PayPal’s Off-eBay Merchant Efforts Hit Paydirt with Dell Signing

EBay Inc.'s PayPal payment service continued its diversification effort beyond the eBay online auction community this week by adding computer giant Dell Inc. to its growing fold of mainstream merchants. PayPal also unveiled an online gift-certificate program for merchants that expands upon an eBay gift-certificate plan launched two years ago. Adding Dell, the dominant personal computer maker with $54 billion in annual sales and the No. 2 Web retailer, as a merchant is a coup for PayPal. Dell's sales model relies mostly on telephone and Internet orders. The PayPal service will be available only to consumer and small-business customers. A spokesperson for Round Rock, Texas-based Dell would not speculate on how much charge volume Dell expects to generate on PayPal, but says that in Dell's last full fiscal year, about half of the company's $7 billion in U.S. consumer sales were online. “We [added PayPal] because our customers want us to,” the spokesperson says. “We do not sell through retailers.” Dell also accepts major credit cards and has an in-house financing operation in partnership with CIT Group. A PayPal spokesperson says, “we have been talking for a long time” with Dell but wouldn't give details on how the deal came together. Neither firm would discuss pricing. though PayPal claims its acceptance costs generally are lower than those for credit cards. PayPal's typical standard merchant fees range from 1.9% to 2.9% of the sale plus a 30-cent transaction fee, with no start-up or other monthly fees. Dell launched the PayPal service with a promotion taking $20 off PayPal charges over $200 from Nov. 14 through Dec. 6. PayPal's new gift-certificate program, meanwhile, enables online businesses of all sizes to offer customers electronic gift certificates of any value up to $500. It's the first time PayPal has offered non-eBay merchants such a service. The eBay program started in October 2003. PayPal wouldn't say how many merchants are participating at the end of the program's first week. “It is still early, but we've seen interest from many of our merchants, because more and more consumers are purchasing gift cards and certificates in place of traditional gifts for holidays and other special occasions,” a spokesperson says in an e-mail to Digital Transactions News. PayPal isn't charging merchants extra for offering the gift certificates; they pay only the standard fee at the time of redemption. There are no fees to consumers apart from the value of the certificate. Merchants create the gift certificates by setting the amounts, colors, and images and publishing a “Buy Gift Certificate” button on their Web sites. PayPal processes certificate sales and redemptions, sends receipt e-mails to the merchant and the merchant's customers, and records transactions in the merchant's account. PayPal handled $5.9 billion in merchant transactions in 2005's first nine months, up 44% from a year earlier. The Dell and gift certificate launches come on the heels of San Jose, Calif.-based parent company eBay's agreement to buy VeriSign Inc.'s payment gateway business for $370 million in cash and stock. The acquisition would add 100,000 mostly small businesses to eBay's merchant fold (Digital Transactions News, Oct. 10).