Thursday, May 31, 2007

The High Risk Merchant's Hottest Guide on Selling Digital Items

Digital Item: What is it?

They say experience is priceless but in the age of the Internet, even experience can be sold online. In fact, if you can sell digital text in the form of theses, e-books, and articles, digital images in the form of digital photos, movies, and videos, digital sounds in the form of downloadable mp3 and other digital content such as blueprints for building designs and presentations, you are essentially selling a digital item. Which is to say the least, a big market demand these days. A lot of digital sellers may start small with a few items on the catalog and grow into a huge company selling hundreds of items. They evolve to finally adopt a processing system with the help of a high risk merchant account provider.

High Rewards, High Risks?

A high risk merchant account provider? You ask. You heard it right. Selling digital items is not exactly the type of online business that regular merchant account providers approve of. There is no catch to it. Digital items are considered high risk items since there is a high incidence of hacking and fraud involved. Also, the biggest problem of most digital sellers is that they are unable to protect their intellectual property rights and thus lose their sales by copycatting.

I'm hitting the nail straight on the head. Selling digital items has such a high incidence of fraud and chargebacks that digital sellers have come up with various ways to protect themselves from these. For example, content would encoded in .pdf format as well as watermarks in order to protect themselves from copyright infringement. More advanced methods include using secure encryption systems.

Dealing with chargebacks is harder. Unless digital sellers have a way of tracing and verifying the transaction, customers will see loopholes for incurring chargebacks against them. They can merely download the product and call for chargebacks saying they did not download it. The best defense for this is to have the product shipped in tangible version such as CDs. Otherwise, create a contract that binds the customer into non-refundable, non-returnable product agreement.

Luckily, the rewards of selling items online is enormous. Not only because you have the whole internet-using world as your client base, but because you are freed from extra costs of shipping and setup that brick-and-mortar and brick-and-click stores have to pay for. Now, I don't have to convince high risk merchants of this idea, they already know and are quite aware of the benefits. This includes the fact that if you own an offshore merchant account, you enjoy such a high tax reduction that international banks bestow.

Also, if you have a good reputation for coming up with original content and have good marketing skills involving social media, there is even a greater potential to earn money. Most digital content sellers begin with free samples of their product and eventually grow into a profitable digital company. The trick is to sell consumer-oriented items that are of practical use to customers. When the latter can get access to your digital products (unlike in bookstores or record bars), there is more potential for increased sales.

Where and How to Sell your Digital Items?

There are several avenues to selling digital items. You can put up your products on eBay, register in a community mall where you own your customized storefront, or even build your own online store with the help of some programming and credit card processor (may or may not be affiliated with high risk merchant account provider).

Each avenue has its advantages and pitfalls. For example, eBay charges a high commission for certain products posted on certain period of time in the auction site. However, there is a high percentage of items getting sold since eBay is the world's biggest marketplace. The same happens with community malls but you have more freedom to customize your storefront and take advantage of more features that these online public markets provide.

For merchants selling digital items in bulk, it's best to create your own website where you can put up a limitless number of products and services. You will need an efficient shopping cart and a user-friendly online catalog displaying products, product descriptions, prices, and even customer reviews. You will also need a reliable credit card processor that can verify transactions in real time, fast. Above all, if you are a startup, applying for a high risk merchant account that will handle your transactions depending on their terms of processing is an excellent way to get your business running in no time. Only when you have established yourself as a digital seller of good profit and credit rating will you be able to own your independent merchant account. By then you can own your own credit card processing system and handle all your business processes from sales tracking to building your own affiliate program at your own pace.

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