DISCLAIMER: This information is provided for information only. Consult your legal cousel and appropriate authorities for the final word on the rules and regulations applicable to your online sales activities.

E-Commerce is a term that generally applies to any form of sale carried out over the Internet. E-commerce is an essential building block of bringing the Internet to its fullest potential and integrating it into our normal personal activities (like buying things!). LavaNet has some excellent products for e-commerce, like our Premium Web Server that includes an expandable shopping cart, database functions, secure ordering and more.

If you want to sell on the Internet: know the law, know the lie of the land. Before going into a mailorder or electronic delivery business, be sure to acquaint yourself with Hawaii and federal mail order laws.

Many limitations apply as far as when you can charge and when you have to ship your product.

Know that doing business online has its perils. The most common troubles are: false orders, stolen or unauthorized credit card usage, "chargebacks" (disputed charges).

The general wisdom is only to ship to the owner address of the credit card you are processing, and to anticipate a fairly high number of fraudulent transactions.

Know about e-commerce before you jump in and be careful to cover yourself by doing the research and making the professional/legal relationships you need to protect yourself and your business. For all the rewards of e-commerce, there are risks also. Though the advertising you see wants to make it sound simple and risk free, it's not. Like any new venture, be sure to research thoroughly and set up legal, reasonable policies (security, privacy, refunds and returns, etc) before you begin selling online.

One of the most common misconceptions about e-commerce is that it only refers to the instantaneous electronic transfer of funds. In fact, there is a whole spectrum of E-commerce types to choose from, depending what type of business you're in, what kind of product you sell, and what kind of volume you move.

Let's overview the whole range, starting with the most simple ones:

If you *do not* have a merchant account:

A merchant account is required if you plan to handle credit card transactions in your business. However, some companies may traditionally sell using only cash or check, and may not be able to get a merchant account for some reason. You can still sell online!

Ecommerce methods that do not require a merchant account:

1. Join a Mall: Your transactions are handled by the mall, who runs your charges thru their merchant account for a fee. The mall sends you the orders to fill and gives you your cut of the money. Some malls do require you to handle your own credit card transactions, so be sure to be clear about what you are looking for.
2. Hire a reseller/fulfillment center: You supply your product to an Internet reseller. You get paid by the reseller either up front or on consignment.

• are willing to process your charges manually (key in number and amount, generate slip of paper, deposit to bank)and want to spend as little money as possible:

  Single Secure Form:
  Set up a web page with a "secure order form". This form allows customers to send a relatively secure email to you, with their order and a credit card number. You fulfill the order and charge it upon shipment. This is one of the most popular "baby steps" to e-commerce available today.

  Callback Card Confirmation.
  Your order form does not need to be hosted on a secure server, because people do not supply you with their card number over the Internet. You receive email orders, complete EXCEPT for the credit card number. You call back the customer to confirm the order, and get their card number at that time. This is a rather old fashioned method, but is good for an extra verification that the card holder actually placed the order, and gives customers a feeling of personal contact too. However, if you move high volume, this could be a lot of work.

• want your transactions pre-verified electronically
• want to process your transactions electronically

  Processing Gateway:
  Sign up for a CyberCash, Verisign or other account.Your orders are prequalified (ie: legitimate card number, zip code matches billing zip code, funds are available for the transaction) but are still processed by you at the time of shipping using a batch processing tool that you access through the Web. Know that online card processing companies generally take a percent of sales as well as charge a monthly maintenance fee. This is NOT the instantaneous electronic transfer of funds. It still has manual and batch processing steps!

  Shopping cart:
  This is a special computer program that allows people to click buttons to buy products. It is generally considered the nicest presentation of your information. It is easy for the customer to use and thereforecan increase sales. You can get a shopping cart program one of two ways:

  1. Build one. This is a very expensive proposition, and kind of "reinventing the wheel" but for some high-end, very custom applications, it may be appropriate. However, it will be a pricey proposition as custom programming is needed, and additional fees usually apply to change it or maintain it.
     
  2. License one that is already out there. A five item mini-shopping cart is included with LavaNet's service. This will allow you to accept orders with a credit card number, though the charges must be run manually. If you require that your shopping cart interface with a payment gateway service, then the full version of the shopping cart is needed.

  Unless your product is delivered electronically, this is the limit of your current e-commerce options. The instantaneous, electronic transfer of funds to you from your customer is reserved for electronically delivered products only, and also requires special status with your bank, including a certain amount of time in business and an excellent "chargeback" history.

• have a product that can be delivered electronically
• meet criteria for electronic funds instant transfer from your bank and payment gateway service

  This case is the same as the above section, with the additional step that you must seek your banker and find out if the bank will allow you to have this status. Then you also must sign up for special status with your processing gateway (CyberCash, Verisign, etc).

Some Governing Agencies:

Federal Trade Commission (FTC)
Washington, D.C. 20580 (202) 326-3128
Oversees laws pertaining to business, including telemarketing and mailorder regulatory requirements.

U.S. Department of Commerce
Your source for International import and export trade laws, including duties and tariffs.

Small Business Administration
Loads of info and helpful publications on starting and running a small business