July 24, 2012
The Age
PayPal wants to let shoppers use its service when buying in-store in Australia.
The battle for the consumer wallet is set to intensify with global payment behemoth PayPal eyeing partnerships with local offline retailers.
PayPal is in talks with a handful of large Australian retailers about introducing its pay-anywhere technology, which would blend online, mobile and in-store buying through a single customer identity and account. The e-payment option available through an app for Android and iPhones, would allow customers to bypass eftpos machines and credit card companies at point of sale, paying directly from their PayPal account.
The eBay-owned company would not name the Australian retailers but said they were household names. The US-based company recently inked a deal to provide pay-anywhere services to 15 large US retailers including Toys R Us, Home Depot, Foot Locker and Nine West.
“We are in talks with them and there is a substantial amount of interest,” US-based PayPal VP of retail Don Kingsborough told IT Pro on a visit to Australia for talks with local retailers.
Any partnership would enable bricks and mortar retailers with advance customer databases to reach their customers via mobile phones, putting more pressure on those that simply rely on walk-in traffic or traditional advertising.
Major department stores such as David Jones and Myer, as well as electronics retailers like Harvey Norman and JB Hi Fi, have been squeezed in recent years as more customers use the internet to compare prices and to shop from abroad. The speed of the change, fuelled as by the strong Aussie dollar, has triggered a wave of profit warnings and stock downgrades in the sector over the past year. The change roiling the sector in turn has forced those same companies to reconsider their business models.
Competition from the internet also steamrolled REDgroup Retail, forcing the owner of Borders and Angus & Robertson into administration in early 2011.
Now the advent of the PayPal mobile payment model would elevate the role of digital customer information in marketing and sales efforts. The mobile phone technology allows retailers to store customer profiles on a computer database. At the same time, customers can shop at one brand whether in person in store, online or via a mobile phone.
Ord Minnett retail equities research analyst Paresh Patel said the gap would widen between retailers who adopt the technology and those that don’t.
“That is where the battle is going to be won in the future for marketing,” he said. “That’s why you see Coles, Myer, Woolies battling it out for customer loyalty. It’s more about collecting that customer information.
“What will happen in the future and is already happening in the US, is that each person will get a tailored offer [through their mobile phones].”
Unless a retailer has an existing, robust and large database, retailers will find themselves out of step, said Patel.
The move adds to a string of new e-payment options which include e-wallets in the form of smartphone apps from banks, credit card companies, and technology giants including Google and, potentially Apple, as well as social banking via Facebook; plus friend-to-friend payment via SMS, Facebook, email and by ”bumping” phones. The trend is likely to accelerate the disappearance of cash from the economy.
A recent test conducted by PayPal showed how dramatic the impact of the mobile technology can be. Last year, PayPal targeted ads to the mobile phones of mothers inclined to buy thermometers in US cities where flu was rampant. When the mothers came within three kilometres of stores, ads urging them to fight the flu by buying the thermometer were served to their phones. Sales of thermometers jumped as a result, PayPal said.
Despite the potential for the technology, PayPal would still face a challenge in getting customers to install the app and use it, said online retailing specialist Mark Freidin of internetretailing.com.au.
“That’s the big challenge for digital marketers at the moment. PayPal and these guys have great technologies and like to extrapolate the possibility of what the technology can do […] but the whole idea is how do you get into the users’ hands to make it effective,” he said.
Also, Freidin said should the technology become popular, there was a risk consumers would tire of endless ads on their mobile devices.
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