Hi All,

Firstly I would like to give you a little history of my current pain in trying to find and sign up to the correct payment processor etc.

I am dropshipping in effect, placing my distributors products on our website, marketing these to our customers... Then taking said customers order, customer pays via our store and at this point said order funds would be submitted to our business bank account and at this point we would submit our customers order for their products to our distributor / supplier and pay for it at the same time, they would then finally send out our customers order to be delivered to them and VOILA... Pretty Painless... no wait for it...

We recently signed up for PayPal Pro, as I'd already been using PayPal Standard and didn't see any reason to change company's to start with for a while and till our new business had got itself a good number of months trading account feathers in the cap.

It was a great Christmas 2009, the birth of my first child, my Son Xmas Eve and then just after Boxing Day, confirmation from PayPal that we had been accepted for PayPal Pro, I couldn't contain my delight at this news from their email.

However it didn't last long... I read the following email and they advised me whilst I had been accepted, they were placing a "Rolling Reserve" (Do a Google Search on that term and see what you think, or read the links in the bottom of this topic) on my account of 10% of each days transactions.

So day one I launch my store... I turnover X amount and they keep 10% back for 90 days, then on day two of running my store, I turnover X amount and again they keep 10% back for 90 days meaning I only receive this 10% back exactly 90 days after and this happens EVERYDAY!!!

This means there is NO WAY I can pay my distributor / supplier for my customers goods, as they require them to be paid for naturally before they will deliver my customers order... OMG I'm so annoyed with PayPal.

Now you may not think this is a lot but I have a Gross Profit Margin of 10% on average set for my 11.5k products. I chose this "Lower Profit, Increased Order Numbers" over "Higher Profit, Lower Order Numbers" and also knew from price checking my distributor's trade pricing with my mark up included and VAT etc, and I can compete price wise on a vast amount of my products with some of the major players in my store's sector.

So, this led me to decide to apply for Barclay's EPDQ Processing service and again any a few weeks of waiting, we were advised they will accept to give us their services but wait for it...

They want to keep ALL... I repeat ALL of my turnover, that's both my trade price for any given ordered product, my VAT which I am sure I would not be able to state to the Tax Man "Sorry Mr Tax Man, Barclay's have retained 45 days worth of my turnover and I cannot get this back till 45 days later and this is rolling every single day it happens" and lastly this means our minimal profit margins for 45days each day at a time!!!!

So not only does PayPal Pro leave me with no way of accepting their services, as how else can I run my business... with their fee's per transaction too I would actually be running at a complete permanent loss and that's not an option.

Barclays also leave us with the same scenario but they are just both buttered up in differing ways, with the same end result for many NEW businesses.

This has now left me totally disillusioned, I know they have to cover their arses with things like Chargebacks, Refunds etc but our whole future partially relies upon new businesses flourishing, being given a level playing field... We can't flourish if we can't start!

Not to mention I feel this is the banking industries way to now have found a way to legally or illegally you could feel, to line their bottom line a hell of a lot in the interest they will gain on the millions of online sellers "Rolling Reserve Funds"

I also empathise that there are people worse off, who I have been researching online put $500k through their PayPal accounts and they've been levied with up to $50k reserve fund request or up to 30% rolling reserves, however I have to ultimately concentrate on "Our Ship" when push comes to shove.

I have also read that when the 90th day or later and they come to withdraw said rolling reserve, they are fighting tooth and nail to get this off of PP!!!!

So my second part to this topic would be.;

Have you created a new Bank / Merchant Bank Account / Payment Processing account, only to be at the point of acceptance advised of these "Rolling Reserves" or "Reserve Retainments"?

If so, how did you find the right solution to this problem?

How many company's did you have to apply to, before finding your right solution?

*Dreams if only customers would return back to paying with Cheques, I wouldn't be suffering this pain*

We just want a way to let our customers pay for their purchase on our store, enable those funds to hit our business bank account in as few a days as possible and to not be hit with extortionate rolling reserve / reserve request kitty fee's... Can anybody advise me in what way I can turn next, to find my way out of this nightmare?

I look forward to hopefully hearing from some of you soon.

P.S. I'm surprised this issue hasn't been brought up on here before.

P.P.S. Please post anything related to the content of the above, either directly about my issues and if you have any helpful guidance I can follow up or even if it's just to moan of your own experiences with these rolling reserves etc.

Links that make good, scary reading if you are considering PayPal as a payment option and you are a new business;

http://200westmain.com/redinkdiary/?p=2068

https://www.thepaypalblog.com/2009/06/seller-reserves/

In all fairness, you should be ashamed of taking the complete rise out of your suppliers by devaluing their products in such a way. In fact, I find it completely disgraceful (if indeed your suppliers know) that they allow you to sell at such a low margin. Did you ever go to business school, I'd take a guess at no?! After administration, tax (25%/40% (depending on your net profit)) and wages you must make nothing at all trading in this irresponsible "Robin Hood" kind of fashion.

