In previous articles I made mention of the huge replica / imitation business on eBay, and held it up as a possible option as long as you weren’t dishonest about the nature of your products.  However, I’ve been researching this topic more and have come to the conclusion that selling imitation and replica products is a huge risk – something that should be avoided like a Jonas Brothers concert.

Obviously, there are a ton of people doing it.  There are kiosks in the mall selling purses “inspired by Louis Vuitton” and perfume “inspired by Tommy Hilfiger”.  However, there are also a boatload of websites being sued and eBay sellers slapped with 108 years in jail or $100,000 lawsuits.

What does the law say about selling replica items?

The laws in the US, Canada, and Europe clearly state that importing, wholesaling and retailing counterfeit designer goods is illegal if the maker does not have legal copyright and licensing agreements with the trademark holder.  Violaters are subject to punative fines and jail time.

When is it legal to sell replica items?

If you are hellbent on selling replicas, make sure you don’t use the words “replica” or “imitation”.  For instance, in your eBay post you should never say “Imitation Rolex Watch”, but rather “Rolex Style Watch”.  Even this is sketchy.  It only takes a cursory examination of the message boards to find stories like this charming tale from gatorgreg2004 (the question was “Can you sell replicas on eBay?”:

You can try but I would not! I got sued by a major manufacturer a couple of years ago. It was BAD! They sued me for a million and settled out of court for 10K. Bout lost my marriage. Lost a lot of weight because I was so stressed. I would run the other way if I was you. Just my 2 cents (or should I say thousands of cents!…Let me tell you how you can get in trouble….and I am speaking form firsthand experience! Major companies have “undercover” employees that will buy your “replica” product that you are selling (on ebay, Craigslist, or wherever) and once they do, they have you. They won’t inform you right away that they just caught you selling these items. You will hear a knock on your door someday and be handed and nice big manila envelope with a lawsuit against you. That happened to me and was the WORST experience in my life ever!  There are SO MANY ways to make money on the internet! Why do you feel like you have to do it this way? Can you get away with it for a while? Sure…but why risk it? RUN form selling this stuff! I hope you heed my advice and save yourself a bunch of heartache!

What are the eBay rules about selling replicas?

These days eBay authorities are banning offenders without a trial.  At the very least, you risk negative customer ratings when you sell imitation products.

Conclusion:

Stay away from fake products!  Replicas are a billion dollar industry, and you may be tempted to sneak your fingers in the honeypot, but you’re taking a huge risk every time you do.  There are plenty of ways to make money online legitmately – you don’t need the knock-off market.

selling products online

When selling products on eBay or from a personal website, your best bet is usually to build a solid product line sourced from a dropshipper or wholesaler.  Selling a steady product line allows you to open an eBay store and build a name for yourself as the best supplier of Barbie dollhouse furniture or laptop bags.  However, there are times when you might want to supplement your dropship or wholesale products with items from another source.

When is a good time to supplement dropship products?

1.When you’re just getting started on eBay, you might want to sell a variety of items to boost your customer satisfaction rating.

2. Around the holidays you might want to sell theme items like Easter baskets or Christmas stockings.

3. Before committing to a dropshipper or wholesaler, you may want to test the saleability of a new item by selling a few samples on eBay.

Where can you find products to supplement your dropship and wholesale items?

1.Costco and Sam’s Club

It may seem ridiculous that you can purchase items from Cosco and Sam’s Club and re-sell them on eBay for a profit – after all, aren’t eBay shoppers looking for a great deal?  Won’t they know they can get the item cheaper at Cosco?  Not necessarily – remember, a lot of people don’t have Cosco or Sam’s Club memberships, or simply haven’t seen the item you’re selling.  I’ve seen gift baskets, calling cards, tools, and barbeques from Cosco and Sam’s Club sold for profit on eBay.  It’s not always a staggering profit margin – the calling cards might be marked up $5 or $6, the tool sets $10 – $20, but it only takes a few supplementary sales per day to boost your profit margin significantly.

