Monday, November 19, 2007

Retailers Explore New Ways of Being Paid

A decade ago, PayPal was best known as the payment method of pick for Beanie Babies purchases on . This vacation season, it could pay for a diamond ring on the online jewelry maker .

Gilbert Stuart Isett for The New House Of York Times


Darrell Cavens, senior frailty president for selling and engineering at Blue Nile, an online jewelry maker that is offering price reductions to PayPal users.

Blue Nile River and respective other high-end Web retail merchants are introducing price reduction publicities with PayPal, now a subordinate of eBay, in hopes of attracting consumers who are willing attempt methods other than recognition card game to pay for their online purchases.

Retailers are also looking to PayPal — and rival recognition card options like Check and Bill Me Later — to aid them less recognition card processing costs. In tighter economical times, retail merchants state such as nest egg can intend the difference between a net income and a loss.

"Merchants are definitely focused on generating more volume for option payments in the vacation season," said David Bruce Cundiff, an analyst with Javelin Scheme and Research, a consulting firm. "It come ups down to changing consumer behavior."

That, Mr. Cundiff and other analysts said, is where the Blue Nile River publicity come ups in. Starting Nov. 26, clients who purchase with PayPal will salvage 20 percentage on their purchases, with a upper limit price reduction of $50. More than 15 merchants, including and , will follow suit. Other sites, like Shoebuy and Zales, will offer other price reductions and transportation publicities to PayPal customers.

Mr. Cundiff said PayPal was the major ground that recognition card options have got gained roughly 14 percentage marketplace share.

PayPal said about 150 million people and an unrevealed figure of merchandisers "in the 100s of thousands" usage its service. The subsidiary's gross jumped to $470 million, an addition of 35 percentage in the most recent one-fourth over the same time period a twelvemonth ago.

Only in the last twelvemonth have PayPal go popular adequate to utilize on Blue Nile, said Darrell Cavens, senior frailty president for selling and engineering at the online jeweler. "They're not so alternate anymore," Mr. Cavens said. "It's becoming mainstream."

Blue Nile River offered the PayPal option to its clients in October, but he declined to state how many purchasers had used the service. "But we've certainly seen much higher gross sales through PayPal than I had expected," he said.

PayPal have tons of competition from Google Check and Bill Me Later, among other companies.

Michael Kirkland, a Google spokesman, said Check would soon denote vacation publicities similar to those offered by , Buy.com and other merchandisers during the back-to-school shopping season. At that time, the merchandisers provided free transportation and other price reductions for Checkout's customers, Mr. Kirkland said.

Bill Me Later, which lets merchandisers to widen short-term credit to customers, have enjoyed similar growth. Gary Marino, main executive director of Bill Me Later, said more than than than 700 companies offered the company's service, more than twice last year's figure.

"There's a spot of a herd outlook when it come ups to this," Mr. Marini said, "but it looks to be working well for us."

The large inquiry for retail merchants that return the clip to seek option payment services is whether clients who choose for Bill Me Later or PayPal would have got otherwise bought the commodity anyway with their recognition cards. If that is the case, money saved on payment processing fees is not necessarily adequate to countervail the clip and disbursal of changing a Web site's payment technology.

Mr. Marino, though, postulates that Bill Me Later presents new, affluent customers. The norm annual income of a Bill Me Later user, he said, is $75,000, well above that of the typical Internet shopper.

Alternative payment companies can bear down less for processing fees than recognition card companies partly because they pass much less on marketing. Frank Sui, an analyst with Deloitte Consulting, said companies like Wage Pal, Bill Me Later and Google Check pass less than $5 to get each new customer, compared with more than than $250 spent by recognition card companies. Mr. Sui said recognition card companies have got also struggled to contrive new services at the gait of their more than agile Internet competitors.

Still, the traditional recognition card companies are not idle. , for instance, is working with PayPal. The companies said that this week, they would denote a service called PayPal Plug-In, allowing PayPal users to shop with any merchandiser that accepts MasterCard. The service, which PayPal have tested for much of the last year, necessitates users to download a software system application.

Michael J. Wagner, main executive director of eToys, the online plaything retailer, said he had resisted offering PayPal and other services. Now, a calendar month after the company began to utilize PayPal, the service business relationships for nearly 9 percentage of the Web site's purchases, with no price reductions or other publicities to lure customers.

"We're truly surprised, and very pleased with it," Mr. Otto Wagner said. PayPal minutes cost eToys at least 0.3 percentage less than those processed by recognition card companies. And PayPal makes not necessitate eToys to counterbalance the company for deceitful transactions, as the major recognition card companies do, he said.

"So we're a large protagonist of these other payment methods," Mr. Otto Wagner said. "Somebody have to maintain the MasterCards and Visas honest."

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