Want to sell wine online? You can forget about PayPal
Posted on February 25th, 2011
Saved in Sour Grapes recommends
I bumped into a wine merchant recently and was telling him that it was great that he was the only one in Ireland accepting PayPal (in addition to Laser & credit card payments). when the stopped me right there.
Not any more he said. 4% is too much a chunk of a wine merchant’s margin.
Wine merchants operate on a margin of 20-30%, sometimes a bit more if they import the wines themselves.
So, out of the €3 out of a €10 bottle, they need to pay themselves, pay rates, utility bills.
€0.40 doesn’t sound like a lot but represents 10%+ of their margin.
So, the next time a customer tells you to put on PayPal, ask them if they’re willing to pay for the difference, just for the convenience.
What would I recommend? Realex.
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It’s tough selling wine and making money. Maybe retailera could do a Ryanair and add a processing charge of €5 per case. Or another €5 for priority delivery and another couple of quid for insuring the delivery, not to mention a Log on(check in) charge. Add enough irritating hidden charges and maybe they could advertise wine at €1 a bottle and still make money!
Excellent idea, Martin, but I think we want people to enjoy their wine. Although, like Ryanair, maybe some people just use wine to take them to a better place!
PayPal charge 4% because they can: they dominate the market and there’s no realistic alternative, so no competition. Charging customers extra for “transaction fees” will just piss them off.
That’s a load of nonsense – I use payPal for all my class fees; the % is 3.5%, not 4 and for the ease of both invoicing (PayPal handles the invoicing) and the ability to be paid by credit or debit card it makes sense.
Anyone who can’t survive on the fee is in bigger trouble; furthermore, unless you’re turning over a lot PayPal works out cheaper than using a merchant account credit card terminal. I know, I’ve used both.
PayPal aren’t perfect – if you take in more than €2,500 in one month you have to jump through hoops to prove you’re not laundering money but, once done, it’s very easy to use.
How much do they charge you if you pay with credit card? I think they will apply similar fees…
What margin are you working off, Dermot?
The fee is 3.5% plus 35 cents.
Based on a bottle of wine of €10, that’s 70 cents. (if I’m lucky enough to make 3 euro on a bottle of wine).
70 cents of 300 cents (the 30% margin) is 23% of my margin – just to receive payment!
So, you’re right, PayPal is a load of nonsense.
Dermot, it’s clearly not a load of nonsense.
Taking the €10 bottle example, €0.69 (0.34 + 0.35) is 6.9% of the price of the bottle of wine.
Surely you know what tight margins (and getting tighter) retailers have to work off?
Besides, retailers would have a merchant credit card terminal anyway.
PayPal pillages retailers because they’re the only show in town. OK if you’re on Service margins like wine courses Dermot, but unviable when you have to make a living out of online sales. Credit card charges typically 1.5%.
Tell me about it?
Have you tried any other merchant services?
When I spoke to PayPal a while ago they asked me if they could keep 30% of the takings for 90 days! :D
Bunch of Jokers for anyone with serious ambitions. I have the names of some decent merchant providers if you want them. You know my email.