2.Outlet Malls

The great thing about outlet malls is you can purchase brand-name clothes for heavily discounted prices.  Brand-name clothing sells very well on eBay, especially when you can advertise it as “tags still on”.  Jones New York, Ralph Lauren, Nike, Adidas, Tommy Bahama, and Victoria’s Secret outlet stores are all a great place to find clearance clothing you can sell for profit on eBay.

3.Thrift Stores and Flea Markets

There are a ton of products at thrift stores and flea markets which can be re-sold on eBay for profit.  Matching dish sets, tea pots, gently used brand-name clothing, anything leather, and vintage toys are all great finds.  Cashmere, old lace, and antique buttons are also good.  The more “like new” your purchases are, the better your chances of making a buck.  Try to visit thrift stores on the day they put out their new merchandise, and arrive early to flea markets and bazaars – the best deals will be snatched up early.

4.Garage sales

Like thrift stores and flea markets, the key is to arrive early, cash in hand.  Don’t be afraid to bargain, especially later in the day.  Most people are trying to get rid of unwanted items – they’re not too particular about the price.  Try offering, say, $10 for an entire box of children’s clothing, or $5 for a box full of old paperbacks or cosmetics.  Look for products still in the original package and anything brand-name.  Cowboy boots, brand-name perfume (even if the bottle is only 3/4 full), and gift items are all good garage sale discoveries.

What are the most important things to remember when selling supplementary products on eBay?

1.Research Before You Buy

I really can’t stress this enough – don’t just wander around your neighborhood, buying every piece of junk people have for sale.  Make a list of products you think you can sell for profit on eBay: “Victoria’s Secret robe from outlet mall, china tea set from thrift store, leather cowboy boots from garage sale, etc.”  Then, research those items on eBay.  Perform an advanced search to determine what price similar products are selling for.  Write down the prices so you know that tea sets sell for around $20, so you’re not going to make a profit unless you can buy yours for $10.  Make a note of which products aren’t selling well, which markets are too saturated.  Doing your research ahead of time will help avoid you stocking your house full of flea market items you have no hope of re-selling.

2. Stick with your strengths.

If you’re a fashionista, look for costume jewelry, vintage granny sweaters, lace dresses, and Burberry scarves at your local thrift store.  If your style is more Rush Limbaugh than Michelle Obama, you should probably avoid purchasing trendy apparel items and stick with something you do know, like cookware or tool sets.

For more tips on selling garage sale and thrift store items on eBay, check out this blog post: Selling Antique, Used, And Specialty Products On EBay.

Product Ideas, eBay, selling products online

Bonanzle is quickly become the most popular eBay alternative for sellers who are tired of paying exorbitant fees and dealing with eBay’s crotchety so-called customer service division.  However, Bonanzle doesn’t have quite the cache of eBay yet, so an important part of selling your products is bringing in traffic to your Bonanzle booth.  How can you promote your Bonanzle booth?

7 Ways To Promote Your Bonanzle Booth:

1.When you have a particularly fantastic product, Tweet it

The last thing you want to do is inundate your followers with product Tweets, but every once in a while if you get something really cool, it’s okay to share it.

2.Build a Facebook page for your booth

Google’s new real-time search feature makes social media sites like Facebook a more effective advertising platform for your business.  Facebook updates are actually included in Google’s real-time search results, bringing attention to your Bonanzle booth.

3.Take advantage of the extensive Bonanzle community

Bonanzle has a very interactive community.  By communicating with other sellers and new Bonanzle users, you can often interest people in your products.  This doesn’t mean that you should bombard fellow users with advertisements, but by befriending them you will likely get organic traffic to your booth.

4.Get a car decal with your booth URL

As always, I am a big fan of advertising in the real world as well as online.

5.Hand out business cards that promote your Bonanzle booth

See above.

6.Submit your booth to search engines and directories

You need to promote your Bonanzle booth just as you would a personal website.

