Serious business...getting my hands dirty!

Okay, everything in terms of internet marketing seems to be very automated and easy, which means most anybody can do it without complicated business setups. There has been a surge of people polluting the CPA field so I decided for me it is time to move on to other ventures. Something more complicated...

My Idea

I want to become a CJ Advertiser.

I saw this site in CJ's inventory...http://www.pfaltzgraff.com

If you look through the stores inventory you see a lot of other peoples stuff in there like hersey's merchandise, yet they list it on there site. I am not as business savvy as I could be and I am looking for what this method is called. I dont' think it is dropshipping.

But any way here is how it goes.

1) Go to rent a coder tell them that you won't a duplicate of this site http://www.pfaltzgraff.com with slight variations to make it unique. See what they bid, might be in the thousands, but well worth it. Get a replicate under your logo.

2) Get an authorize.net account for payment processing.

3) Setup backend. (How do I setup the backend of the site for shipping and stuff? I am willing to do hard work if it requires it. Like , do I need to find a supplier or something?)

4) Pay CJ the thousand or 2 to get listed and wait for the cash to start rolling in after some advertising and follow up with magazines.

5) Not easy, but if you have your MBA in finance I think it is very plausible.

It's a million dollar business startup if you're willing to do hard work!
*I'd appreciate if guys could help me get some those few unknown variable figured out. Thank you!

Authorize.net won't play with you unless you have:
1. A business registration
2. A 3 million USD turnover.

Knowing from the eCommerce industry setting up a backend it's easier said than done; even using opensource coding -- means you'll need programmers to learn this which takes roughly 2 months of work and then start coding..

Setting up a site like NewEgg or even pfaltz is strictly easier said than done. Requires a bit more capital than the average BH project.

good luck to anyone who attempts

do I need to find a supplier or something?

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One of the most critical pieces. You need to have a profitable operation first, then consider CJ. CJ isn't a magical way to make money from any site.

Authorize.net won't play with you unless you have:
1. A business registration
2. A 3 million USD turnover.

Click to expand...

Maybe I didn't research well enough but I think this reputable site says otherwise.

http://www.charge.com/compare.aspx

Yes, it does have monthly fees in the $20 plus .30 on every transaction and stuff but nothing too terrible.

You need to be very professional with papers to get anywhere near you envision
with this plan. Good luck, if you do have your papers and some luck then good for you.

Yes, professional is all I am, but I still that one question answered. What is that technique/practice called for getting your supplies? It is not dropshipping, but I need to get the right vocab for it so I can start researching costs and such.

heiny said:

Authorize.net won't play with you unless you have:
1. A business registration
2. A 3 million USD turnover.

Knowing from the eCommerce industry setting up a backend it's easier said than done; even using opensource coding -- means you'll need programmers to learn this which takes roughly 2 months of work and then start coding..

Setting up a site like NewEgg or even pfaltz is strictly easier said than done. Requires a bit more capital than the average BH project.

good luck to anyone who attempts

Click to expand...

This just simply isn't true.

Here's how you do it the grey hat way.

Rent a small office suite somewhere.

Get a land line telephone through the telephone company installed. NOT a voip setup. A real number with the free yellow pages listing. Trust me.

Register a small business in your county and use that address for your business registration address.

Open a bank account also using that address.

At this point you can either just wait (it shouldn't take more than a week for the calls to start coming in) or be proactive and start calling OFFLINE merchant processing companies. There are literally thousands of them.

When their salespeople contact you, tell them you sell something door to door, or through referrals or whatever. The product doesn't really matter so long as it's in line with a retailer and also the type of product your online business will sell. Tell them also have an online product line that you're thinking of promoting and you'd like to set up your shop to do both swiped and ecommerce transaction, and that you'd like to use authorize.net as your gateway because you've heard such great things about them.

They'll try to sell you a terminal and check equipment and blah blah. Just tell them "Nah, I really prefer to do everything via the internet, but I'll consider getting a swiper for my retail traffic. Maybe a wireless terminal down the road."

Basically you're trying to convince the salesperson that you're a) legitimate and b) going to buy some equipment from him if he plays ball with you. Equipment leases are where most of these guys make their money.

Get everything in writing and CHECK IT OVER. Don't be a dumbass and just sign on the dotted line; you might regret it. If it all looks legit, sign up for processing, buy the gateway software (usually a couple hundred bucks) and then start slowly selling your online products. One line at a time, building credibility for a few months with the processor and authorize.net.

180 days later you can start to really ramp up to full speed and be off and running.

I'm not saying the OPs method will work. But if you want to process through a cart or backend directly, this method will get you there in pretty rapid order.

