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Business Advice

Bringing online tools to the offline pool

Retail spaces are becoming showrooms for online stores
The Business Times - April 23, 2012
By: Anna Lee
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Bringing online tools to the offline pool Mrs Norton of Mothers En Vogue attest to the convenience offered by the online payment platform. -- BT IMAGE

THE lines are blurring between what is offline and online. With increasing ambiguity between the online and offline worlds of retail, there begs the need for a more relevant response of merchants to cater to the changing consumption patterns, a gap that PayPal believes it can fill.

DNR Wheels saw itself at this same crossroads: having already established its brick and mortar presence with an office and warehouse facility, much of the purchase of their disability and rehabilitative equipment and home nursing products were still made through phone orders.

This and clients' needs to obtain more detailed product descriptions created the impetus for DNR Wheels to move online in spite of their predominantly local customer base.

PayPal, a widely-used online payment platform, saw this big shift in 2011 where local services and products, as opposed to cross-border sale products, were increasingly offered on PayPal, alongside the proliferation of deal sites that takes advantage of its services, says Klas Hesselman, PayPal head of marketing, South-east Asia and India.

DNR Wheels has since launched its online site with PayPal's help. This not only reduced the phone bills, but "also guaranteed prompt payment before goods are delivered", says Raja Singh, managing director of DNR Wheels.

And in the volatile retail market, PayPal's role is timely. Forty-seven per cent of the retail purchases, as PayPal's recent study shows, are researched online before an offline transaction, while "retail spaces become showrooms for online spaces", where individuals purchase goods at a cheaper price online after viewing the physical product in store, says Mr Hesselman.

PayPal's value proposition comes in that it removes the chore of securing a payment method from establishing the business online.

"We want to give tools to merchants to help them save the sales, such that the customer's journey from online to offline is seamless.

"It's a blue ocean, not a red sea. As a startup, you're competing with existing businesses where they are not yet (competing). Large brands and big retailers have not yet made their existence online, which means that as a startup you have the opportunity to find a more competitive space and eCommerce is the best way to do that," explains Mr Hesselman.

This is practically translated into taking the payment headache off merchants, removing the fraud from businesses and allowing customers to easily get up and running to focus on the business, he says.

Cerissa Cheok, founder of Metrocakes, a purely online couture cake business, testifies to that: "Time is of essence and we did not want to be caught up figuring out the logistics before starting the business . . .using PayPal cuts out a lot of time for us."

Mothers en Vogue is another such company which has benefited from the convenience offfered. This comes especially with transactions from the US market "given PayPal's strong reputation amongst businesses and consumers (there)", says Sharon Ho-Norton, founder-director of the company. PayPal has been pivotal as it provided a means for payments from US-based wholesale buyers and international and other online clients, Mrs Norton added.

The online business has helped to further spread the brand name by expanding into brick-and-mortar retail, with international distribution and franchising. Their flagship store is in The Centrepoint, with two showrooms in the US and a strong European client pool.

The converse has occurred as well, bringing payment convenience for a physical service. Cookyn Inc, which hosts cooking classes, has taken the hassle of payment to the online realm through PayPal.

"We wanted to offer customers the convenience of signing up for our cooking events without the hassle of having to make a trip down to our office to make payment," chef-owner Mervyn Phan shares.

PayPal can be seen as considerably successful in bridging the online-offline chasm in the retail world whichever direction the merchant is heading - from the online realm to the offline, or from traditional retail to online sales.

For some, this presents a significant cost. With the 3.4 per cent transaction charge, plus 50 cents, it is a major drawback for clients who make bulk purchases.

Kue, an online kueh-lapis bakery, caters mainly to the corporate crowd of at least 20 orders and above during non-Chinese New Year seasons. Business owner, Robin Pho, finds that in terms of larger orders, the fringe costs are slightly off-putting.

"A cake for $50 requires us to pay almost $4 to PayPal . . . For corporate orders, they are in the thousands of dollars, and if we have to pay a few hundred dollars in fees, that's a bit tough," Mr Pho says, though he acknowledges that it still caters to consumers' preferences of paying via credit card.

These figures are exacerbated especially with orders from overseas. BT found that on April 5, PayPal's exchange rate was S$1 for US$0.773, as opposed to US$0.794 reflected on XE, a currency and foreign exchange site. Even compared to banks' exchange rates - in the event that a bank transfer may be preferred - PayPal's rates are higher than the US$0.789 offered by DBS.

However, Melva Bek, director of Vibe Holdings, which has an online business selling nail polishes, disagrees: "It is indeed very steep, but I would compare it against the cost of applying for a credit card machine, which incurs a monthly subscription charge of $180 and one per cent transaction fees. PayPal might still be cheaper when you do not receive that many transactions and there are no set up costs."

Mr Hesselman summed this up as "bringing online tools to the offline world for merchants to compete in a multi-channel environment." And this multi-channel environment is subject to rapid change; PayPal has found that traditional retail has grown two to three per cent against the double- and triple-digit growth of e-commerce and mobile commerce (m-commerce) in terms of transactional volume. It further believes that m-commerce is the trailblazer of today.

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