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Weird 3rd party situation (long)

Weird 3rd party situation (long)



9:26 am on Mar 22, 2005 (gmt 0)

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I have worked on the technical end of professional e-commerce projects for some time. I currently have a pet side project but do to its unique (although I can’t imagine it being that unique) business model I have legal concerns.

Business Model:

I have identified a niche market of widgets. Widgets come in various shapes and sizes. Due to the way widgets are produced, widgets venders/producers tend to be small mom and pop type operations and none of these operations offer a complete line of widgets. Most offer their widgets online (the widget market is too small a niche to operate successfully locally), but because they are not techies, most only offer their widgets through mailed and confirmed checks, some use paypal, only a couple actually use a full cc gateway e-commerce solution. Either way their sites are very outdated/underdeveloped and most seem to employ little web marketing practices. For the consumer it can be hard finding the widget they want because distributors are hard to find on the web. I would like to solve a few problems in the widget market by setting up an online ‘bazaar’ or marketplace. First, to overcome the vender technical challenge, I will offer widget producers/vendors a point and click way to an e-commerce store already designed to sell widgets hosted locally on my web site. To solve the vendor web-marketing problem and the consumer problem with finding the widget distributor that sells their particular desired widget… instead of the vendor’s widgets being listed just among their own widgets, they would be listed among all the widget from other vendors signed up in the marketplace as well. (The market is such that normal competion concerns that may arise from this is negligible) So as the consumer, for example, if you wanted blue widgets you could go to the blue section of the ‘marketplace’ and see that “Bob’s Widgets” has a 2’6” blue widget for sale. “Joe’s Widgets” has a 3’9” blue widget for sale, etc. The purchase is made on my site. I will take a small-predetermined fee on top of the usual gateway cc charges and send the widget vendors a check every month from their online sales minus my percentage. The vendors of course will ship the product. Because the widget market is information starved, I am positioned to be the leading online supplier of widgets information and thus have a lot of widget connoisseur (consumer) traffic on my site. In effect I suppose I will be a 3rd party payment processor with added value?

Here is the issue:

Since I am not directly supplying the widgets myself, I personally cannot assure the widgets get to the consumer in a successful and timely manner. Of course the vendor will have to sign a statement of good intent, and the consumer will have to agree to a wavier every time he/she makes a purchase that my site is not responsible for the successful shipment of purchased goods, the listed vendor is. Question is, can I say correctly and legally that ‘mysite.com’ is not a party in the transaction and the sale is completely between the vendor and consumer even though it’s my bank that initially gets the cash and I own the site on which the transaction occurred? If there is a dispute what should I do? Maybe do nothing and let the vendor, consumer, and cc company hash it out? Should I simply side with the consumer in all circumstances and return their money (the vendor will have this ability too through their web store control panel) leaving the burden of proof to the vender to take up the matter with the cc company. Does the legal issues with this third-party system make this business model too complicated and disaster prone to pull off? Has this model been successful (from a legal stand-point) somewhere else? E-bay comes to mind, but they avoid any of the credit card transactions themselves, don’t they? Ideas, issues, comments?

Thank You,


12:43 pm on Mar 22, 2005 (gmt 0)

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That's not much of a legal problem. Ebay does it (without payment processin), Amazon does it with payment processing.

You're some kind of commercial agents who acts as a broker plus does encashment.

I'd stay clear away from the relation between vendor and customer. _That_ could get complicated. I'd go with Ebay and let the parties deal with themselves.

3:13 pm on Mar 22, 2005 (gmt 0)

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Welcome to the forums Brad!

A lot of companies rely on resellers to get their products out there. And honestly, no matter how much you say it (and I know what you mean) - the vendors are selling your product. And how they represent themselves, they are representing your company. And your products.

And one thing you do not want to do - or even hint that you are doing - is charging Visa discount rates when you are not an acquiring bank and you are not licensed to.

You will need to call it some other fee - like handling fee. So if I bought one from you for $10.00 via Paypal, you might get $9.41 - but you want $10.00 basically? You will need to do a little creative book-keeping, but charging something like 6% for anything up to a certain amount. And then at $20, maybe charge 5%