7.Try Pay-Per-Click advertising and banner ad exchanges

If you don’t have the marketing budget to pay for Pay-Per-Click and banner ads, try participating in traffic and banner ad exchanges.

Bonanzle, selling products online

So you want to start an online business, and you’ve decided dropshipping is the best option for you.  How can you find the best dropship products to sell online?

Step 1: Brainstorm Multiple Product Ideas

Think of 5-10 products you could successfully sell online.  It’s important to have a few different products in mind, because you may not be able to find a dropshipper for your first idea.  After all, not all products are available through a dropshipper, or you may not be able to get your product at a price that allows you to make a sufficient profit.  If you have 5 or more products in mind when you start looking for suppliers, you can compare the results for fishing rods, magic tricks, calligraphy pens, chemistry sets, and baby carriers to make a final decision.

Tip: If you are having trouble brainstorming product ideas, check out this list of products you can sell online for a profit, or simply examine your online purchases over the last month or two.  You should come up with some solid ideas by thinking of the products you yourself like to buy online.

Step 2: Find A Legitimate Supplier – No Middlemen!

If you type “dropship products” or “find dropshippers” into a Google search, you will come up with literally millions of results – educational articles, links to databases and directories, and a mountain of companies purporting to offer dropship services.  Some of these companies may be legitimate, but a huge number of them are actually middlemen.  When purchasing products to resell online, it is extremely important that you get as close to the source as possible – this means you need to purchase directly from the manufacturer or distributor.  Why is this so important?  If you don’t, it will be very difficult for you to make a profit.  You may not be able to sell your products at all, because your prices won’t be competitive.

Let’s imagine your competitor is puchasing food dehydrators directly from the manufacturer.  He gets each dehydrator for $84, then marks them up $20 and sell them for $104.  You, on the other hand, are purchasing from a middleman.  You get the food dehydrator for $99.  You are then forced to either sell it for a $5 profit, which wouldn’t even cover the cost of your overhead, or try and sell it for $120, in which case people will simply buy from your competitor.  You need to get your dehydrators direct from the manufacturer, just like your competitor does.

How can you tell if a dropshipper is a middleman?

Ask these 3 questions:

1. How many different products do they dropship?

You may think the fact that they dropship everything from kitchen faucets to baby clothes is a good thing, but in fact that’s the sure mark of a middleman.  They obviously are not manufacturing all those different products – they’re purchasing them from a manufacturer and marking up the price.  A real manufacturer or distributor focuses on one particular kind of product, like anti-aging skin products or bowling balls.

2. What does it say on their website?

Most legitimate suppliers will proudly post on their website where their products are made.  But be aware, not everybody offering an online service is honest.  Many middlemen post success stories of clients making thousands of dollars selling their products, but that doesn’t mean a thing.  You are always better off buying direct from the source, no matter what a middleman tells you.

3. Do they charge a fee?

Legitimate dropshippers don’t charge an annual, monthly, or sign-up fee for their services.  Only middlemen do this, because they know once you figure out you can’t actually make money selling their products, you’re not going to buy anything else from them.  The fee is where they make their money.  A real dropshipper only charges a small dropship fee, commensurate with the price of packaging and shipping the product.  This means that when you order your food dehydrator from them, they only charge maybe $2-$10 to cover the cost of packing and shipping the item.

How can you find legitimate dropship suppliers?

Wholesale Match operates a database of quality dropship and wholesale suppliers.  If there is a dropshipper available for your product, we’ll find them.  All you have to do is submit a list of products to our Research Team, and they will email you back a list of dropshippers and/or wholesalers in 1-3 business days.  We also provide a variety of educational materials for people who need help starting their online business.  Finally, we are the only supplier database that offers a 100% money-back guarantee on our annual membership.  If you don’t make back at least the cost of your membership, we will refund it in full at the end of the year, as long as you give us a chance to work for you by calling, emailing, or submitting a Research Request at least once a month.

dropshippers, dropshipping, product research, selling products online

So you want to start an online business and you’re interested in dropshipping.  How do you start dropshipping products online?  Well, it’s actually pretty simple to set up.  Online entrepeneurs are drawn to dropshipping because it allows you to sell products online without carrying an inventory.  Basically, you could start posting and selling products today with very little capital required.

