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Privacy/Security Issues & Adding E-Commerce Capabilities When it comes to your site, privacy and security are top of mind for most online customers. And if you really want them to spend their online shopping dollars on your site, you'd better get your e-commerce operations right from the start.

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To help ensure your online customers' confidence--andencourage them to shop--there are several approaches you can take:posting--and adhering to--a well-crafted privacy policy, applyingfor a privacy seal, offering plenty of payment options and securingtheir online transactions. And to ease your e-commerce headaches,we'll tell you what you can do to prevent shopping cartabandonment and lower your return fraud rates.

31. Include a privacy policy. Drafting and boldly postinga privacy policy is a must-do when building your website--it'sa necessity today for building consumer confidence. A good policyincludes a description of how data is collected and used; a way toallow users to choose not to provide data or permit their data tobe shared; and a description of the procedure for users who want torequest or update data. You can also follow fair-informationpractices laid out by the FTC. And remember: Once a privacy policyis posted on your site, you'd better adhere to it, or you canexpect to find yourself in legal trouble.

The Direct Marketing Association has an online guide to helpentrepreneurs develop a privacy-policy statement. The guide encourages companies to complete a questionnaireand create a privacy-policy statement consistent with theassociation's Privacy Principles for Online Marketing.

32. Make sure your policy is thorough. A good privacypolicy should cover questions anybody visiting your site mighthave. Your policy will need to:

Reveal what personally identifiable information is beingcollected through your site, including that which isautomatically collected when users log on. For instance, you maywant to state that your business collects information onvisitors' internet addresses and browser types to help withsite maintenance.

Tell your visitors how the information will beused. Is it for shipping and billing purposes? Do you sharethe information with anyone else? Inform visitors about choicesthey have concerning the collection, use and sharing of thatinformation. If visitors must register and provide information,allow them to opt not to receive newsletters or other e-mail.

Describe security procedures used to protect visitor datafrom loss, misuse or alteration, including your secureserver and encryption methods. Let them know how they can view theinformation you've collected on them and correct anyinaccuracies.

33. Apply for a privacy seal. Online seal programs arelike a Better Business Bureau for the web. It works like this: If abusiness follows certain privacy rules, it's allowed to displaya seal of approval on its site. Customers logging on to your sitewill feel more confident buying your wares; the seal offers proofthat your business takes privacy seriously and uses the informationcollected in a responsible way.

Two leading privacy-seal programs are TRUSTe(TrustedUniversal Standards in Electronic Transactions) and BBBOnLine,a subsidiary of the Council of Better Business Bureaus. To includeeither of these programs' privacy seals on its website, acompany must agree to post a privacy statement that's easilyaccessed and understood; further, the business must implementprivacy principles that reflect fair-information practices.

34. Choose a shopping cart system that works for you. Toaccept online payments, you must have a shopping cart system thatallows your customers to select and purchase products from yourwebsite. A shopping cart system typically consists of threecomponents: the product catalog, the shopping cart and thecheckout/payment system. The product catalog displays the items youhave for sale on your site. The shopping cart system allows yourcustomers to select products by clicking an "add items tocart" button, and the checkout/payment system allows customersto complete the checkout process and pay for their purchases with acredit card.

To select the shopping cart system that's best for yourbusiness, you should consider a number of factors, including theproduct you're selling, the depth of your product line, thepurchase options you wish to offer customers, the inventory controlfunctionality and the extent of automation you desire. Numerouscompanies can assist in the setup of your shopping cart and onlinecredit card payment system. These companies typically chargeseveral hundred to several thousand dollars for theirservices--but, like anything, you get what you pay for, so alwaysuse a company with good references in this area. The money youspend now will be returned many times in increased sales volumefrom credit card customers.

35. Start accepting credit cards on your site. Thedecision to accept credit cards is a wise one for any retailer.Research has shown that accepting credit cards increases revenueand helps with cash flow, since you receive the money within a fewdays instead of waiting up to a week for a check to clear. Andcredit cards don't bounce, as some checks have a tendency todo. To accept online payments, you'll need the following:

  • An electronic shopping cart system
  • A payment gateway service
  • A credit card processor
  • An internet merchant account issued by a bank or otherfinancial institution or service bureau

Here's how online credit card processing works:

  • Your customer submits his credit card information at checkouton your site.
  • The shopping cart software sends the transaction to thegateway.
  • The gateway routes the information to the processor.
  • The processor contacts the bank that issued the customer'scredit card.
  • The issuing bank approves or declines the transaction.
  • The processor routes the result back to the gateway, which thenpasses the result back to the Web site shopping cart system.

