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PayPal cozies up to retailers with showrooming-busting offer

October 4, 2013

PayPal's offer within Levi's mobile site

PayPal is teaming up with a handful of retailers including Levi’s, Aéropostale and Maurice’s with a time-sensitive offer for free shipping, highlighting the importance of incentivizing consumers with mobile and Web offers to beat showrooming this holiday season.

PayPal is offering consumers who shop on retailers’ mobile sites, applications and Web sites free two-day for a limited time. In addition to educating consumers about alternative payment types, the marketing move will also help PayPal form closer relationships with retailers as the company makes a bigger play to capture real-world transactions.

“What PayPal is trying to do is generate more awareness,” said Sheryl Kingstone, Toronto-based research director at Yankee Group. “What PayPal gets out of this is more branding and awareness, especially with mobile.”

“They want to capture some of this type of revenue as they try to generate more revenue from the retailer side,” she said.

How it works
When consumers shop from a mobile site, app or Web site from one of the participating retailers, the offer will automatically be applied and the order will automatically be sent to a consumer’s home within two business days.

To qualify for the offer, the order must be shipped to a location within the U.S.

The full list of retailers participating in the program are Sports Authority, Aéropostale, Levi’s, Kenneth Cole, Dockers, iRobot, Maurice’s, Shop PBS and Aéropostale’s P.S. brand.

PayPal worked with eBay Enterprise to provide the free shipping.

PayPal has not announced any plans to expand the test, but the initiative is clearly a move from the company to go head-to-head with Amazon over its popular Prime service that also offers two-day delivery to consumers.

For the time being, the PayPal incentive is appealing to consumers because they do not need to pay for two-day shipping, although that will likely change if PayPal extends the program and will need to charge consumers for the service.

To compare, Amazon’s Prime charges $79 a year for consumers to use the service.

“The primary benefit is to our customer, but from a brand stand point, we wanted a better understanding of payment methods available to our customers, which they choose and what drives that choice,” said Brett Trent, vice president of ecommerce at Maurice’s, Palestine, TX.

PayPal promoted on Maurice’s Web site

Maurice’s is also planning to roll out a new mobile experience in November, including a new site, showing how the new PayPal test likely fits into a broader holiday strategy.

Aéropostale did not respond to press enquiries, but is one of the more interesting retailers in the participating group since the company’s demographic skews younger, and both parents and children buying the clothes are likely to possess a mobile device.

PayPal within Aéropostale’s mobile site

Bigger market play
PayPal also offers retailers a route around Amazon, which many bricks-and-mortar retailers see as a threat, especially around the holidays.

Showrooming is likely to play an even bigger role for retailers this year, and retailers want to stop consumers from shopping from Amazon while in-store.

The new pilot also points to consumers using their mobile devices more this holiday season to comparison shop and search for deals.

For PayPal, the move fits into a bigger push to move beyond online person-to-person payments into real-world transactions.

PayPal also recently rolled out a revamp to its consumer-facing iPhone and Android app with mobile offers, order-ahead functionality and the ability to finance purchases (see story).

“We are trying this promotion out because we believe that consumers want fast and free delivery and we believe our merchants will benefit from this program,” said Chris Morse, head of merchant communications at PayPal, San Jose, CA.

“We plan to explore how we can extend this promotion into the future,” he said.

Pre-holiday investments
PayPal’s offer comes at a time of the year that is ideal for retailers to test these kinds of offers so that they can grow consumer adoption before they spend big amounts of money while also avoiding the crunch period of time when retailers are solely focused on driving as much revenue as possible.

Retailers that incorporate the new technology straight into their mobile sites and apps may benefit from better understanding consumers’ spending habits, which can also benefit better marketing.

For example, retailers might have a greater incentive to test loyalty-based coupons and offers to trigger online sales if consumers have more options to pay.

“If you can get consumers to start cross-channel shopping, you can start to see more creative marketing strategies around the holidays,” Yankee Group’s Ms. Kingstone said.

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York

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