How do I start dropshipping products online?

Step 1: Get your Seller’s Permit, Tax ID Number, and PayPal account

The best dropshippers and wholesalers require a Seller’s Permit and/or Tax ID Number, so the first thing you should do is apply for these.  Second, set up a PayPal account so you’ll have a way to process payments from customers.  It may seem strange that this is the first step, before you’ve even thought of products to sell onine, but getting these three things set up can take time so it’s best to do it right away.

Step 2: Brainstorm products

You need to decide what kind of products you might like to sell online.  You should think of a few different options because there may not be a supplier for the product you first had in mind, or the product may not be as profitable as you’d like.  If you’re having trouble coming up with ideas, check out this link to a list of Products You Can Sell Online For A Profit.

Step 3: Find a supplier for your products

The easiest way to find quality suppliers for your products is to let Wholesale Match do the work.  For a small monthly or annual membership, our Research Team will find dropshippers and wholesalers for any and all products you can think of.  If there is not currently a supplier for your desired product in our database, our Research Team will go out and find one for you – we are the only database that does this.  Best of all, there is no risk to using our services because our annual membership comes with a 100% money-back guarantee.

Step 4: Set up an account with a dropshipper

After you’ve reviewed the list of dropshippers and/or wholesalers our Research Team provides you, simply choose the one(s) you want to work with and contact them.  It’s a simple process to set up an account with a dropshipper, and it shouldn’t cost you any money.  The dropshipper will provide you with a pdf file with descriptions and images of their products.  You can use these images to start posting items online.

Step 5: Start selling products

Once you have an account with a dropshipper, you can start selling their products online.  You can do this from your own website, on eBay, or from another auction site like Bonanzle or Amazon.  When you make a sale, you simply order the product from the dropshipper and have it shipped directly to your customer.  The difference between the price you charge your customer and the price you pay your dropshipper is your profit.

dropshipping, make money online, selling products online

Pay-Per-Click (PPC) advertising is a very useful way to bring traffic to your website in the early stages of your online business when you’re still building your search engine page ranking.  PPC advertising is a system where you pay for ads on search engine pages and other websites.  You bid for the best placement, and then you pay a set amount, say 10 cents, every time someone clicks the link to visit your website.  PPC is beneficial to online business-owners because you don’t pay simply to have your ad posted, as you would with a traditional billboard or tv ads – you only pay when people actually visit your site.  You can also strictly control your costs, because once your agreed-upon amount is depleted – say $300 – your ad is immediately removed.

The downside of PPC advertising is that the traffic can be of very low quality – meaning, visitors have a high “bounce rate” (they leave immediately after landing on your home page), or your traffic has poor conversion (you have plenty of visitors but they don’t buy anything).  You can also have an issue if you’re paying for international visitors, but you don’t ship out of the country.

Obviously, you need to choose the right PPC service for your online business.

Which is the best Pay-Per-Click service?

The biggest and most popular PPC option is Google Adwords.  Google generally brings the most traffic to your site, and the traffic is of relatively high quality.  The problem with Google is it is usually the most expensive PPC option.  Many small businesses find it difficult to compete with the big brands in PPC on Google.  (It helps if you bid for placement at the end of the day or end of the week.  Many large companies have a set PPC budget on a daily or weekly basis – once their fund is exhausted, PPC becomes cheaper for the little guys.

What are my alternatives to Google Adwords?

If you prefer not to use Google for reasons of cost or because you want a more specialized PPC program, you can consider the following options:

1. Yahoo! Search Marketing

Pros: Like Google, Yahoo! is a popular engine with a well-established program and quality traffic.

