Online sales climbed 24% year over year, while Best Buy’s overall sales were flat.
Pushing into mobile and in-store payments, PayPal breaks out of its online niche.
In the past year, Caché Inc., a multichannel retailer of trendy women's apparel, took several steps to connect with more consumers in its sweet spot: women aged 35 to 50 who like fashionable dresses and sportswear, such as wrap dresses in unique printed designs and fringe cowl neck sweaters, in selections that change with the seasons. It's built a hosted e-commerce site with Speed FC, added customer ratings and reviews from PowerReviews Inc., created a mobile site and app with Usablenet Inc., and started selling internationally with FiftyOne Inc.
Now it's ready to turn on eBay Inc.'s PayPal as a payment option with the hope it'll help Caché uncover even more new customers, says Kevin Metz, the retailer's vice president of e-commerce. Caché.com accepted only Visa, MasterCard, American Express and Discover until the end of last year, but will begin accepting PayPal this month.
Metz says he saw a 10% lift in sales after adding PayPal as a payment option at retailer Ulta Beauty, where he was director of e-commerce before joining Caché. That experience, combined with survey data that reveal 30% to 40% of the retailer's customers use PayPal to buy elsewhere online and say they would use it at Caché.com, leads him to believe the site's customers would find PayPal an appealing payment option. PayPal, as part of Caché's FiftyOne application, is already helping to boost international sales, Metz says.
Caché isn't alone in considering PayPal, according to a study of retailers' payment plans that was still in the works at press time from research and advisory firm Retail Systems Research LLC. Early results indicate merchants are interested in using PayPal to grow online sales. "Retailers view PayPal as the leading light in payment innovation," RSR managing partner Nikki Baird says. "It sure looks like PayPal has a good opportunity to take a shot at the big payment networks."
PayPal, like Caché, is aggressively working to find new customers, among both consumers and retailers. That includes a push to encourage consumers to use PayPal when making purchases on mobile phones and, in a departure from its roots as an online payment system, in physical stores. To woo retailers, PayPal is offering to partly cover implementation costs along with processing fees that can be lower than those of the major card brands, cost savings that can help offset the expense of adding PayPal as a checkout option.
PayPal is also increasing the ways consumers can use PayPal to buy things both online and in stores, and has pilot projects in development with 16 retailers meant to make shopping easier and more rewarding—including through PayPal-driven loyalty programs—for their customers. "It's all about making things easier and more valuable for consumers and for our merchants," says Don Kingsborough, PayPal's vice president of retail and emerging markets.
'Better, faster, safer, cheaper'
PayPal, backed by the deep financial pockets of eBay, appears to be on the right course as it competes in a crowded field, says Steve Mott, owner of payment systems consulting firm BetterBuyDesign. "PayPal is doing more to innovate for better, faster, safer and cheaper payment transactions than anyone," on web sites, in mobile commerce and in physical stores, he says. And that's at a time when Forrester Research Inc. projects that online consumers in the United States will use PayPal, Google Checkout and other alternatives to credit cards for 23% of e-commerce transactions by 2016, up from 20% in 2012.
At the core of PayPal is its operation as a prepaid account system that provides consumers the ease of making an online payment by simply entering a log-in name and password. Although consumers can load their PayPal accounts with a credit card, they need not reveal payment card details to retailers—PayPal stores that data—which can be attractive to security-conscious consumers, especially when they're shopping with a little-known e-retailer. PayPal also frees merchants from having to store and secure customers' payment account information, as the merchant never sees that data.
That has enabled PayPal to build a trusted brand that in recent years has extended far beyond its roots as a payment tool used on eBay.com. PayPal—which recorded $35.2 billion in payment volume for the third quarter ended Sept. 30, 2012, up 20% from a year earlier—now claims to serve 190 markets worldwide, covering 25 currencies, with 117 million registered active users among consumers. (That payment volume is separate from the value of the transactions PayPal processes on behalf of merchants, which rose 9% in the quarter to $23.7 billion.)
PayPal is also positioning itself as a more convenient way to pay on a mobile phone than a credit card, which requires a consumer to enter his 16-digit card number. The company has developed PayPal Mobile Express Checkout, which lets consumers store their payment information for easy payment on a mobile device, and launched it within the past year on multiple mobile phone operating systems, including iPhone, Android and BlackBerry.
PayPal says it processed $4 billion in mobile payments in 2011, and as of December, was on course to do $10 billion in 2012. It expects that trend to continue. In the report "U.S. Alternative Payments Forecast, 2011 to 2016," Forrester Research says the ease of using the PayPal Mobile Express Checkout feature will likely be a catalyst to increase mobile commerce sales.
Another big initiative is PayPal's move into payments in physical stores. At more than a dozen retail chains including The Home Depot Inc., Guitar Center Inc. and Toys 'R' Us Inc., PayPal is rolling out payment terminals that let consumers pay by either entering the same log-in and password they use for PayPal online, or by swiping one of three payment cards co-branded by PayPal and MasterCard: a debit card or prepaid card linked to a consumer's PayPal stored-value account, or a PayPal Extras MasterCard credit card, which is issued by GE Capital Retail Bank. All three cards can be used wherever both PayPal and MasterCard are accepted. PayPal won't say how many of the co-branded cards have been issued. For small retail shops or street vendors, a service called PayPal Here enables retailers to modify mobile devices with PayPal card readers to also accept PayPal transactions.