October 27, 2011, 12:54 PM

PayPal dramatizes how it plans to get into stores

A New York showcase highlights technologies PayPal expects to offer in 2012.

Lead Photo

Visitors see demonstrations of technologies that the payment services company expects to debut this fall with one retailer.

The stars are lining up for PayPal, the payment services arm of eBay Inc., to make the transition into stores. And to generate some buzz about the services it expects to launch in 2012, PayPal has set up a temporary showcase in a New York City storefront.

The invitation-only showcase takes visitors through various shopping scenarios that rely on PayPal and eBay technology. One vignette set at a hardware store demonstrates how a consumer purchases a grill in the store, pays for it with a PayPal account and elects to have it shipped to a residence. Then, while still in the store, the sales clerk (portrayed by an actor), makes a sales pitch for grilling accessories to take home. Other vignettes include a living room and a grocery store that highlight other aspects of PayPal’s mobile offerings, such as coupon redemption and receiving loyalty program points.

The vignettes demonstrate PayPal’s digital wallet technologies that could help drive in-store sales, a spokesman says, and heavily rely on the increasingly common habit of consumers to use smartphones in stores to get more product details and make purchase decisions.

PayPal envisions its technologies having a role in five steps that lead to a consumer’s purchase decision. The first step is targeted advertising that picks up the consumer’s location and displays local merchant advertising. Prompted by the ad to visit a store, a consumer then might scan a product bar code to learn more about the item, resulting in local search results that display inventory availability at nearby stores. From there, a consumer picks a store to buy the item and uses her PayPal digital wallet to complete the transaction. A consumer might also earn loyalty program points that are tracked in her PayPal digital wallet.

The scheme will draw upon recent eBay acquisitions, such as Where, a mobile app that lets consumers check inventory at nearby stores, and Milo, which tracks local retailer inventory to display in search results.

How it will all work is a little unclear, because PayPal is declining to release more specific information, such as a how consumer might transfer the value of a physical gift card into her digital wallet.

PayPal stands to benefit greatly if it can persuade merchants and consumers to adopt these technologies in stores. PayPal is on track to process $100 billion in online transactions this year, the spokesman says, but that is a small number compared to the $8 trillion in global transactions at the retail point of sale, as calculated by The Economist Intelligence Unit, the research arm of The Economist magazine. “There’s a huge upside for the company,” the spokesman says.

PayPal expects one retailer to start using these technologies this fall and 20 more merchants in 2012. PayPal’s Manhattan showcase will be open until the end of January.

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