Cons: They are likewise expensive, though some keywords are cheaper.

2. MSN AdCenter

Pros: Known for quality traffic and a very useful keyword research tool.

Cons: Poor reviews for their difficult interface and overall useability.

3. SearchFeed

Pros: SearchFeed purports to be a more specialized PPC service.  They promise more targeted advertising, which could be beneficial for people selling niche products – in particular they offer geo-targeting (traffic from your specific country).  They are generally much cheaper than Google.

Cons: Smaller services like SearchFeed have been accused of providing lower-quality traffic.  However, since the service is so much cheaper, you may still get a better ROI (Return on Investment).  For example, if you received 100 visitors from SearchFeed for the same price as 10 from Google, as long as 10 or more of those visitors are of comparable quality, it’s a better investment.  But it’s quite possible that all 100 of your visitors could be useless.

Note on SearchFeed: If you are receiving inappropriate traffic (too many international visitors, scam clicks, etc.), you can call the company and ask them to tailor your placement.  This has resulted in better traffic for some users.

4. 7Search

Pros: Known for their high ROI, which they claim is better than Google’s.

Cons: As with many of the smaller services, users have reported receiving 100 visitors from all over the globe for every 1 from the US.  If you’re not planning on shipping internationally, this could be a problem.

5. MIVA

Pros: Quite inexpensive, and offers a list of under-bid keywords that you can advertise for pennies.

Cons: Accused of having a very high automated traffic/scam traffic rate.  Some users claimed to have spent hundreds of dollars without receiving a single viable sale, though others reported a positive experience with a good return on their investment.

Most of the reviews I’ve read on messageboards, blog posts, articles, and so forth are very mixed.  The best course of action is probably to try a few different PPC services and monitor your conversion rates and overall ROI very carefull.  I would recommend starting with Google, and then run the same PPC ads through other companies as well.  (You need to use the same keywords and post on the same days/times so you can isolate the real value of the service.)  Many PPC services offer a $25 or $50 credit for signing up, which would allow you to test their results without spending too much money.

internet marketing, selling products online

When choosing which product to sell online, you’re going to consider a number of factors including:

1. Is there a reliable dropshipper or wholesaler available for this product?

2. Is the market saturated?

3. Is there a demand for this product?

4. Do I have enough knowledge or can I learn enough about this product to write valuable product-related content for my website?

You might end up having four or five potential products that meet all these criteria.  How will you choose which one to sell?  Profitability may be your deciding factor.

How can you calculate the profitability of potential products?

A spreadsheet is generally the most efficient and effective way.  Remember, as will any spreadsheet your results are only as accurate as the data that you enter.

Below is an example spreadsheet for calculating the profitability of three potential products: jeweled sandals, corporate gift baskets, and fishing poles.  I’m assuming that all three products are being supplied by dropshippers and the only variable costs are the purchase price of the product and the dropship fees.

As you can see, the most expensive item is not always the most profitable.  In this case the medium-priced item, the corporate gift basket, is actually the most profitable.  Assuming you can sell an equal amount of each product, the corporate gift basket is the one you should sell.  Maybe you would have preferred to sell sandals because they’re more fun, but remember, you’re starting an online business to make money.  If selling toilet seats will pay for your BMW, then that’s what you should sell.

pricing and profits, product research, selling products online

Continuing my discussing of eBay alternatives, here is a short overview of one of my favorite places to sell products online:

Bonanzle:

Bonanzle is supposed to be a kind of anti-eBay, a sales venue where the evils of eBay are avoided.  There is no charge to list items, and final value fees are a lot cheaper than eBay.  Bonanzle tries hard to promote buyer-seller communication, so there is a lot of instant-messaging and “pervasive chat” on their site, which amounts to more real-time negotiation.  They also have a “pre-schedule pickup time” program for people who want to sell items in their own city and avoid shipping costs – this could be beneficial if you’re interested in selling a large, bulky product that can’t be shipped conveniently.  Finally, Bonanzle’s customer service is much better rated than the largely-hated eBay customer service team.  Overall, Bonanzle has been rated the best eBay alternative by Ecommerce Guide and Small Business Computing.

