What Is An Online Merchant?

What Is An Online Merchant?

An online merchant is a business that sells goods and processes payments over the Internet. This ecommerce store transacts through a virtual terminal and payment gateway. These merchants are similar to physical store merchants except that the point-of-sale and all business is conducted online.

What Does An Online Merchant Do?

The role of an online merchant is to sell products on their website. It is most common for new business owners to start off as online sellers. This is different than an online merchant because the merchant has more responsibilities such as managing inventory and organizing payment services. These merchants can choose to charge a flat rate or monthly fee aka recurring billing.

For an online merchant to be successful, they must maintain the product or service quality, set pricing, manage payment services, and execute strategic marketing. Advertising online is essential for business growth and sustainability. It is important for the merchant to be knowledgeable of new media trends in order to properly maintain the company brand and successfully sell products.

Online Merchant Transaction Process

The process of a transaction from the card holder's bank account to the online merchant account is intricate, but broken down becomes quite simple and clear. Below is a flow of online payment processing from point-of-sale to the online merchant bank account.

What Are The Different Kinds Of Online Merchants?

01. Ecommerce Merchant

An Ecommerce merchant sells products or services exclusively over the Internet. An online merchant account is different than an online seller. The online seller only buys products and sells them for profit. The online merchant has additional responsibilities. The major responsibility is that the online merchant is in charge of payment processing. They also need to manage inventory, develop the company brand, and promote the products or services.

02. Wholesale Merchant

A wholesale merchant, also known as a wholesaler, purchases goods in bulk. After the products are purchased, the merchant redistributes them to retailers in smaller volumes. In the past, it was more common for wholesale merchants to operate out of large warehouses, but lately, the trend has swayed towards the merchant acting as a broker of the transaction. This method of business is called drop shipping.

03. Retail Merchant

A retail merchant, also known as a retailer, purchases goods from wholesale merchants in smaller quantities. The retailer sells products directly to consumers. Usually these types of merchants are much better at marketing and advertising than wholesalers.

Retail prices are always higher than wholesale. One major contributor to the price difference is that retail spends more on promotion, PR, advertisements, and marketing. The retailer is also more responsible for their public image and customer service since they are customer-facing.

Retail merchants are essentially resellers. This allows them to change labels and repackage products using a different brand. Not all companies allow the packaging to be changed. Trademark rights and other agreements can affect the freedom a retailer has for re-branding. This selling strategy is effective, however there is much more involved in product promotion. Reselling seems to be the most popular form of product distribution among business owners. In the wake of the Covid-19 pandemic, it is apparent that retail merchants will be taking their business online more and more as social distancing and shelter-in-place continue.

04. Affiliate Merchant

An affiliate merchant is a business that generates sales of products through a network of affiliates using links and ads. Affiliate merchants advertise merchandise on a website and then earn a percentage of the sale when the buyer makes a purchase. A membership fee is commonly charged for merchants to be a part of the network. An additional commission is taken from every sale in order for the affiliate program to function.

The Status Of Online Merchants

Every year online sales grow as more merchants open online. This trend is likely to continue, especially considering the effects of the Covid-19 pandemic on the public's decision to not shop at physical locations. Instead, shoppers are being driven to use their debit card, American Express, Visa, Mastercard or Apple Pay to purchase products from online merchants using ecommerce websites and online credit card processing resources. This leaves the question: is it time to move your business online?