Category Archives: Suppliers-Good and Bad

Running Your Business, Suppliers-Good and Bad, Your Money

PayPal Secrets

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PayPal SecretsIf you search online for the phrase “PayPal sucks” you’ll find discussion board comments and even entire websites with bad things to say about PayPal.

Many of the complaints seem to suggest that PayPal freezes funds and even shuts down the accounts of honest merchants for completely unfair and arbitrary reasons.

Reading between the lines, I suspect that a lot of these complaints come from individuals whose business practices have problems that PayPal’s aggressive customer service controls have exposed.

To put it another way, I believe that if you deliver an honest product with good customer service you’ll find that PayPal doesn’t suck*. From our perspective, PayPal is one of the most reliable online services that we use.

PayPal Standard Buy Now Button
PayPal Standard
“Buy Now” Button

Why PayPal?

When starting our first online store, I chose PayPal Standard, a combined shopping cart and payment gateway, because of its simplicity. This service allows you to start collecting payments by pasting a few lines of HTML code on your web pages, following instructions on the PayPal website. You’ve probably seen PayPal Standard “Buy Now” buttons like the sample shown here.

Since that time our website has changed a great deal, but PayPal is still collects our payments. Although we’ve moved to a more flexible service called PayPal Payments Pro, many of the core advantages are unchanged, including:

  • Competitive transaction fees, that get smaller as your sales volume grows, and the ability to accept many different customer payment cards
  • A lack of hidden costs such as extra fees on rewards cards, statement fees, and so on
  • Aggressive security controls to prevent hackers and an occasional dishonest customer from taking your money
  • Integrated UPS and USPS shipping that automates your shipping labels and provides proof of fulfillment in case of any disputes
  • A history of good telephone support, by staff that seems to be US-based

But despite these positive points, we had to discover some critical, mostly unwritten rules to keep things running smoothly.

Secrets to Trouble-Free PayPal Service

Many of the most important secrets for working with PayPal didn’t seem very obvious at first. We had to learn some of these through experience.

  • Make the email address for your PayPal account your primary customer service address, since buyers will see the address when PayPal confirms payments and issues refunds. Choose an email address that’s simple and will make sense to customers, like service@Example.com.
  • Document all customer requests that impact fulfillment (for example shipping address changes) and use integrated PayPal shipping to help prove you shipped every order.
  • Avoid accessing your account from a new location without notifying PayPal beforehand, as this could trigger a security lockout.
  • Once you add employees, configure additional PayPal logins to prevent others from viewing balances, transferring funds, and so on.
  • As soon as your account balance is big enough that loss of funds would be a disaster, enable the PayPal Security Key that uses a cell phone or smart card to authenticate any login that’s allowed to withdraw money. Use of your mobile phone as a security key is free to US customers.
  • Most importantly, treat customer satisfaction as your top priority. Answer questions and complaints quickly, and do everything in your power to focus on customer service so that no one ever ever needs to contact PayPal or their payment card issuer to dispute your charges.

PayPal Shortcomings

All online services suffer occasional outages, and PayPal is no exception. In our experience PayPal disruptions have occurred less than once per year, and are usually resolved within a few minutes of calling their support line.

Our biggest frustration with PayPal used to be its transaction reporting. We find these reports difficult to use since so many of the entries are temporary, behind-the-scenes transactions like authorizations, holds and reversals. These related, temporary transactions often span consecutive months so they’re difficult to reconcile, and they’re so numerous that they bogged down our accounting software. We found no reliable way to import the transactions into QuickBooks, and the add-on tools we tried only made things worse.

After years of frustration we finally found a great accountant who taught us how to solve the problem. For details about the simple way that we now get the financial results from PayPal into our accounting software, see our story about QuickBooks Hell.

What’s Next?

Once you’ve configured your website and chosen your shopping cart and payment gateway, if you sell physical goods you’ll need to determine the shipping options you’ll provide customers. We’ll discuss that next.

Next: Shipping Your Products

 

* This is not a paid endorsement.

Running Your Business, Suppliers-Good and Bad, Tips for Your Business, Your Money

QuickBooks Hell

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QuickBooks HellAs your business grows – and especially once you start to work with outside suppliers – you’ll likely need an accounting software package. For most businesses QuickBooks is the unavoidable choice. If you want to get help from an accountant or eventually hire a bookkeeper QuickBooks is practically mandatory.