The entire process is done electronically and takes just secondsto complete.

36. Set up a merchant account. An Internet merchantaccount is a bank or account in which funds from online sales aredeposited by the processor. Merchant accounts are usually issued bybanks that are associated with the major credit card services, likeVisa and MasterCard. Although many banks used to shy away fromgranting merchant accounts to internet merchants, now that onlinesales are a much more accepted shopping option, lenders are nowmuch more likely to be willing to grant you a merchant account andeverything else you need to accept online payments. Be warned,though: The fees are usually higher for online operations.

37. Protect your customers--and your business--fromfraudulent payments. Although fraud rates are on the rise,credit card payments still remain one of the safest payment methodsavailable online. And that's due to sophisticated solutions,such as the LinkPoint Secure Payment Gateway, which process creditcard payments in real time using Secure Sockets Layer (SSL)technology that encrypts all confidential information during thetransmission and authorization of transactions.

Other fraud-prevention tools, such as the Address VerificationService (AVS), make online credit card acceptance even safer. Theservice compares the numerical information in your customers'addresses with records stored by card-issuing banks. It thenreturns codes that indicate whether the numbers match. Although theinformation provided by the AVS does not affect the authorizationof your transactions, it can help you make informed decisions aboutsuspicious orders.

Besides the AVS, you can protect yourself by using the cardvalidation code 2 (CVC2) and the card verification value (CVV2)verification systems of MasterCard and Visa, respectively. Theseverification services use the three-digit codes printed on allMasterCard and Visa cards to help you determine whether yourcustomers possess legitimate cards.

38. Don't stop with address and card verificationsystems. Many experts say these are only a first step.Merchants selling valuable products that are easily resold, such aselectronics, should also invest in the advanced fraud protectionservices offered by gateway providers. These services generally usefraud filters to screen for suspicious activity in real time. Theycost an additional $30 to $1,500 per month, depending on the levelof customization, along with additional setup and transactionfees.

Before implementing fraud-protection services, however, webmerchants should design websites that are more fraud-resistant. Onee-commerce expert recommends designing the checkout process so thatafter a consumer presses the "buy" button, the"back" button on the web browser no longer responds.Also, thank the customer for the order without indicating whetherthe card has been accepted. This way, the site doesn't serve asa tester for fraudulent account numbers.

39. Minimize shopping cart abandonment. Despitewidespread knowledge of the problem, shopping-cart abandonmentcontinues to plague e-tailers. Here are a few easy tips you canimplement on your site to minimize shopping-cart abandonment:

  • Remind people of what they're getting as they'rechecking out.
  • Provide shipping costs early on.
  • Show stock availability on the product page, and offer anestimated delivery date.
  • Include a prominent "Next Step" or "ContinueWith Checkout" button on each checkout page.
  • Add "shop with confidence" messages that remindcustomers of your security/privacy policies.

The number of shopping carts abandoned could be reduceddramatically if retailers were to make these relatively minorchanges to their online checkout processes. And finally, beforemaking any changes to your shopping cart, you might want to use webanalysis software to see how people navigate through a site. Bydoing so, you can learn not only what frustrates online shoppers,but also what keeps them opening their wallets.

40. Implement policies to curb return fraud.Brick-and-mortar retailers have always had to deal with returnfraud. But with so many sales happening online, e-tailers arebeginning to rethink their return policies to minimize fraud.Combating return fraud starts with posting a concise, reasonablyrestrictive return policy on your site. Such policies are importantto online shoppers, according to a survey released by the NRFFoundation (an arm of the National Retail Federation) and theAmerican Express Co. "The NRF Foundation/American Express 2004Customer Service Survey" found that 70 percent of onlineconsumers want returns to be accepted without problems, 70 percentwant return policies to be clear, and 69 percent want them to befair.

Some retailers have begun using The Return Exchange'sVerify-1 to track return fraud. Verify-1 stores a customer's IDand payment information when he or she returns an item. The systemthen compares variables such as return frequency, dollar amountsand/or timing against rules that form the retailer's returnpolicy. Although it's a bit pricey, the service might be worthit if it could slash the number of fraudulent returns youexperience.

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