Grow Revenue with Recurring Orders in your Magento Store
In a typical eCommerce system, products are purchased and then delivered to a customer once per order. However, there is also an often overlooked type of order between a customer and a merchant where the customer places an order once and then receives the same products on a recurring basis (i.e. once a month until such a service is canceled). This type of service is categorized as recurring.
Recurring orders can provide eCommerce merchants with the opportunity to generate an ongoing revenue stream from an existing customer. Large online retailers such as Amazon.com (with their Subscribe & Save) and QVC.com (with Auto-Delivery) have made recurring purchases easy for customers and lucrative for the vendor. However, setting up such a purchase option on a site can greatly complicate order processing. Fox example, to effectively process a recurring sale, the merchant must keep the following in mind:
- Keep credit card payment tokens so that a next payment can occur automatically
- Handle stored credit card tokens and manage card expiration dates
- Deal with the potential for account cancelation, number changes, or other changes in billing information
- Handle any delays in payments (such as delinquent account handling)
- Handle automatic order creation and fulfillment on recurring basis
Magento, a partner platform of LYONSCG, has an answer to a variety of different recurring transactions. The platform works with a specific set of requirements to minimize the number of different use and edge cases for the system. For example, with Magento:
- You cannot mix regular and recurring products (so called nominal products) in the same shopping cart. This makes it so the system doesn’t have to recur and recalculate all of the taxes, shipping fees, and payments for a part of the order. It’s easier to handle an order in full as compared to doing partial captures and authorizations.
- Discounts and gift cards/store credits are not allowed for the recurring order. This is due to the recurring order nature and ability to bill an appropriate amount for each occurrence of the order. Since PayPal is handling the actual financial portion of the recurring order, this limitation has been set in place to avoid any additional complications of resetting payment terms.
- Magento is using PayPal for payments. Magento has a full set of PayPal payments exposed natively in the system and that’s why PayPal is a choice number one for the recurring billing to work. More importantly, keep in mind that the actual financial portion happens on the PayPal side after an order has been set up to recur and not on Magento. That is, Magento doesn’t store any of the credit card information, but rather relies on PayPal to store it and handle financial transactions and how often they occur.
Recurring orders can be a complex aspect of your Magento eCommerce store. However, revenue upside and customer convenience provide definitive positives for your business. You’ll be able to more fully realize your eCommerce potential by evaluating your needs for recurring purchases, identifying the solutions in the marketplace that address your specific requirements, and evaluating the best way to implement their particular recurring need.
Alexei Roudometkine is Chief Architect at Lyons Consulting Group, and is responsible for helping with business development activities and for building a process for proper technical architecture structures and implementations of projects. Overall, Alexei has implemented close to 100 Magento projects while working as a Senior Technical Architect, as well as several Demandware projects. Alexei has a Master’s Degree in Nuclear Physics and was trained to be a nuclear submarine reactor operator.