QuickBooks has the potential to make seemingly impossible tasks look easy. Once you get QuickBooks configured right, it’s gratifying to see your transaction history loaded into tax software like TurboTax, and to see the correct IRS forms completed almost instantly. And, you’ll sleep better knowing you’ll have precise profit-and-loss data within a few days after the close of each month. You’ll also know exactly how much sales tax to send to your state each quarter (if required), and you’ll be confident that the bills you’re paying are correct.

Unfortunately, QuickBooks can also make many basic, daily record keeping tasks seem impossibly difficult. Even after reading books on double-entry accounting principles used by the software, I found that setting up and maintaining my company’s books with QuickBooks was hugely frustrating, and it seemed to consume limitless amounts of time.

While I’m no Certified Public Accountant (CPA) and can’t offer specific help setting up QuickBooks for your business, I can share a few pointers that I wish I’d known before wasting what seemed like an eternity in QuickBooks Hell.

Keys to QuickBooks

Used correctly, QuickBooks can provide a great deal of value in tracking and reconciling items such as:

  • Bills, payment card charges, and business expenses in general
  • Key business accounts including your checking account, online merchant account, and sales taxes payable to your state
  • Purchase orders, and the payments that you send to suppliers
  • High-level financial results, with the ability to feed this data to TurboTax

However, we find other activities to be impossibly difficult with QuickBooks:

Before finding our really smart CPA, we paid several other accountants to try and make our QuickBooks setup workable. We quickly learned that while many people call themselves ‘experts,’ most were only familiar enough with QuickBooks to make it work for one particular type of business. Nobody seemed to understand the software well enough to help us set up efficient processes for our online store.

Setting Up QuickBooks for an eCommerce Store

Fortunately, after trying to manage inventory for several years with an expensive version of QuickBooks, we eventually found our great CPA. We followed his advice to discard that version of QuickBooks, buy the more basic QuickBooks Pro (often sold for under $200), and start fresh with the features that we found usable. We also switched to planning our inventory with an Excel spreadsheet, and then entering the correct information into QuickBooks at the end of each month.

For our particular business, here are some of the key guidelines we eventually learned with help from our smart CPA.

  • Don’t import individual online transactions into QuickBooks; instead, create QuickBooks entries dated the last day of each month to match the few top-line totals (like Payments received, Payment fees, and Refunds sent) reported for the month by your payment processor.
  • If you sell physical goods, don’t use QuickBooks to manage builds or forecast inventory; instead, enter monthly inventory adjustments in QuickBooks, using the data you track in Excel, so that QuickBooks can calculate your Cost of Goods Sold and the value of inventory on hand.
  • Don’t choose a bad eCommerce platform, payment gateway, or software add-on only because it claims to integrate with QuickBooks. We learned this the hard way, after testing and rejecting many alternatives.

Using these guidelines we’re now able to close our books within a few days after the close of each month, and to easily track the information needed to pay suppliers and tax authorities. And, our sales revenue in QuickBooks exactly matches the 1099K report that PayPal sends to the IRS each year.

If you’ve got questions not answered here, please visit our discussion forum.

Serving Customers, Suppliers-Good and Bad, Tips for Your Business

Shipping Your Products

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Shipping Your ProductsIf you sell physical products online (as opposed to electronic downloads), the choice of shipping options presented to your customers and the way that shipping fees are calculated will both be determined by your shopping cart.

Very basic shopping carts (like PayPal Standard) usually calculate shipping fees based on weights that you configure and order quantities, in combination with shipping regions that you define.

Because this basic method only estimates the fees, you’ll find that some customers pay too little, while a few visitors might feel they’re being overcharged and will abandon your shopping cart without a purchase.

More advanced shopping carts can give customers a broader choice of shippers, and generally link with carriers’ online systems to calculate accurate shipping fees based on weights, box sizes, delivery addresses, published rates and any discounts you might have. In the case of our own store, we try to charge every customer exactly the fee calculated by the carrier, including any carrier discount, to minimize shopping cart abandonment and complaints.

Note that once you receive an order, unless you use PayPal you’ll generally need to copy-and-paste the customer information into a system provided by each carrier to print the required shipping label. An advantage with PayPal is that its services all provide an online system to print UPS and USPS labels directly, without the need to copy-and-paste.

Shipping Carriers Compared

Probably 80% of our customers choose UPS when buying from our online store. And as far as we’re concerned, UPS has a number advantages:

  • UPS has top-notch online tracking that provides timely and reliable information about the status of each package.
  • UPS has fair and reliable processes for dealing with lost shipments, damaged goods, and occasional customer fraud, and a willingness to track down root causes and resolve claims quickly.
  • You can change delivery and even recall a package after you’ve sent it, albeit at a significant cost.
  • UPS offers a convenient online system for emailing customers prepaid labels to return products if needed.
  • Insurance of up to $100 is included in the cost of every UPS shipment.

