What did Shopify do that sent thousands of e-commerce store owners scrambling to find a merchant account for their business? Hint – it had to do with the coronavirus and businesses pivoting or transitioning into supplying safety-related products.
So, were you a Shopify seller of personal protective equipment (PPE)? Or, were you selling other high-demand products driven by the coronavirus? Then you would already know what we are talking about. Or are you an e-commerce business owner looking to now expand? And you realize the problems of continuing to use payment aggregators like Stripe and PayPal? (Perhaps you were even blocked by them for selling PPE and other gear.) Then read carefully.
A few – well many – bad apples and all had to suffer
Remember when the Coronavirus reached America and Americans went on a frenzied buying streak? Where they grabbed up every toilet paper, hand sanitizer, and wipes in sight? Well, we are sure that you also may recall the shortages and price gouging that followed.
Companies like Amazon that facilitated these types of businesses had to put immediate restrictions and limitations in place. The main aim was to avoid merchants misleading and overcharging consumers. So, thousands of Amazon sellers either lost their accounts or had them suspended.
Almost overnight, the sale of PPE such as masks, gloves, vizors and sanitization items became a high-risk industry. One avoided at almost all costs by regular merchant services providers, payment providers, and e-commerce platforms like Amazon and Shopify. It all stemmed from a rise in demand and some savvy business owners listening to the demands of their customers.
Businesses strategically pivoting for growth – and demand
Masks (N95 masks, reusable, and disposable). Hand sanitizers. Gloves. Other medical equipment like temperature monitors. These all became big-ticket items almost overnight. Businesses that were seeing a downturn due to social distancing and closure measures strategically switched to offering these and other items as consumer demands grew.
For some businesses, it was easy to pivot. Merchants who previously sold related items were (and still are) switching their business model to accommodate new consumer demands and to capitalize on this trend. For example, clothing companies moved into making surgical masks and other face masks for both private and medical use. Alcohol manufacturers quickly transitioned to making hand sanitizers. Plastic bag companies naturally switched to producing gloves.
Many small and medium-sized enterprises rushed into the e-commerce space to fill the gap in supplies for COVID-19 related products. And many of them went to commerce platforms like Shopify and Amazon.
But Shopify said not so fast. And they put in place stringent requirements related to the sale of COVID-19 products. This resulted in the expulsion and closure of over 5000 online sellers within a one-month period. Similar situations happened with Amazon and Stripe. They, too, implemented strict measures to manage sellers of PPE and other related items.
The restrictions and limitations imposed by these companies and their competitors apply equally to all merchants selling COVID-related products. This means that even as a legitimate business, you will find it difficult to scale if you rely on these platforms.
Companies that already had their own e-commerce websites particularly in the clothing or safety industry and merchant accounts fared better in the aftermath. Those that relied solely on third-party commerce platforms suffered.
If you were one of the thousands of sellers affected, DirectPayNet can guide you to finding a merchant account to continue growing your business.
So, what can you do?
Merchant accounts are lifesavers for sellers of COVID-19-related products
A rise in demand for merchant accounts is being driven by the business demands of COVID. A few bad apples at the crux of the pandemic caused severe repercussions for almost all sellers on these platforms. This led to online payment aggregators disallowing certain products being sold via their platforms. Plus, with his vertical being deemed too risky, other payment processing options became necessary.
And that’s where having a payment expert on your team can help. This isn’t just about your own merchant account(s). It’s also about being guided on matters of compliance so you do not lose your entire business. COVID-19 has been pushing more online sellers to get their own merchant account, even if your business still uses Stripe or PayPal. It’s important to have a backup. Third-party processors (such as Stripe) terminate accounts swiftly. You could be left without payment processing capabilities for weeks until you get a new solution.
Now, we’re not going to say that a merchant account will solve all your payment woes. But having one that aligns with your brand and products makes it much easier to scale upward.
Follow the many recommendations on the DirectPayNet blog when preparing to apply for a merchant account. Doing so can significantly increase your chances of success. We also recommend that you understand the card company rules like this set coming up for June 2020 by Visa. And as an e-commerce merchant during COVID-19, make sure you’re following these 7 online strategies to grow your business.
