Food and gift basket sales increased 4.7%, but total e-commerce, which includes online and telephone orders, increased less than 1%.
After Google began requiring it to keep a high reserve of funds to cover unfulfilled customer orders placed through Google Checkout, e-retailer Gordian Project downplayed Google as a payment option and boosted its overall number of orders.
After Google Inc. started requiring it to keep a high reserve of funds equal to nine days of average sales volume to cover yet-to-be-filled customer orders placed through Google Checkout, PlumberSurplus.com downplayed Google as a payment option and boosted its overall number of orders, the retailer says.
Gordian Project, which sells plumbing supplies and camping gear through PlumberSurplus.com and OutdoorPros.com, uses and says it is pleased with several Google web site and marketing tools including web analytics, AdWords for search marketing and Website Optimizer for optimizing landing page content and reducing bounce rates.
But when it comes to Google Checkout, Gordian has been at a loss trying to figure out why Google started requiring it about six months ago to keep a financial reserve equal to 670% of an average daily sales volume processed through Google Checkout.
“When Google told us the reserve amount, our jaws dropped,” says Vanessa Nelson, sales manager for Gordian. “That’s equal to nine days worth of average sales volume-large enough to affect the cash flow for a small or mid-sized business.” The retailer notes that other payment processors typically require reserves equal to a maximum of two days of purchase volume processed through their systems, and that some are equal to less than a day.
The reserve is designed to cover the retailer’s “delivery exposure,” or the average value of orders that have yet to be shipped to customers, as well as the value of any chargebacks or refunds, Nelson says. With low chargeback and refund rates, most of the financial reserve is related to the delivery exposure, she adds.
She admits that some of Gordian’s orders, particularly for products like customized bathroom sets, can have a lag time between the time an order is placed and the time they’re delivered. But the retailer contends that its decision to take payment at the time of order placement, instead of at the time of shipment, is an internal business decision over which payment processors typically have no control.
Google maintains the right to withhold a portion of payments received through Google Checkout as a reserve to ensure sufficient funds are available to cover the merchant’s liabilities, which can include chargebacks, returns and other unspecified matters, as noted in Section 6.4 of the Terms of Service for Google Checkout, a Google spokeswoman says. Google did not publicly comment specifically on the Gordian reserve, though the spokeswoman says the reasons behind reserve amounts can vary for each merchant and may include the time between orders and shipments.
After discussing its reserve requirements with Gordian, Google agreed to reduce Gordian’s reserve by about 29%-to about 475% of average daily sales volume-a figure Gordian still considers far too high, Nelson says.
In the meantime, Gordian has moved the Google Checkout icon from first place to last in its list of four payment options on its checkout pages, resulting in a drop of about 66% in orders placed thorough Google Checkout, Nelson says.
But total orders since the change in payment option layout are up, though Gordian is not sure yet what has caused that increase, Nelson says. Most of the increased order volume has been in orders placed through Gordian’s own Secure Checkout button, which now appears atop the list of payment options and processes customers’ credit card payments through Authorize.net. Other payment options include PayPal and PayPal Pay Later.
Gordian will keep Google Checkout among its payment options, at least for now, to continue taking advantage of the promotional opportunities it offers as part of Google search marketing campaigns, Nelson says. When a Google Checkout icon appears with a paid-search ad, it produces a higher than average clickthrough rate, she adds.