant accounts and third party billing services all which costs money. I was interseted in the opinion of people actually doing this sort of thing on the net and how much business actually needs to go through the site to make it worth while. I'm not sure what the profit margins on CDs are but I would guess it is only a few dollars, given this does he need to be doing a lot of transactions to make his online presence viable?

 

Thanks for any info on the subject.

 

Nigel

[hobbzilla]

Just run the numbers to see which would be most beneficial for your circumstance.

 

3rd party (PayPal being cheapest) - often costs more in the long run when you have a substantial sales volume.

 

ie.

2checkout charges $49 setup & 5.5% & 45?/transaction

An average merchant account w/Authnet will run you $100 setup 2.2% & 30?/transaction + $15/mth (& minimum fees of $25 or so).

 

Perhaps go with the 3rd party for a couple months and see what kind of processing you will be doing.. then compare to the merchant account and see if you'd save. But off the top of my head.. I'd say if you need to do about $750 of sales a month to be better off with your own merchant account.

[XtremeCarAudio]

if your friend has a store (offline) does he take credit cards there? if so he should not need another merchant account as he already has one, and he will need to find out from his account providers what virtual terminals they have availe

[wizardsandwars]

We find that you would need to process more than $1200 per month to be better off with a merchant account / gateway, than 2checkout.

 

You would have to process more than $50,000 per month to be better off than using paypal.

[Daemonj]

Considering most stores pay $5 or under for a CD and typically charge $12, I would say the profit margin on CD's is very high.

 

Depending upon how much your hosting costs are (I would assume a dedicated server is costing you $150/mo.), their current customer draw (local or out-of-town), shipping costs (are they trying to make a profit from their shipping or just cover the cost), the break-even point should be under 6 months depending upon what the development costs are.

 

Of course, the above is just my estimation without having actual figures to work with.

[Max40]

Hi

In case your interested, try http://www.nobilinternet.com

a Sydney Australian compamy.

 

$295.00 per year + transaction fee $0.55 reducible depending on number

of transaction.

 

their email does not work, so you will need to call.

They have already set up an OSC website.

 

regards

 

Max

[26.2]

If you take advantage of the Paypal debit card your total costs plummet to

 

2.9%-1.5% (discount from using pp debit card) + 0.30/transaction fee

 

to as low as

2.2%-1.5% (discount from using pp debit card) + 0.30/transaction fee

 

So that 12 cd costs you as little as $0.084 + $0.30 = $0.384 and as much as 0.348 + .30= $0.648.

 

You would easily be paying in that range for a offline merchant account.

 

The high end will actually drop to 2.2% + .30 based on dollar and transaction volume.

 

go to

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http://www.paypal.com/cgi-bin/webscr?cmd=p...en/fees-outside

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to see there fee structure

 

aj

[wizardsandwars]

Yup 26.2 is correct.

 

Just don't offer ONLY PayPal though or you will lose sales.