Critical lessons for maintaining your merchant account while growing your business
As you prepare to take on the e-commerce space in a more structured manner, we want you to have the best chance of success. Here are a few pointers to keep your customers happy and improve your chances of being approved for a merchant account. If you already have an account, following them will ensure you stay on good terms with your merchant services provider.
Do you have any questions about how these recommendations can be implemented or how they can affect your business or merchant account? Please feel free to contact DirectPayNet and speak with one of our knowledgeable business representatives.
Don’t put all your eggs in one basket
Unlike what the Shopify sellers did, don’t rely on one source of processing for payments. For example, a quick or unusual uptick in your sales can cause your business to be flagged and lead to dire consequences.
This small business owner found out the hard way after they started selling plastic face masks and sales skyrocketed. Their merchant account provider froze payments indicating that they were not selling their usual products. (They were a printing company that naturally had plastic in stock). They were able to get it sorted later. But not before having to open two other merchant accounts to continue selling.
The lessons here?
- Be truthful when filling in payment processing applications.
- Notify your merchant account provider(s) of material changes to your business operation.
- Have a back-up plan.
- Choose your merchant account providers wisely. If they do not have an appetite for high risk businesses, and you operate in that type of industry, consider getting a new one.
- Diversify and complement your checkout with additional payment options like ACH or e-checks.
Manage your supply chain
Manufactured products relying on a global supply chain often require a “just in time” supply process. We are in a global pandemic with limitations on movement and travel. Plus, every country is facing increased demands for raw materials or the finished products. This situation can be difficult to navigate when it comes to having a reliable supply chain.
So, in applying for a merchant account to facilitate the growth in this area of your business, make sure you have a solid supply chain. Inability to supply your orders within the time agreed with your buyers can lead to trouble. Issues like double refunds, chargebacks and the cost of disputing them creates problems within merchant accounts.
The lessons here?
- Have as air-tight a supply chain process as possible so you can meet your order fulfillment requirements.
- Ensure your promoted delivery times are in keeping with what you can actually meet.
- Maintain communication with your customers. This reduces impatience and possible chargebacks to your account.
- Manage disgruntled customers and limit online complaints as much as possible. A negative Better Business Bureau rating can cost you your account. Or prevent you from accessing other merchant accounts in the future.
Streamline your order fulfillment process
A criterion that merchant services providers evaluate is a business’ supply chain. And their order fulfillment process. Your ability to receive shipments of materials or getting the finished product to the consumer is a key factor in assessing your business. But it’s also a critical aspect of keeping your customers satisfied. A happy customer is less likely to request a chargeback.
You’ve seen the issues with delayed deliveries as Amazon prioritized what they deemed necessities. Merchants would have suffered with customers canceling orders because of the length of the delivery time. You have to take this example and ensure you don’t repeat it with your e-commerce online store. In doing so, you’ll protect not only your brand, but also your merchant account.
The lessons here:
- Provide clear shipping times, shipping guidelines, and refund policies on your website
- Provide customers with tracking information so they can maintain their own updates on their packages
- Ensure your customers have easy access to contact information and how to get in touch with you about their order
Technology is your business best friend
Keep your best friends close to get your business moving in the right direction. In the e-commerce world, it’s about the tech and tools at your disposal to protect your business and customers’ information.
This will limit issues of fraud, lower chargeback rates, and protect client information from theft or mishandling. You also want to manage your customer relationship well.
The lessons here:
- Start with a 3D-secure (3DS) e-commerce website. This allows you to keep your customer payment transactions encrypted and protected.
- Use anti-fraud software to restrict or limit orders to certain markets that require a much longer delivery period. This reduces the likelihood of chargebacks, because the products took too long to get to their destination.
- Track packages out for delivery and provide regular updates to your customer. You want to keep customers from getting impatient. Or, limit their need to initiate a chargeback because they feel like they were misled about receiving the product.
Accessing the right merchant accounts
As the incidents with Shopify and Amazon shows, you can’t build your business on third-party platforms without repercussions. Especially if you decide to transition to what they – and the card companies – deem to be high-risk verticals.
Selling protective gear, sanitizers, masks, etc., is, in effect, a very volatile market. And traditional merchant accounts and payment aggregators avoid high-risk businesses at all costs.
Are you willing to do what it takes to maintain a solid, reliable business model? Then let’s talk about getting the right kind of merchant processing to grow your business.
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