Bonanzle is known as a venue to sell more unusual, off-beat items.  I’ve heard a lot of good things about the community on Bonanzle who is known for being much friendlier and tighter-knit than your average auction site.  I was also impressed by the layout of their site, which is bright, inviting, and quite easy to navigate.

The downside to using Bonanzle, like any alternate venue, is they don’t command quite the same traffic as eBay, so you may not get the same volume of sales (though you can easily get lost on eBay and not get any sales there either).  I do know of at least one person who opened a t-shirt store both on eBay and on Bonanzle, and received multiple sales from the former, but none from the latter.

Overall, I would definitely recommend checking out Bonanzle.  Since it doesn’t cost anything to list items, it’s to your benefit to try selling there as well as on eBay.

selling products online

When speaking about selling products online, I generally focus on selling from your own website or on eBay.  This is not because those are the only two ways to sell products online, or even because I think they’re the best option.  I usually focus on those two because that’s what most people are interested in doing, but there are definitely other options out there.  EBay isn’t perfect: it gets a lot of traffic, but it also has a ton of sellers, which means competition is fierce and it’s easy for your listing to get lost in the shuffle.  EBay has notoriously poor customer service, and their fees take a big bite out of profits: you have to pay just to list an item on eBay, which means you lose money if your product doesn’t sell, and if it does sell, you lose money again paying eBay a percentage of the final sale value.  EBay also charges for additional photos, videos, etc. to enhance your listing, besides raking in fees for advanced seller tools.  Now, this doesn’t mean you can’t make money on eBay – plenty of people do.  But eBay isn’t necessarily your only or best option for selling products online.

Alternatives to EBay:

1. Craigslist

Each major city has its own Craigslist site, where items can be posted in a fixed price format.  Craigslist is better known as a place to find a new job or a free couch, but you can definitely make money selling products here.  Because most buyers assume that you are operating on the Craigslist that caters to your own city, you might have to stick to your particular neck of the woods: Chicago Craigslist buyers assume they are buying a product from someone else in Chicago and may well want to come over and see it before forking out their cash.  Also, Craigslist is not set up to be your own personal eBay store, so if you post fifty different items for sale, you’ll probably get blocked as a spammer.  On the plus side, you likely won’t have much competition as not too many sellers have capitalized on Craigslist even though it’s an extremely popular site with a lot of traffic.  Just watch out for scam artists: Craigslist has its fair share, so don’t respond to emails from supposed buyers in Barcelona who “just need your bank account number to send you a wire transfer”.

2. Amazon

Amazon has removed its auction option, but you can still sell items in the Stores section.  Amazon has no listing fees, and is probably just as popular as eBay is.  (This means there is also a lot of competition, just like on eBay.)  Amazon is known more as a place to purchase new products vs. used ones, but those are likely the kinds of products your average dropship-retailer would be selling, so that’s not necessarily a negative.  Amazon also has a lot of options for order fulfillment: for instance, they will act as a dropshipper and will store, pack, and ship your products if you send them a bulk shipment.  However, they will also slap their name and logo all over the box, since self-promotion is something like catnip mixed with crack for Amazon.

3. ECrater

ECater is designed to be very similar to eBay.  The main benefit of eCrater is their dedication to remaining entirely free – no listing fees, and no final value fees.  They make their money by charging for premium product positions.  Whether this means your listing will be practically invisible if you don’t pay, I don’t know.  Like most of the alternatives to eBay, it’s a little soon to find definitive feedback on the message boards, and the success and failure stories I’ve read have a lot to do with individual sellers’ decisions.