However UPS is not perfect, and some of its practices can really hurt.

  • As far as we can tell, UPS has no transparency when it comes to the big discounts they give different online retailers. We’ve had to plead our case every year with the local UPS rep, and hope they’ll help us out.
  • Any time you fail to catch the smallest customer typo on a shipping address, UPS may charge you an address correction fee of $11.
  • By default, UPS uses a customs clearance service that could charge international customers hidden fees that total more than the cost of shipping; when customers refuse to pay, you might have to refund their purchases and pay insanely high fees to get your package back.

As you might guess, we now use only the US Postal Service (USPS) for shipments outside the USA. The USPS has a number of advantages:

  • Unlike other carriers, the USPS offers consistent and transparent pricing for all its services.
  • You won’t get stuck paying surprise fees for address corrections, returned packages, international customs clearance, and so on.
  • The USPS offers Saturday delivery at no extra charge, and unlike UPS can deliver to PO boxes.
  • Customers pay very low rates for shipping to distant US locations like Alaska, Hawaii, Puerto Rico, and US military bases.

Sadly, some USPS practices seem to be stuck in the pre-Internet age:

  • Especially when it comes to overseas shipments, the USPS online tracking system often gives unreliable, outdated information.
  • USPS support can be almost impossible to reach, and it could take several hours and multiple phone calls to resolve a single issue.
  • The USPS requires a two week wait before they’ll trace a lost package, and often won’t even report their findings until 21 days after that.

Choose Your Carriers with Care

No matter what carriers you choose, much of your customer service effort will be spent resolving delivery issues. We’ve gotten plenty of complaints about both carriers, and have gotten negative online reviews from customers who seemed angry that we don’t offer a particular service they like.

Note that our online store has no track record with other shippers like FedEx, partially because of lack of integration with PayPal, and partially because of my personal bias arising from bad experiences as a consumer.

Configuring shipping options in our shopping cart was the last big step to start selling online. Next it was time to make our store visible to search engines so that people could find us.

Next: Make Your Website Visible

Advertising Your Products, Suppliers-Good and Bad, Your Money

Steve’s Marketing Rule

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Steve's Law of MarketingAs our business grew, we made a real effort to measure each marketing program to find out how much of a return it provided. We carefully monitored our online campaigns, and used incentives like coupons to test the effectiveness of print ads.

Because we measured the return on every dollar spent on marketing, we learned a simple rule that’s proven true virtually 100% of the time.

Steve’s Marketing Rule:

Never trust anyone who tries to sell you anything marketing related.

In other words, never trust someone who is making the slightest effort to sell you online ads; print advertising in magazines, newspaper or flyers; search engine optimization (SEO) services; TV or radio ads; customer email lists; or any other marketing-related service you can imagine. This also holds true as your company grows and providers that you have used successfully in the past approach you to sell add-on offerings.

Here’s Why

The truth is that the better the marketing-related service, the less it needs telephone salespeople, email Spam, and other kinds of outbound promotion.

Any advertising or marketing-related service that can show a positive return is quickly adopted by companies who are hungry for better sales, and a little positive word-of-mouth spreads rapidly among prospective clients. So if a marketing service or advertising media is any good they’ll almost never make any real effort to approach a small company like yours first.

Choose Your Marketing Programs Carefully

Our QuickBooks reports show that advertising and promotion are always a very big part of our expenses, and choosing the right marketing programs was critical to our success. I’ve found that the most reliable way to create productive new marketing campaigns is to:

  1. Figure out what media your prospective customers are most likely see; this could include online searches, targeted magazines or newspapers, YouTube videos, and so on.
  2. In each case, look for how other companies who appeal to your same target audience are using the media, and consider starting out by matching their style of ad.
  3. Measure the effectiveness of every campaign, and keep working to improve your results over time.

It can also be a big help to share your advertising experiences – good and bad – with people at non-competing online stores.

Steve’s Marketing Rule is really just a corollary of Steve’s First Rule of Money, discussed in the next article.

Next: Steve’s First Rule of Money

Suppliers-Good and Bad, Tips for Your Business, Your Money

Steve’s First Rule of Money

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Steve's First Rule of Money

Steve’s Marketing Rule, discussed in the previous story, is really just a corollary to a general rule that I’ve always found to be true.

