PayPal Launches First Campaign to Sign up ‘Off-eBay’ Merchants

PayPal Inc. is in the midst of rolling out its first marketing campaign to sign up non-eBay merchants for its online payment service. Dubbed “PayPal for Business” and aimed at what PayPal considers small and medium-size Internet merchants, the campaign features a telemarketing effort, a direct-mail blast, and a new, revamped Web site. And it may not stop there .”We've only tapped into the beginning of what we're planning to do,” says Stephanie Tilenius, vice president and general manager for merchant services at the eBay-owned unit. “You'll see a lot more from us.” The new marketing touts lower acceptance fees for PayPal compared to credit cards, which dominate payments on the Web, and new technology intended to make it easier for merchants to integrate PayPal into their accounting and other systems. PayPal segments the online merchant market into three sectors depending on current PayPal transaction volume. Merchants doing from zero to $250,000 annually are small proprietors; those running $250,000 to $5 million are small and medium-size businesses; and $5 million plus are seen as large merchants. The new campaign is targeted at the middle segment. A separate sales force has been hired to sign up large merchants. PayPal began laying plans about a year ago to expand its business in what it calls “merchant services,” or payment services for merchants outside of the eBay auction community. Already, this so-called off-eBay volume accounts for about one-quarter of PayPal's dollar volume, or $1.3 billion out of a total volume of $4.4 billion in the second quarter, and is growing at an annual rate of 58%. This is with little or no marketing to the online merchant market. The company also noticed businesses were graduating from dependence on eBay auctions into the larger merchant community as full-fledged Internet retailers. “The organic growth was already pretty strong, [so] we said, 'Let's scale this bigger,” says Tilenius, who will not disclose numbers on the size and scope of the current campaign or give projections on expected off-Bay volume. The effort to grow merchant services in large part meant developing application programming interfaces, or APIs, that would make it easier to for merchants to flow PayPal transaction data through their existing accounting, order-management, shipping and tracking, and returns systems. PayPal introduced the new APIs in May and is still refining them. Smaller merchants, on the other hand, often simply adopt PayPal as a payment mark on their sites and rely on a hosted service to manage transaction data. Beyond the APIs, PayPal is approaching gateways to include its payment service on their roster of offerings to merchants. It enrolled CyberSource Corp. early on and recently signed up Retail Decisions USA Inc. (Digital Transactions News, Aug. 24). It also introduced a new, merchant pricing scheme in August, with rates split into four tiers and varying by volume (Digital Transactions News, June 17). The processor's best domestic rate is now 1.9% plus 30 cents, as compared to 2.2% plus 30 cents under the former, two-tiered schedule. As part of its pitch to off-eBay merchants, PayPal points to the fact that it charges only its transaction fee, with no startup fees or monthly or minimum charges. As a result, it estimates merchants doing $500,000 a year in volume would pay around 2% of sales for PayPal, compared to just over 4% with a conventional bank card account.