4. Online Auction

Onlineauction.com is one of a few new auction sites that allows you to pay a flat fee to list as many products as you want.  In this case, it’s $8 a month.  Onlineauction.com is also similar to eBay.  Many former eBay PowerSellers switched to onlineauction.com during a recent spate of eBay boycotts.  While I have received positive feedback from some people who made the switch, others have not yet sold anything from the new venue.

Other EBay Alternatives:

Adflyer.co.uk – British alternative
Altec Trader – No fees except for specially promoted listings, option of a free store
Audiogon – Place to buy and sell used hardware, flat fee of $8 per month
Deal Tent – Listing fees and commissions apply, but cheaper than eBay
Etsy – Place to buy and sell any handmade products
iOffer – Auction site with no end times and a lot more haggling
My Store – No fees except for advanced seller features.  Simpler to use than eBay.
Neoloch – Calls itself “The Friendliest Auction Site”
Overstock Auctions – Extremely similar to eBay, one of the best-looking sites
Trocadero – Storefront for antique and fine art sales.  No listing fees, flat fee of around $30-45 per month
Wagglepop – Flat monthly fee of $9.95

If I had to pick a favorite eBay alternative, it would probably be Bonanzle.  Check back tomorrow for a blog devoted entirely to the pluses and minuses of selling products on Bonanzle.

selling products online

I was recently asked whether you need a merchant account if you have PayPal.  After all, in a sense PayPal is a merchant account: you can accept credit cards, debit payments, almost anything through PayPal.  However, PayPal has its negatives, and using it exclusively can lose you sales and put your online business at risk.

Overview of PayPal and Merchant Accounts:

No matter what venue you’re selling from, (eBay, a website, Amazon),  you need a method to accept payment from your customers.  Cheques and money orders are cumbersome and unreliable, and most customers don’t want to pay that way.  Your main options for online business transactions are a merchant account and PayPal.  A merchant account allows you to process credit card payments.  PayPal allows you to take payments from any customer who has a PayPal account.  Your customer’s PayPal account can include funds from credit cards, debit, bank accounts, sales they’ve made online, etc.  Both a merchant account and PayPal will cost you money and come with certain restrictions.

Merchant Accounts:

Merchant accounts can be expensive to set up and usually charge a monthly fee.  Some have restrictions which may limit the amount of transactions you can run each month or the total dollar amount you can process.  Often these restrictions are removed after a few months when you’ve proved your reliability.  Merchant accounts are generally more expensive than PayPal to begin with, but depending on your sales volume they may be cheaper in the long run.

PayPal:

PayPal is an extremely popular payment system.  Most online shoppers have PayPal accounts, but not everybody.  (Your customers must have PayPal accounts to purchase from you unless you use the Virtual Terminal feature for a fee of $30 per month.)  Anyone can set up a PayPal account for free, and it doesn’t cost your customer anything to buy a product through PayPal, but you will be charged fees every time you make a sale.  PayPal fees are usually 1.9-2.9 percent of every sale, plus a 30 cent fee for each transaction.  PayPal comes with a Seller Protection Policy, but only if you ship a physical/tangible product or service within seven days to an eligible address with proof of delivery.  If you did use PayPal exclusively, it would make it easy to monitor and examine your payment data.

The dangerous thing about using PayPal as your only payment option is that PayPal reserves the right to freeze your funds or suspend/cancel your account. On a moment’s notice you could be unable to accept payments or access your funds for months at a time, which could shut down your business entirely.  These penalties can occur for reasons as obscure as “suspicious activity on the account” i.e. if your sales tripled in one month or you had too many chargebacks.  For this reason, I would not recommend using a single payment system, PayPal or a merchant account.  That is the very definition of putting all your eggs in one basket, and makes your online business vulnerable to financial stranglehold.  Even without the fear of losing your payment processing/fund accessing priviledges, it is better to have multiple payment options so you never lose sales.

Ultimately, the answer to this question is no, you don’t need a merchant account if you have PayPal, but it would be safer and more beneficial to your business to use both.

eBay, selling products online