When creating a company, one of the significant choices any entrepreneur makes is deciding how to sell their products. In today’s economy, there are hundreds of different routes to take, often establishing a mix of various strategies tuned for their particular customers. One such route is to create your own online store and sell your products directly.
Recently, my business partner and I were considering opening up an online storefront for our software company, Draconis Software. The idea was to make it easier to reach smaller customers (those who would only be interested in 1 to 5 software licenses, and usually costing only a couple hundred dollars in total). Rather than having these small customers go through our regular sales channel (where we target larger customers with sales presentations, on-site demonstrations, etc), these customers are able to evaluate the software for themselves using a free demonstration version, and make the purchase – all on their own.
Setting up an online store can be a very complex process, and is very dependent on how many customers you’re expecting, the level of control you require over the process, and the amount of legal liability you’re willing to expose yourself to. There are essentially two options: create and host the storefront yourself, or outsource it to a specialized service provider. We chose the latter.
This is a multi-part article that outlines what I found in my research, including reasons for choosing to outsource, how you might do the same, and even info on setting up your own storefront in-house. This part details why you might choose to outsource to a registration service, and some of the options you have.
Choosing to Outsource
One option (and probably the path of least resistance) in creating an online storefront is to outsource the messy details to a service provider. For software developers, there are several options, including SWReg and Kagi. We went with a company called RegSoft (which is a service provided by Digital River, a large, publicly traded company).
We chose to use a company that caters especially towards software developers and we found that RegSoft seemed to fit our needs. This company allows you to add individual software products that can be individually licensed using software product keys – just what we were looking to implement. And, we’re able to avoid having a merchant account and the liability issues of monitoring for fraud.
One of the biggest issues we’ve run into: dealing with how our purchase process appears to the customer. Many service providers don’t allow you to fully customize how your store looks. I’m still not entirely sure I understand why. RegSoft, for instance, allows you to customize how it looks within certain constraints (i.e. choosing a predefined template, setting some of the page’s colors, etc). If you’re looking to implement a truly consistent user interface, you may need to do some more digging.
To get started using a service provider, you’ll need to first determine how you want to receive cash. Most allow you to supply either bank information (and receive direct deposits), or a PayPal account. Be warned however: PayPal has it’s own fees for commercial organizations, so you may want to go the direct deposit route.
Most online providers can automatically handle refunds should a customer request one. In order to offer this service, you must keep a certain amount of money on-hand with the register at all times (well, after your first sale, of course). Should a customer request a refund, I’ve found that most will first send a note to the developer asking for you to authorize the refund (and if they don’t get a response within a certain time period, issue the refund automatically). If a refund goes through, the cost is deducted from your current on-hand balance. Each month a certain amount must be kept in this on-hand reserve, so it’s a good idea to check with your service to determine what amount will be held over. Should you ever cancel the account with them, you can claim that money back.
Another factor we found is that some providers offer a way to handle export requirements. For instance, in the United States, some companies may be restricted from selling certain software to individuals or companies in various nations. If you are selling software that may be restricted from certain nations, your registration service should be able to limit what certain customers can purchase. You should check with your provider to see if they check against the Buerau of Industry and Security‘s Denied Persons List and other related BIS lists.
Doing your research before signing up with a service will save you all kinds of trouble down the line. Pay particular attention to the fees you will be required to pay (if any); create an accurate estimate of the sales traffic you’re likely to see and calculate how much you’ll likely pay in fees to your registration service; then sign up! Creating an online store can be a great way to increase sales and reduce the complexity for your customers to purchase from you.