And yes, I do know p r e c i s e l y what I'm talking about here.

chickuzt said:

Yes, professional is all I am, but I still that one question answered. What is that technique/practice called for getting your supplies? It is not dropshipping, but I need to get the right vocab for it so I can start researching costs and such.

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I believe the word you may be looking for is reseller or authorized dealer.

Wow, scubaslick what an amazing flawless response. Thank you so much, absolutely amazing!

Okay and last question for a while. Do I have to stock some inventory on me or would I wait for a customer order/purchase then contact them to ship to the given address as I forward them their percentage? Thank you!

chickuzt said:

Okay and last question for a while. Do I have to stock some inventory on me or would I wait for a customer order/purchase then contact them to ship to the given address as I forward them their percentage? Thank you!

Click to expand...

A few more details that will answer this and help ease the process and clarify a few things.

1) You don't have to lie to them about the business, but you need to arrange the truth to look the right way.

You're new to the business. You sell mainly door to door or at home shows or parties or whatever. It's probably not a bad idea to have a little "catalog" printed up with a bunch of products in it. Also not a bad idea to have a little stock that you use to "show" at your parties. You can also show them to the sales rep if you choose to have one visit you.

You CAN do all of the steps by phone and fax. It isn't mandatory that a sales rep come out. So you don't need a fancy office or anything like that. You need a business address and bank account, plus a yellow pages listing. That's usually all the due diligence they'll do for a new account. They MIGHT ask for a copy of your "marketing materials." A nice little flier outlining your business should work just fine.

You'll need to estimate your monthly processing. I'd start small. Tell them that you're just starting up and you only sell a few hundred dollars a week, but that your business is growing fast. Right now you take cash and checks, but a lot of your customers are asking for credit card sales so you're checking in to it.

The application will ask about your percentages of sales. You have two options here.

1) Be a "retailer looking into ecommerce." This gets you higher rates for your internet transactions but reduces the risk of getting denied for processing.

Buy an old processing terminal somewhere like ebay. You can pick one up for a few dollars. You can plug it in to any telephone line and use it. Even a very very old, simple machine will work for your purposes. Just be sure you get one that actually works. Do NOT be sold on needing all the bells and whistles. Any terminal will work, even one that doesn't have a printer. Most processing companies will give you an imprinter for free or for a few dollars, along with carbonless receipt paper if you stay strong and refuse to buy their terminal. Remember what I said about the salesperson making their money from terminal leasing. Not all, but roughly 75% of a sales reps money in this business comes from equipment sales. (Some companies offer freebies or rentals. If that's the case, you're fine to accept it. And it'll make things easier on you that way, so go for it if you choose one of them that offers this.)

Take your terminal to your grandmas house and "sell" her $20 worth of stuff. Then mom. Then uncle Sue and Aunt Sally. etc. etc.

You don't have to do a LOT of sales, but over the first few weeks to two months you want consistent, swiped transactions.

The reason is that on your application for processing, you'll want to put down that most of your credit card transactions will be swiped. This is important because if you indicate that you'll be doing mostly non-swiped transactions, you take a risk of getting declined for service at all. It's unusual, but it could happen.

After a few weeks, start keying in some sales. One here one there. Nothing huge. Then you start doing more and more sales this way. Open your ecommerce site and get it integrated with a shopping cart using the authorize.net software (not hard to do; just ask the processing company for some help and they can usually get you straightened out).

If your ecommerce business starts to boom, who can say that's a bad thing, right?

Eventually you "decide" to drop the offline sales and focus strictly on online. Your application is out of date and you'll probably get a call from the risk management department of the processor. But if your chargeback percentage is in line (and it will be if you're doing legitimate business) then you can actually turn that call to your advantage.

2) Be an online merchant and process everything via authorize.net. Slightly lower rates for your ecommerce, but much harder to get approved.

Here's the deal. Processors are leary of 100% online businesses that are brand new. HUGE amounts of fraud there. But if you have a six month track record, showing steady growth and you gradually phase out your "offline" business (which never really existed!) it looks natural and is easily defended.

What's more, once you've done this and you're running some decent volume, you can actually call up the company, say that a competitor of there's dropped by and offered you BETTER RATES than they offered because you're doing so much more volume.

You can get your non-qualified (that's fancy industry speak for transactions where you don't have the card in hand to swipe it) rates dropped from something like 3.5% (typical non-qualified rate for a retailer) to something closer to 2.5% (typical for a reputable ecommerce business).

There you have the basics.

Hope that helps.

Wow, and thank you again so much. Okay maybe that wasn't the last question, I've got another...

Why do I need to buy a processing terminal? Lets say I signup through charge.com, a verified reseller for authorize.net Wouldn't charge.com have the terminals within their facilities doing the processing?

