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Payment Options and Strategy: The Moose Hut (TMH), a gift shop in Calgary, Alberta

Rod and Martha Nelson started The Moose Hut (TMH), a gift shop in Calgary, Alberta, more than 15 years ago. The Nelsons have capitalized on the tourist trade drawn by the Calgary Stampede, which is one of the largest rodeos in the world. The shop sells a wide range of Canadian themed items to rodeo and other tourists who visit central Alberta throughout the year. TMH's offerings range from inexpensive food items, such as pure Canadian maple syrup and smoked salmon, to much more expensive handcrafted gifts, including Inuit and First Nations artwork. The company's trademark product, the Moose Mug, is one of its biggest selling items.

Many of TMH's customers return to the store whenever they visit Calgary. TMH's line of Canadian Day Party Favours is especially popular with homesick Canadians who have moved to other countries and TMH has been selling those products by mail order for the past several years. After reviewing the sales numbers for these mail order items, Martha has decided that it might be a food idea to expand the mail order operation and begin accepting orders through a Web site. Many of the store's items have a high value to weight ratio and would be easy to ship to customers around the world.

TMH currently accepts only checks denominated in Canadian or US currency in its mail order operation; however taking orders on a Web site will probably require the company to be more flexible in accepting multiple payment methods. Rod and Martha asked you to help them examine payment processing alternatives for TMH's new Web business.

To be acceptable, a payment processing method needs to handle all major credit cards , perform currency conversions, and be available to a Canadian merchant. Most important is that the payment processing method must be reasonably priced. The margins on most gift items at TMH are between 10% and 30 % of the selling price, but the extra costs of shipping and handling items sold through the web site will reduce those margins. TMH would like t keep the payment processing costs below 4% of the selling price, if possible.

Questions:
1. Using the links in the Online Companion for this case, identify at least 3 payment processing options that might be suitable for TMH. Write about the 3 payment options describing each. Include specific advantages and disadvantages for each option.

2. Prepare and one page memo in which you make a specific recommendation to Rod and Martha. Include an explanation of the reasons for your recommendation.

Solution Preview

The fact that the store only accepts checks now is an issue for an on-line store, especially since the denominations are only in US or Canadian currencies. One main gal of the store is to cater to ex-patriot Canadians living all over the world. Therefore TMH must have the ability to process all different types of currencies, and make it as easy as possible for them to shop with TMH.

The first major payment processing option could be a credit card. This is probably the most secure and easy tool. People enter their credit card number, and then they buy stuff in Canadian currency, and the credit card company will then take care of the conversions to any local currency. The credit card is quick, easy to use, and most cards do charge 4% or under for processing fees. The downside is that some credit firms might charge more than 4%, and some firms won't send out the payments for at least 30 days (they wait for 1 billing cycle to make sure that no returns were made..). So if TMH needs their ...

Solution Summary

About 500 words, three suggestions. No references.

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