PayPal fixes shipping snafu, but will it be enough for the channel?

A survey by online payment company PayPal Inc. and e-business analysis firm ComScore Inc. shows that unexpected shipping charges cause 56 per cent of Canadian online shoppers to abandon their virtual carts.

”They don’t know until the very end (of the shopping process) how much it’s going to cost to ship, and that really deters them,” said PayPal Canada general manager Darrell MacMullin at a briefing in Toronto this week.

MacMullin and representatives from shopping alert Web site Red Flag Deals, online drug store Well.ca and Dell Canada Inc. discussed trends in online shopping at the briefing, particularly barriers to completing transactions.

PayPal has announced an express checkout feature built on the PayPal Instant Update API, which draws address and shipping data from the customer and the vendor and provides shipping, insurance and tax totals earlier in the buying process.

The channel uses PayPal as a method to process credit card payment by customers. However, it has never gained tremendous traction outside of the major e-tailers in the channel. Joe Ussia, director of sales for Digica Solutions of Toronto has the PayPal service but does not like to use it because it’s cumbersome and the fees are “ridiculously” high.

“We tried using it a couple of times and our customers couldn’t get it to work. As we looked deeper into it, there were some technology bugs that PayPal claims they fixed since last month. I’m glad we didn’t use it after all because the fees would have made the sales come in at a negative profit for those particular invoices,” Ussia said.

Digica ultimately set up a telephone credit card account through the Royal Bank of Canada, which does not charge any monthly fees. According to Ussia, there is only a straight 2.5 per cent on all transactions as a flat fee.

If presenting the shipping charges earlier in the process means more sales, eliminating shipping charges entirely is an even bigger incentive, said Well.ca CEO and founder Ali Asari. When the company dropped its $3 per order shipping charge, it was “an inflection point” for sales.

Ansari admits free shipping isn’t going to be practical for every online store.

“It only works for certain types of products,” he said – particularly high-margin items. It’s also a useful customer loyalty tool. While some visitors might just order a small item once and never return, “a big lesson we had to learn (was) it’s important not to punish everyone for what a select few do,” Ansari said.

Well.ca carries about 15,000 products and its average order is in the $50 to $70 range.

Social shopping is a growing trend, according to Prashant Ramesh, senior manager of e-business for Dell Canada. “Every e-tailer is talking about it,” Ramesh said. Dell launched an online lounge for customers to share information, and uses microblogging site Twitter to alert customers to new deals, he said.

Red Flag Deals president and founder Derek Szeto pointed to features like online bookshelves, allowing customers to share their tastes with others, as one successful example of social shopping. Providing shoppers with forums for knowledge sharing and reviews is another e-tailing tactic that’s taking off, he said.

“They are certainly looking for the information online,” even if they aren’t necessarily buying online, he said.

Some other survey results:

* More than half (51 per cent) of Canadian shoppers surveyed said they get buy-button anxiety – they “typically feel a little anxious” making an online purchase, according to the survey. One reason: Forty per cent aren’t confident that the online merchant can keep their financial information secure. “That’s troubling when roughly half the people who buy from you are worried about giving you their credit card information,” MacMullin said.

American shoppers seem to be more confident. Forty-five per cent said they feel anxious when they get to the final click, and only 27 per cent felt e-tailers can’t take care of their credit card information.

* Forty-three per cent of those who abandoned their carts said it takes too long to fill out credit card information. Online checkouts can often take longer than brick-and-mortar checkouts, according to MacMullin. “That’s kind of backwards,” he said.

* Seventy-eight per cent of Canadians who abandoned a cart knew the site or had bought from it before.

* Only three per cent filled up a shopping cart with no intention of buying. That number was the same in Canada and the U.S.

* In Canada, 75 per cent said they abandoned a cart less than once a month. In the U.S., that number is 62 per cent. Four per cent of Canadians admitted to abandoning carts more than five times a month on average.

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Jim Love, Chief Content Officer, IT World Canada

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Dave Webb
Dave Webb
A journalist of 20 years experience in newspapers and magazines. He has followed technology exclusively since 1998 and was the winner of the Andersen Consulting Award for Excellence in Business Journalism in the eEconomy category in 2000. (The category was eliminated in 2001, leaving Webb as the only winner ever.) He has held senior editorial positions with publications including Computing Canada, eBusiness Journal, InfoSystems Executive, Canadian Smart Living and Network World. He is currently the editor of ComputerWorld Canada and the IT World Canada newswire.

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