Launching a Shopping Website
January 9, 2011 8:16 AM   Subscribe

How do I determine how and how much to charge users who visit my website?

I am working on a launch of a website that connects merchants and shoppers, and I am looking for a guide that helps me figure out two things;

1. Which way should those people be charged;
a. Click throughs
b. Flat Monthly fee
c. Per item sales percentage fee

2. How much should those charges be?

I've talked to merchants I'm targeting to use the site, and about half so far have shown interest. Some complained about Ebay's deemphasis of the small business. Others mentioned some problems with shipped items. But most encouraged my upstart idea, with one guy saying its the American way.

Anyway, I am working with a developer, and he can provide some help, but he says I need to set my own prices. I'm not exactly sure how to do that. So if I need to read up on some research or do some testing, or follow some model, I am willing if anyone has some suggestions.
posted by CollectiveMind to Work & Money (12 answers total)
Response by poster: Oh, and also, under the category of which way to charge, the developer did recommend upselling, as in, offering a basic service to merchants and shoppers and charging for a premium listing or service. So, that's d.
posted by CollectiveMind at 8:25 AM on January 9, 2011

As a shopper, I would not utilize a web site that "charged" me to find merchants, there are too many free options, so the answer to that question is -0-.

As a merchant I would have to see some documented and proven benefit. The profit margin of the item being "sold" is a huge factor, I don't think you could charge the same fee to, say, a grocery store that works on a very thin margin and a diamond dealer that's probably selling for twice what he paid. There's no firm answer to this.

Documenting actual sales would be nearly impossible, unless you never divulge the name of the merchant until after the sale was completed.
posted by HuronBob at 8:50 AM on January 9, 2011 [2 favorites]

Generally, it's easier to take a percentage of money actually earned than it is to charge for the potential of future money being earned, so if you can figure out a reasonably convenient way to account for percentages of real sales, that would probably be the best way to go.
posted by empath at 8:50 AM on January 9, 2011

It really depends on what you're selling on if I'd pay as a buyer. I mean, there's always Amazon.
posted by theichibun at 9:48 AM on January 9, 2011

If there are free alternatives, the answer is zero, unless the free alternatives are so bad that you would pay for the convenience of not having to deal with the bullshit.

But that raises the question: what bullshit? What specifically are you trying to "fix" with eBay/Amazon/whomever's current implementation that you could do so much better and charge for the privilege. Because, I'm sorry to say, I think the answer to that question is "nothing."
posted by Civil_Disobedient at 9:50 AM on January 9, 2011

Could you tell us more about what kinds of merchants and goods will be involved?

Frankly, this sounds like an awful idea that NO rate structure can make profitable.
posted by jayder at 10:06 AM on January 9, 2011

I think what you're basically looking for is affiliate marketing. It's pretty common (off the top of my head, Zappos, Dell, Victoria's Secret, the Gap, Steve Madden and Apple all have affiliate programs), but it takes a lot of work (and a lot of traffic) to make decent money with it.
posted by kate blank at 10:18 AM on January 9, 2011

Unless it is an extremely small small niche corner of interest, I would think there is so much competition out there already free and otherwise, as to make this impossible.

On the other hand, a guy who used to work for me came up with a stupid idea, a stupider website, and has been raking it in. He got written up in Huffington Post, did all the local morning shows, ended up on Groupon etc. I think he has pulled in close to 10K since he started last year.

Go figure
posted by timsteil at 10:57 AM on January 9, 2011

Response by poster: To HuronBob, you're right ... I wouldn't charge shoppers to find merchants. Should've worded the question better. Sort of like how dance clubs don't charge women but do charge men because they know men will come to where the women are. Shoppers don't need to be charged because merchants will pay to find this targeted niche. And to timsteil, it is a very small niche corner of interest, and a stupid idea that people make rich may be philosophically stupid, but not economically so. Like you said, go figure in the spirit of P.T. Barnum and Marshall McLuen. But this isn't Viagra or esoteric health drinks. Like every entrepreneur, I think this could actually work and provide actual benefit, not hucksterism. To Civil_Disobedient, I'm not trying to do SO MUCH BETTER. Just address the niche corner of interest timsteil mentions. All of these comments are very valuable. Thanks.
posted by CollectiveMind at 1:54 PM on January 9, 2011

But that raises the question: what bullshit? What specifically are you trying to "fix" with eBay/Amazon/whomever's current implementation that you could do so much better and charge for the privilege. Because, I'm sorry to say, I think the answer to that question is "nothing."

Well, I don't think the answer is nothing. The world is screaming for a good eBay alternative. However, lots of people have tried and failed, so it is a lot harder than one might think.

So, my answer to the original poster....

You are asking us to define the key feature of your business. That doesn't make a lot of sense to me. However, take a close look at the business models used by craigslist, kijiji, eBay, and Amazon Marketplace, and figure out what space you want to occupy.

The place to start all that is: Craigslist could make $500 million a year. Why not?
Article here

And, after considering the above, let us know what you are trying to accomplish with this venture. Maybe somebody will have something more useful to say.

Hint: If what you are trying to do is maximize profit, I can promise that I won't spend another second on this question :)
posted by Chuckles at 1:58 PM on January 9, 2011

Response by poster: I'm not asking you to define the key feature of my business, as in, tell me what price I should set. What I am asking for is advice on what mechanisms might be best, in the online retail world, to support them. I have no visions of a Facebook or an Ebay or a Craigslist. So, Chuckles, I'm not trying to maximize profit. I'm trying to realize profit. Modest.
posted by CollectiveMind at 3:15 PM on January 9, 2011

Fact is, you don't actually need to charge much of anything, hence the craigslist example.

eBay's biggest problem is the spam listings. People will put 20 of the same thing, just to increase their visibility. They'll miscategorize things because getting more eyes helps their business even though it reduces the utility of the site. In my opinion, eBay Store fees are part of what makes the spam approach affordable...

So, my strong bias is toward price per listing. Perhaps something based on a fixed fee to list that gets replaced with a percentage when something actually sells. $1 to list replaced by a 1% final value fee on a completed sale will control the spam problem without pricing yourself out of the inexpensive item market (because the 1% applies if it sells, and the $1 only applies if it doesn't sell).

That might be wrong though.. People will be more willing to take a risk with you on price per listing, and you encourage the very small players who could become loyal customers. But, you let the riffraff in if you do price per listing. A big price barrier is a good control over the market that doesn't require much action or thought on your part.

I think clickthroughs is a lost cause unless you are targeting the most popular consumer items. Lots of things you could get a cut from are only interesting to 200 people in North America. I haven't thought through the spam related issues of charging for clicks.. I doubt it will discourage spam though. Hell, just look at spam sites and you can see that you don't actually have to sell (or facilitate an actual sale). Get a good rank in search engines and collect clicks. The money makes itself. Pretending to have stuff for sale is a not bad way of generating page rank and clicks.

Anyway, I don't actually know much of anything about what your target business is, and that part is critical. I assume you have some idea what you bring to the market place.. To me that has to be the starting place for this question.
posted by Chuckles at 4:28 PM on January 9, 2011

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