An online merchant is a person who accepts payment, usually in the form of credit cards, in exchange for goods or services over the Internet. Special accounts, called merchant accounts, are often created with credit card processing companies, to enable the merchant to accept online payments. Sellers generally pay a fee to the processing company for this service.
In the early 1990s, the Internet became accessible to the general public. The web, email, chat rooms, and other online tools swept across the world. In the midst of this new technological frenzy, businesses saw the huge potential that the Internet had for marketing and sales. Small businesses began cropping up all over the web, giving rise to dot-com businesses.
Within a few short years, thousands of companies had established an entirely online presence, and many used a website as their sole source of marketing. This major expansion of Internet merchant business came to be known as the dot-com bubble. That bubble would burst around 2000, when competition became so overwhelming that investors no longer trusted a solely Internet business to be productive, and pulled investment funding. Today, an online merchant is very different from its early ancestor.
Merchants today must use a variety of marketing tools to promote an online business. These sellers now understand that, with millions of online merchant accounts, a website alone will not sell goods. Some Internet companies also incorporate traditional marketing, such as direct mail or newspaper advertising. Other, creative forms of online marketing can include Internet ads, blogging, and social networking.
The ability to accept payment over the Internet is critical to the success of any online merchant. In fact, a business is usually only classified as a merchant account if it has the ability to process credit or debit cards. Some merchants have agreements with credit card processing companies that take a portion of the merchant's sales total as payment for this service. Other businesses may choose to use a service, like Paypal™, that processes payments connected to an email address.
Along with traditional independent, online stores, there are numerous websites that offer a kind of storefront on a larger website. These are usually based on the early Internet concept of a web-based mall. Merchants can purchase a store on the site for a monthly fee, and sell their goods through the larger entity. This can save on individual marketing costs, but typically does not entirely eliminate them.