eCommerce Demystified – Part 2: Scenarios

In eCommerce Demystified - Part 1, we identified the major steps in a typical eCommerce process. As we noted then, you'll need to decide which steps of the process to outsource and which to handle on your own website.

Although there are many possible combinations, in practice there are only four standard eCommerce scenarios. In this segment, we'll identify and explain those four scenarios.

eCommerce Scenarios

The diagram below recaps the major eCommerce steps.

The table below identifies the 4 major eCommerce scenarios.

Let's look at each of these scenarios in a bit more detail.

Scenario Details

Merchant Store

In the Merchant Store scenario, the shopping cart, checkout process and collection of payment information are all handled by software on the merchant's own website.

The only processing that cannot be handled by the merchant's eCommerce software is payment (credit/debit) card authorization. The merchant must establish a Merchant Account with a bank or other financial processor, who then becomes the Acquirer who handles that validation. When a card needs to be authorized, the merchant website submits the transaction to the Acquirer using a Payment Gateway.

Although this approach gives the merchant maximum control over the customer's eCommerce experience, there are other considerations that may make this scenario less attractive. We will cover those considerations in upcoming installments in this series.

Hosted Solutions and Payment Processing

In the remaining scenarios, some or all of the processing is provided by a hosted eCommerce services vendor. All such vendors support payment authorization, but differ in who is the Acquirer. There are two major approaches:

1. Standard Merchant Account — the hosted eCommerce vendor uses the merchant's Merchant Account, so that the merchant's own bank is the Acquirer.
2. Bundled Acquirer — the hosted eCommerce vendor handles the function of Acquirer themselves.

We will discuss the pros and cons of each approach when we dig into general considerations for choosing among the scenarios.

Hosted Payment

In the Hosted Payment scenario, software on the merchant's own website provides a shopping cart and collects checkout information.

The difference in this scenario is that here a third-party service provider handles collecting payment information and credit card processing on their own website.

It may seem odd to delegate that one function to a third-party, but there are definite advantages to this approach. We will discuss this further in subsequent parts of this series.

Hosted Cart

In this scenario, the merchant delegates more functions to the hosted service provider.

The customer chooses one or more products or services on the merchant's website. When they are ready to checkout, they are transferred to the hosted providers website. The hosted provider then handles the remainder of the processing.

Hosted Store

In the final scenario, the merchant offloads the entire eCommerce process to a third-party.

When the customer is ready to purchase, they are transferred to the hosted provider's website. The choice of product and all further processing steps are handled there.

Next Steps

There you have it! Four different scenarios, ranging from a complete eCommerce solution on the merchant's website to a complete outsourcing of the eCommerce process to a third-party.

So, how are you supposed to choose which of these is best for you? The remainder of this series will try to help you answer that question.

It may appear from the discussion up to this point that you simply need to decide how much processing you want to do on your own website. In practice, the decision is seldom that easy.

In Part 3, we'll begin to cover a number of general considerations that might influence your decision one way or another. You might find that you want to re-think your choice.

Note: When you're ready, I have the skills to help you implement your online store.

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