Carts: Fees, Licenses, and When Free Ain’t Free

Here are a few thoughts on how pricing works with shopping carts, based on the 12 carts I’m reviewing for the Guide. Like most things about shopping carts, there’s no right answer, there’s just what’s right for you—

Software License vs. Monthly Subscription

With some paid shopping carts you invest all the cash up front, with others you send a little bit of cash each month.

A monthly subscription can be as little as $5, an affordable option if we’re starting a business on a tight budget. I like that there’s an inherent customer-centeredness around paying a monthly fee…if the service provider wants continuous income, they must continually provide a good service.

With a shopping cart software license, you’re fully invested from the start. Licenses can be very affordable—like around $50—and upgrades are often free. But my question is: Where is the monetary incentive for developers to add new features or fix bugs? Money-back guarantees are short-term or nonexistent, so what we buy may be all we ever get.

However, when we compare the expense of a $50 license to a $5/month service, in our first year we’ll spend $50 on the license and $60 for the service. After that, the license costs us nothing while the service costs us $60 every year…maybe more if they raise the price.

Note: There are free shopping carts if your budget is very tight, but paying for a shopping cart often means you get some kind of technical support. Often. Not always.

How Much Free Shopping Carts Cost

There are plenty of shopping carts without licenses or subscriptions, but they all cost something.

With some shopping carts, the cart is free but the support is not. Magento is a great—though admittedly extreme—example. Their Community edition is full-featured, without warranty or support, and completely free. Their Enterprise edition has more features, a warranty, “complete end-to-end product support via world-class Service Level Agreements”, and costs $11,125 per year. Per year.

Worse than a free cart that costs us money is a free cart that costs us customers. Many free shopping carts require registration and/or login for customers to buy. This “feature” is infamous for thwarting both new and old customers at the start of the checkout process. The tale of the $300 Million Button tells it best.

With some free shopping carts, we may need to buy extra features à la carte, or shell out $35 for the manual. And some free shopping cart services charge us a listing fee for each item plus a transaction fee on each sale in addition to the fees we’ll pay our payment processor.

Where is the free?

Transaction Fees vs. Monthly Subscription Fees

When there’s no cash to spare, a shopping cart with a transaction fee instead of a monthly subscription fee is great, right? With transaction fees we only pay when we sell something, so there’s never cash coming directly out-of-pocket. On a slow month we’ll pay less in transaction fees, whereas with a monthly fee we have to pay even when we don’t sell anything.

However.

At some point, as we continue to work hard on our thang, sales will be consistently plentiful and a monthly subscription will be a better buy. Here’s how monthly fees look with a 3.5% transaction fee—

See what happened at just $750 each month in sales? We spent $26.25 in transaction fees, which is enough for a basic package with many carts. Later, when we have $1500 in sales each month, we can get started with any cart mentioned in the Guide and have access to almost all their nifty features. At $3000 in monthly sales, we can afford bigger, better packages and even more features.

Why pay $100 per month for a shopping cart? Because in many cases, $100 means we can—

• Offer over 2000 products
• Talk to a real, live person on the phone when we have a question or a problem
• Customize the cart to look like our website or blog
• Push our sales data to QuickBooks so we don’t have to key it by hand
• Offer gift certificates and other goodies, and
• Use money-making features like cross-selling (i.e., If you like X, you might also like Y or Z)

Note that some cart services charge both transaction fees and monthly fees. In my opinion, a cart would need to be pretty nifty to be worth paying both. And maybe some of them are. Maybe.

Set-Up Fees

Set-up fees get on my nerves. I mean, I get it, okay? They add a little a friction so only serious customers sign up. Also, they’re usually non-refundable so service providers can come out ahead even when they refund cash on their money-back guarantee. And it’s understandable when a service provider has a manual setup process using real hands belonging to real people. I get it.

And they still get on my nerves.

But they’re too common to avoid and too annoying to ignore. One important thing, though: It’s unwise to dismiss a shopping cart just because there is a setup fee. Compared to a similar service without setup fees, but costing a little more per month, the setup expense can balance out by the end of the first year. Yet in the years that follow, long after the setup fee is forgotten, the others cart’s more expensive monthly fee will go on and on.

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So. Just a few thoughts…

Photo credit: sylvar

Tagged as: shopping_carts