Launching an eCommerce Platform for Creators with Stripe Connect: Direct vs Separate Charges
Creators don’t want to run a business – they just want to get paid. So if you’re a founder of a link-in-bio sales platform for content, goods or services, e.g., a personalized Creator merch platform, a print-on-demand business, or a similar eCommerce SaaS for Creators, here are some important business model consequences of using either Stripe Connect direct charges or separate charges.
We talk to founders of Creator-focused businesses quite often about their plans to launch a platform facilitating eCommerce in a way that’s scalable for the platform and convenient for the Creators.
One of the key aspects is capturing payments from end-customers and getting Creators paid in an automated way at scale, for which we usually recommend using Stripe Connect.
On the other hand, there is a matter of managing risks to the platform business, which is usually done by offloading as much of it as possible to Creators themselves.
The eCommerce Risks: Refunds, Returns, Chargebacks, Disputes, Fraud
One of the key decisions, with business model consequences, is who should take the risks, customer service burden, and potential liability associated with running an eCommerce business. These risks include:
- Refunds: Managing customer dissatisfaction and return of funds
- Returns: Handling physical product returns, restocking, and quality issues
- Chargebacks: Dealing with payment reversals initiated by customers through their banks
- Disputes: Resolving conflicts between customers and creators
- Fraud: Protecting against fraudulent transactions, low quality of counterfeit products and maintaining platform integrity
Direct Charges for a Store Builder like Stan or Shopify
If you’re aiming to replicate the success of Stan.store or Shopify, but with your own twist, you are working on a multi-tenant “store builder” where:
- Consumers can buy products from each creator separately
- Each order contains products from just one Creator store
- Each Creator store is a separate business
Stripe Connect with Direct Charges allows you to streamline payments at scale:
- Capture consumers payments using cards, wallets, installment payments
- Creator is the Merchant of Record and their descriptor is visible on the consumers bank statement eg. MrBeast Store
- Take a platform fee from each order – either a percentage, a fixed fee, or a combination of both
- Automate Creator payouts
Business consequences of using Direct Charges:
- All the risk is on the creator’s side
- Platform liability is reduced, in theory
- In practice, there is still a significant effort required to manage risk
This approach reduces the risks on the platform side and attempts to offload all the risk to the creator, but as demonstrated by the Stan case study below, maintaining Creator satisfaction and the platform’s good name at scale still takes a significant effort in terms of monitoring, vetting, dispute resolution, and arbitration.
Separate Charges for a Creator Marketplace like Etsy or Amazon
If you’re intending to build an Etsy-like marketplace where consumers may shop for various Creator content, goods or services, you are working on a multi-vendor marketplace:
- Consumers can buy products from any number of Creators in a single order
- Each order contains products from many Creators
- Your marketplace hosts many competing or complementing Creator products
Stripe Connect with Separate Charges allows you to streamline payments at scale:
- Capture consumers payments using cards, wallets, installment payments
- The Platform is the Merchant of Record and their descriptor is visible on the consumer’s bank statement eg. AMZN
- Split payments between multiple Creators in a single order
- Take a platform fee from each order – either a percentage, a fixed fee, or a combination of both
- Automate Creator payouts
Business consequences of using Separate Charges:
- All the risk is on your platform side
- Creator liability is reduced, in theory
- In practice, the Creators are contractually obligated to deliver quality goods and perform up to consumers expectations
This approach reduces the risks on the Creator side as the Platform takes on the risks and their management. Creators benefit from a friendly (friendlier) sales environment while maintaining ownership of the sold content or goods, at a cost of marketplace fees.
Stan.store Case Study: Creators Take the Risks, However Small
Stan.store is a popular eCommerce platform for content creators to monetize their digital goods, content, and services. The platform allows Creators’ fans and followers (Consumers) to purchase Creator Content using the Stan platform.
Stan is using Stripe direct charges and includes the following language in its T&Cs:
- Stan is not a party to any transactions regarding the purchase and sale of Creator Content
- Such transactions are solely between Creators and Customers
- Creators are solely responsible for ensuring that any Creator Content made available through the Services meet all applicable laws, rules and regulations
- The Creator Content described by Creators must be delivered as described in an accurate and satisfactory manner
Creators using Stan.store often use the following language in their own consumer-facing T&Cs:
“Due to the digital nature of our Products and instant access to our Services, we do not offer refunds after purchase. All sales of the Product and/or Services are final.“
As well as dispute and chargeback protective language:
“You agree to not dispute any charges at any time. In the event that you inadvertently dispute a charge made to your account in connection with a purchase made through this Site, you agree to immediately cancel/withdraw such a dispute. You understand that disputing a charge through your financial institution is a violation of this Agreement and you agree to not do so. You are responsible for any fees, including collection agency fees and costs and attorneys’ fees, associated with recouping payment on outstanding payment and/or disputes and any collection fees associated with such an event. We reserve the right to forward any payment disputes to a collection’s agency.”
This T&C language is intended to limit the Creator’s liability and risks. Stan is not concerned with its legality or consequences – it’s all on the Creator.
On the other hand, Stan is attempting to keep its good name by actively monitoring, vetting and managing its Creator stores, sometimes refusing service and closing Creator accounts. Such cases could be easily found on TrustPilot or other review websites.
Other Stripe Connect Considerations
In either case – using direct or separate charges – a creator needs to go through Stripe onboarding and KYC procedure and validation, e.g., present ID, confirmation of residential address, in order to get a standard account.
It’s doable if they’re committed and you demonstrate value. Success in onboarding creators typically depends on clear communication of benefits, strong platform support, and a compelling value proposition that justifies the effort of verification.
In both cases Stripe fees (3%) are non-refundable. In case of direct charges, the platform fee could be refundable from the platform account or the creator’s account.
Creator Mindset and Platform Precautions
When considering all of the above and balancing the platform’s interests versus Creators convenience, it’s worth considering that most Creators are not interested in:
- Taking any risks – they expect your business entity to take a bigger cut and facilitate a pleasant money-making experience
- Providing customer service – that’s extra work most people don’t have time for
- Issuing refunds or giving money back or being liable – that’s a no-go for most Creators, hence the attempted no-refunds policy
As you very well know, most of the Creators are regular people e.g., empty nesters, stay at home parents. Not business people. They don’t want to start a business – not really. Just to get paid.
That’s why most Creator monetization platforms, even those like Stan using direct charges and not being a party to the transaction but falling under other regulations and legal risks, go to great lengths to:
- Ensure civil User Conduct in terms of legality and quality
- Ensure Anti-Spam Compliance
- Ensure Creators have all the applicable licenses, permits, and authorizations
- Gracefully and legally handle any Copyright Complaints
- Ensure its own Indemnity and Release
- Offer Dispute Resolution by Binding Arbitration
- Prohibit Class and Representative Actions and Non-Individualized Relief
- Maintain Confidentiality of all the above
Stripe Connect Payments: Direct Charges or Separate Charges?
The choice is really between running a store builder or a marketplace from the business model perspective. There are legal and financial risks tied to both routes but choosing either requires a significant legal, risk mitigation, and customer service effort which has to be justified by the market size and the business opportunity potential.
Spree Commerce supports any of the discussed business models and Stripe Connect applications with its fully customizable and flexible code base – for either a multi-tenant or a marketplace website. Reach out to discuss your specific use case.
