Wherever and whenever consumers shows up to shop, the merchant’s goal should always be the same: Make sure they buy and then turn them into repeat customers.
But two decades into the digital era of payments and commerce, PayPal president and COO Bill Ready told Karen Webster, consumers’ buying habits have changed. Their expectations of retailers are much higher, and converting them into buyers – much less loyal customers – has never been more challenging.
“Consumers are always thinking, ‘how long is this [buying experience] going to take me?’” Ready told Webster. “And when consumers don’t get the answer they want to that question, they just move on to the next merchant.”
More likely than not, that “next merchant” is often the large, vertically integrated tech and retail mega-player who checks those user experience boxes around selection, delivery, discovery and ease of payment rather elegantly, Ready noted.
It also begs the question, he said, about what the future holds for retailers and financial services players about the evolving retail landscape, and how to serve this tech-savvy, convenience-driven consumer.
A question to which, Ready noted, there is an increasingly diverse set of good answers.
Laying the Sidewalk Where the Grass Is Already Flat
Ready told Webster that when he thinks of the evolution of payments – particularly mobile payments – he thinks back to the old adage about college campus planners making a decision about where to put the sidewalks.
“You can lay a sidewalk somewhere that a landscape architect says it will look nice and hope to convince people to walk on it,” Ready remarked, “or you can look at where the grass is already trampled down, and lay the sidewalk where people are already walking.”
Getting people to do a new thing is hard, Ready noted, but getting people to do something they’re already doing and offering them a better version?
That has legs. (No pun intended.)
In the world of commerce – particularly for brick-and-mortar players – Ready said tapping into the already well-trodden grass will require some perspective shifting.
For years, brick-and-mortar merchants have bemoaned the scourge of “showrooming,” where the customer evaluates the product in-store only to flip online to buy. Instead of thinking of ways to fight it, merchants are now looking hard at ways to use showrooming as a conversion opportunity.
Ready said showrooming is an example of “worn grass” in that customers are already jumping onto the mobile channel in-store. Taking that behavior and making it simple for the customer to stay in the retailer’s orbit and easily get what they want is where the new thinking comes into play.
“Merchants want to make it drop-dead simple for the customer to find what they want in their store and to buy it from them,” he explained, providing the example of training clerks to guide customers to their app to order something that might not be available in the store. Moving the customer online for the purchase creates an opportunity to capture their information and make a connection that may have otherwise been missed.
As Ready told Webster, helping merchants make those connections is fundamental to PayPal and PayPal One Touch. Using PayPal to complete a purchase – online or online while in the store – not only authenticates the consumer and enables the purchase, but it’s also an important on-ramp into that retailer’s own loyalty program.
“The great thing about the online purchase in the store with that merchant is that the retailer now has everything they need to enroll a consumer in their loyalty program,” Ready explained. “There are no forms to fill out, no guest registration to complete, no additional password to have to remember. The consumer just checks the box, and now the retailer has another direct and personal channel to use to reach them.”
PayPal’s efforts in using One Touch as a booster for loyalty programs offline is very similar to how it removed the friction from online checkout, by making it a seamless part of the purchase process using mobile phones in the store.
“We want to give retailers a way to bring their customers closer to them,” said Ready.
A Fork in the Road
Ready told Webster that it’s easy to take too narrow of a focus when discussing the topic of retailer disintermediation in the era of digital commerce. Instead, he said, the great commerce reformation is more a clash of two forces that will shape what’s next in commerce across digital and physical channels.
Those two forces: open versus closed commerce platforms.
Those paths, Ready noted, speak to different consumer experiences.
Massive vertical integrators with scale, he noted, do a good job of addressing consumers’ concerns about convenience, speed and security. Within their own closed ecosystems, they’ve done an expert job of ensuring that once a consumer finds or is shown what they want, they don’t have to think too much about buying it.
But as much as modern customers like convenience, he noted, they also like the diversity and uniqueness of product selection.
“You see a lot of movement toward buying locally, or looking for artisan products,” Ready said.
For those providers of products hoping to scratch that consumer’s itch, he noted, consistently finding buyers can be tough.
They can become part of a large platform in an effort to find a short-term gain in value, which Ready said could come at the expense of a long-term loss of being disintermediated from their client base.
Or they could try to compete with the massive players – without the scale and customer assets that these platforms offer.
That fork in the road, Ready told Webster, is basically a coin flip between two bad options.
Ready said that PayPal offers those merchants a better, and more open, alternative.
“[PayPal’s] interest is to democratize sophisticated eCommerce capabilities so that they aren’t the realm of a few massively scaled, super sophisticated commerce providers,” Ready explained.
The merchants, he noted, still have plenty to do – it’s up to them to find the right value proposition, the right logistics offering and the right goods and services set to reach consumers. But Ready said that a nice merchant shouldn’t need 100 million digital users to get off the ground. PayPal connects them with those hundreds of millions of users, giving them the chance to compete with their own unique offerings across the open environment of the web.
A “More Is More” Outlook
Central to all of this, Ready told Webster, is PayPal’s position as an enabler of retailers, brands and banks to optimize the opportunities of a digital commerce world. That outlook has defined every move that PayPal has made over the last two years – with issuers, networks and retailers.
It’s why the more recent reporting of PayPal wanting to be a bank, Ready remarked, was very much off the mark, even though the media’s assumption was somewhat understandable.
There are players who are laying tracks to build a complete vertical stack for commerce and transactions, and who realize that they can build banking services into that platform and become the front-facing funnel for them.
But when you look at the reality of what PayPal is offering and doing, he noted, the facts don’t match the claims.
The PayPal CASH card – the company’s debit offering – is a good example, he noted. It is a product marketed to the 30 million Americans who are unbanked, living on cash-only margins and paying incredible fees for things like check cashing.
PayPal’s offering there, Ready noted, is highly competitive with the check-cashing players these consumers are interacting with for financial services – but a consumer with an established bank-based checking account or credit card isn’t going to switch to this product.
“We are going after consumers who don’t have access. If we can get them into the digital commerce world, the odds are good that our product will be a very good transition to a traditional financial institution, at some point in the future,” Ready said.
It’s consistent with PayPal’s explicit goal, which is to boost their presence in the digital sales channels where all of their growth is now happening, and enabling consumers to use their rewards points to pay at any retailer, rather than just at a handful of the few largest.
In closing, Ready noted, the future of retail and digital payments could be about making the commerce world smaller, with more aggregation pushing more and more products into fewer channels.
But he doesn’t think it will be – and PayPal has staked a claim and bet its business model that a smaller future for commerce isn’t really what consumers, merchants or issuers really want.
What consumers do want, he noted, is the ability to tap into all of the sophisticated tools of discovery, payment, delivery and promotion, married to a wide-ranging and diverse selection of products from a growing number of merchants.
“At the end of the day, we think everyone should be part of the digital retail and commerce game, because that is the best outcome for consumers – not just for merchants and issuers.”