I'm trying to decipher this...

In the credit card payments process, Authorize.Net sits between the merchant and the payment processing entity (e.g., FDMS, TSYS Acquiring Solutions (SM), Global) that does business with the merchant's bank. Authorize.Net also has a relationship with the payment processing entity, which allows Authorize.Net to pass transaction information on behalf of the merchant via the Internet (over a proprietary and secure connection).

A typical Authorize.Net credit card transaction flows in the following way:

1. A credit card transaction is submitted to the Authorize.Net Payment Gateway either from a merchant Web site or directly from a merchant.
2. Authorize.Net automatically passes the transaction to the Acquiring Bank's Processor (the payment processor that does business with the merchant's bank).
3. The Acquiring Bank's Processor passes the transaction to the Credit Card Interchange System (an entity that routes payment information to the parties involved in settling a credit card transaction).
4. The Credit Card Interchange System routes the transaction to the appropriate Credit Card Issuer (the bank or organization that issued the customer their credit card).
5. The Credit Card Issuer approves or declines the transaction and passes both the transaction results and the appropriate funds back through the Credit Card Interchange System.
6. The Credit Card Interchange System relays the transaction results to the Acquiring Bank's Processor.
7. The Acquiring Bank's Processor relays the transaction results to Authorize.Net.
8. Authorize.Net stores the transaction results and sends it back to the merchant and customer.
9. The Credit Card Interchange System also passes the appropriate funds for the transaction to the Acquiring Bank (the merchant's bank).
10. The Acquiring Bank passes remaining funds to the merchant's bank account.

Click to expand...

chickuzt said:

Wow, and thank you again so much. Okay maybe that wasn't the last question, I've got another...

Why do I need to buy a processing terminal? Lets say I signup through charge.com, a verified reseller for authorize.net Wouldn't charge.com have the terminals within their facilities doing the processing?

I'm trying to decipher this...

Click to expand...

You don't need a terminal for authorize.net. You need a terminal to process your handful of offline transactions as swiped while you build your credibility with the processing company.

The whole reason for using an offline company is that it's generally MUCH easier to get accepted to do any processing at all as a "retailer" than as a brand new ecommerce business.

The offline thing is just a convenience step. If you have a 750+ FICO, an established corporation with a good D&B rating, a real established retail business, customer referrals blah blah blah, you can skip all of what I mentioned and jump straight to online retailer status.

I didn't get the feeling that you had all that, so I was laying out a plan to get into authorize.net easily and without spending thousands. Sure, my method takes some time and probably costs several hundred bucks by the time all is said and done, but it works.

As to all that gibberish, the acquirer in my scenario is the offline processing company. No one but banks are allowed to actually process credit card transactions. But the supreme court back in about '83 or so said that that was basically a monopoly. So the banks had to open the doors to outsiders.

Those outsiders are called ISOs. Independent Sales Organizations. They basically work for the banks for a cut of the money earned on each transaction. Every processing company is an ISO for a bank. Some are larger and more reputable than others. Some are both ISO and processing network. (Global, TPS etc.)

Probably not really worth the history lesson here, but authorize.net is just another ISO. Another company that works with processing networks (think of them a bit like the phone company - all they do is transmit data to the banks) and the banks themselves. ISOs can't go directly to the bank with the transaction data. They have to go through a network that has a contract with the banks to provide good quality, secure data transfer.

So what this means is that all of that gibberish is meaningless and it doesn't matter whether it's authorize.net or any other processing company, they all do the same things. The only difference is that authorize.net sells their gateway services through lots of smaller resellers. And since the resellers are the ones putting their butts at risk, it makes sense to go with one who is more desperate for business: offline.

The reason they're more desperate is smaller profit margins, a shrinking economy, customer turnover and the fact that they spread their risk out amongst their retail customers and only have a small fraction of their merchant base as "risky" online businesses. authorize.net's entire model is based on the risky ones, so they're much more careful when you go through an online only channel.

Offline is the way to go unless you're already established.

edit: removed a fragment of a badly formatted thought.

OMFG You are just a bottle pure of genius, aren't you? What college did you graduate from and what did you get your degree in? I am fascinated with your expertise and am wondering where all your knowledge in this area has stemmed from.

You explained this out all perfectly to me and I cannot thank you enough for all the help you have given me!

You're welcome.

I didn't graduate, or more accurately, haven't graduated yet. I have 149 hours collected, although it's been many years since I was in school. Some things didn't quite work out for me but I'm almost to the point where I can go back. I can't wait. I always loved school. Real life sucks. School is beautiful.

Majored in Music.

And I learned all this the very hard way: through years of trial and error building businesses.