You should take this experience of rolling reserves as a lesson in trading and raise the margin on your profit if only to cover eventualities such as this.

I would think your-self lucky in this circumstance - other payment service providers can hold the entire amount.

"Robin Hood" kind of fashion
or
Wal-Mart kind of fashion. I believe they've been quite successful at their low margin model and manufacturers beg them to sell their products.

I've been doing this Internet marketing for a very long time. Here is my nickel's worth.

Set your margins (30-40%) and work on promotion (organic traffic). If your business model is low margins then you're going to need a substantial bankroll for all the months/years it takes you to build a clientele base large enough to turn a profit at such low margins. However if you don't have a large bankroll then you start with reasonable margins (30-40%) and work on marketing your brand and site and don't lose money on any transaction. Repeat customers (customer retention) for great shopping sites is about 45%. What this tells you is that even if you have the best customer service and price you should expect less than half of your shoppers will be repeat buyers. If you have a delivery problem or don't keep up with customer query responses your repeat buyers will drop to less than 25% very quickly.

The low price model attracts the worst kind of customer. We process a lot of orders and been doing it for a long time. The customers with the lowest order total will demand more time and more company resources than customers with higher order totals. We get beat to death by customers with orders under $25. Customers that place $500-$5000 orders rarely contact us. If they have a problem they're diplomatic in resolving it. Customers with small orders demand tracking numbers, demand call tags, demand to talk to the owner, demand email responses in 10 minutes or less, demand toll free support, demand, demand, demand. To add salt to injury if you look at the majority of bad reviews on customer review sites you'll notice it's these same obnoxious customers leaving negatives and bad remarks. Now why in the world do you want to cater to this customer base? If you build a business model strictly for price shoppers you're doomed. You'll have these idiots beating you to death for no money.

The Internet is a BIG WORLD. The majority of people won't do the same due diligence that you do when looking at competitors. Set your margins and work on replacing them for long tail keywords so you're first on those SERPS. You'll get your orders and laugh at the idiot selling almost at cost or 10% margins getting beat to death my his poor customer base. I'd rather sell one item for 30% margin than 3 items for 10% margin. The overhead costs are 1/3 for one order so the margin isn't the same but in fact 20% higher

Here is my case in point. Some sites we own sell hand and power tools. For this one supplier there are about a dozen competitors that we've found. We market better, collect email addresses, have telephone support, answer emails promptly and we're not even close to the cheapest. Some of these guys are at less than 10% margins. We sell $3k-$5k a week per site at 30% margin and our customers love us. They call all the time just to chat I think. When we used to sell for lower margins we didn't dare have a toll free number. Those customers beat us to death on the telephone for stupid stuff. We'd send the tracking number 3 times by email and they'd call cussing and calling us liars and demanding it over the phone. 80% of the time they'd transpose a number and call back cussing again saying we gave them an invalid number, blah blah blah. We're happy those days are gone. It took us years to realize how to run a successful Internet business. Now you have it for free.

Best regards,

Wilson,

I have to say that I've finally found my relaxed replying sense, as to be frankly honest I can't see where you have given any constructive content in the post of yours and for an alleged "First Time" poster who allegedly "Doesn't Know Me", you seem a little OTT and scathing when it wasn't called for.

It seems somewhat fishy whereby your very first post is on this very specialised subject, not an in general CRE subject of how to change a footer, or info box and yet you haven't been seen on here since that solitary post!

First of all, what do you know about the relationship between my Supplier / Distributor & I? Zilch, so that's out of the window.

Secondly, this was not a post about my "Business Plan or Methods" this was purely a post about a very direct subject, PayPal and Payment Processors in general and their Rolling Reserves, seeking other people's views, experiences of such things with their own stores.



Don't make me giggle, jeesh you seem awfully angry and hence your post is in no way helpful... take a leaf out of dsauthorities book if you will.

*Thanks for as always a good constructive post dsauthority, I will reply to yours later today*

They do indeed know everything I do, everything I plan and they are more than happy and they're a very well known UK Technology Goods Distributor - Fact!

You may find it disgraceful, just like I take complete offence at the tone of your unhelpful post, that contributes nothing but unjust negative feeling. Yes there are times for "Truth Hurts" but there is absolutely no truth in what you are trying to put across r.e. that's "Specific" to "My Business" - Fact!

Maybe as I grew up in true Robin Hood country, this will explain why I have set my business up in such a way and it works for "Me" - Fact!

Just to put your mind at rest, I have sorted the Rolling Reserves issue to still utilise PayPal Pro but one thing they teach you at Business School *as you call it* is to never disclose the "Full Story" to people who have no intention in their attitude to help.

It's also known that one of the major reasons why the recent Financial Crash and resulting recession was caused, was due to pure out and out greed.

I have no reason or desire to be greedy with the business I am setting up, I know my financial plan inside out and I am happy with it and what it will return... do you know all of this information too? Didn't think so!

"C'est la vie"