The high(er) cost of doing business online
20 July 2000 - According to the survey, a $100 transaction charged on a credit card could end up costing a Web-based retailer $3.10 to collect as opposed to $2.10 to process the same type of purchase at a real-world retailer.
"The Internet was supposed to level the playing field," said Gartner Group researcher Lavivah Litah. "The bottom line is e-tailers are getting hit from all sides."
Litan said banks that issue credit cards still don't trust Internet sales, where there may be as much as 12 times the fraud as the traditional shopping methods, according to the survey.
"They want smooth transactions, no problems," she said. "They don't want to have to refund anyone (because) they lose money and their good name."
Dotcoms disagree
Several dotcom retailers disputed the findings, saying privately that they pay the same rates as brick-and-mortar stores. None of the companies contacted for comment -- including Petsmart.com,
Litan said no company is willing to air its credit problems in public, fearing investor panic.
It also hints at collusion in an industry whose top two players, Visa and Mastercard, have already been accused of monopolizing the market, she said.
The differences go beyond credit card processing fees. According to the survey, they also occur if a credit card purchase turns out to be fraudulent.
Traditional shops usually have only to show a credit card company a signed receipt, and the card's issuer absorbs the loss. But the survey found that online retailers are usually responsible for tracking down bogus buys, a costly and time-consuming process.
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