While this general rule doesn’t have much to do with selling online, I think it’s worth sharing.

Steve’s First Rule of Money:

Never trust anyone who tries to sell you anything with a measurable monetary return.

Specifically, this rule says that you should be very skeptical of anyone who is making the slightest effort to sell you financial investments, insurance, marketing services, or anything else with a monetary return that someone could possibly measure or predict.

Proof

There are plenty of professionals who can analyze the expected return of just about any investment. And, smart marketers know how to measure the return of almost any ad campaign or marketing service.

You can be sure that if experts believe that an investment is likely to deliver even a slight advantage  (or, in the case of insurance, slightly lower costs than the competition) word will get out, people will rush to buy the offering, and there’s hardly a need to promote it.

Friends in Need

Of course, this also holds true of anyone who asks to borrow money. Individuals who pose an acceptable risk can find ways to secure a loan, whether from a bank or a pawn shop. If you value your relationship with that person, give them money instead of loaning it.

Next, we’ll talk about a costly marketing trap that I discovered the hard way.

Next: Amazon Is No Friend

Advertising Your Products, Suppliers-Good and Bad, Tips for Your Business

Amazon Is No Friend

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Amazon Is No FriendAs a consumer it’s hard to imagine a better online shopping experience than you get with Amazon. The company does an outstanding job selling and delivering products, while also promoting items that are shipped to you by other retailers.

I’ve always found transactions on Amazon to be fast and trouble-free, and I’ve been satisfied with their customer service for as long as I can remember.

However, because of their market power – and some behaviors that I feel are outright irresponsible – I think that you should approach Amazon with great suspicion when it comes to your online business.

Fierce Competitor

Let’s face it: many consumers would be happy to buy a slightly inferior or more expensive product from Amazon than a comparable product from your website. Amazon makes it so easy to buy and return items – and there’s so much trust in their store – that the risk is practically zero.

This is the natural and deserved advantage that Amazon gets from its good customer service. But it also means that you should think twice about starting an online store if Amazon sells even somewhat competitive items.

Our Mistake

Knowing that customers feel comfortable with items they find on Amazon, we signed up for their Seller Central program to display our ads whenever Amazon visitors searched for items like ours. People who clicked the ads were taken to our website, where they found detailed information and accurate shipping rates quoted in real-time by UPS and others.

Shocked, then Angry

Amazon Affiliate Ad
Soon after we started advertising on Amazon, websites offering fake discounts on our products appeared

Soon after joining the program we found ads appearing on websites all over the Internet, offering bogus discounts and nonexistent free shipping on our products. It turns out that the ads are published by Amazon affiliates, who Amazon pays a commission to bring buyers to its website regardless of the products sold.

So many affiliate websites offer bogus discounts on our products that people who search for our company name on Google often click the results that show enticing fake offers. We know because frustrated shoppers contact our customer service staff, demanding that we make good on the bogus ads.

Amazon Affiliate Paid Search Ad
Affiliates ran ads above the Google search results, showing our trademark alongside the bogus offers

Next, the affiliates began running large ads above Google’s search results, showing our company name and the bogus offers.

Feeling confident that Amazon would handle the issue fairly, we contacted the company to ask that they stop the affiliates’ ads that offer fake discounts on our products. Amazon’s reply was a real surprise.

It Gets Much Worse

Instead of putting a stop to fake offers published by its affiliates, the email reply from Amazon seems to blame our company with the odd pretext that our website, like many stores, offers our customers accurate shipping rates calculated in real time by UPS and others.

We concluded that Amazon makes a thin excuse for paying its affiliates to act irresponsibly. Not wanting to reward that behavior, we stopped our Amazon Seller Central ads.

And then things got really ugly.

The affiliate ads with bogus offers on our products continued after we stopped advertising with Amazon, of course. But now when you search for our product name and click the big ads with the fake offers, you’re taken to Amazon’s web page that displays our product images and names, with the misleading message that they are all “Currently unavailable” and a list of cheap alternatives you can buy from Amazon.

Lesson Learned

Early-on another business owner told us that fulfilling products through Amazon can be a big mistake, too, since Amazon has a reputation for using the data they collect to seek out and replace successful products with their own, aggressively undercutting the original sellers on price.

We could have saved a great deal of time, money and frustration if we’d only heeded those early warnings about doing business with Amazon.

Thank goodness our company’s products have positive word of mouth. It seems certain that Amazon harms our business, but more and more customers still find our products without being lured away by bogus ads.

Next: Focus On Customer Service