Online retailer eBay, Inc. (NASDAQ:EBAY) is singularly positioned to thrive in the emerging omni-channel commerce with new offerings from its PayPal unit, which allows payments and money transfers to be made through the Internet.
An omni-channel approach will track customers across all channels. Omni-Channel Commerce continues the evolution by orchestrating all channels to create a seamless, single brand experience.
PayPal's current, and upcoming product line-up for point of sale (POS) scheduled for release within the next 12-24 months, bridge the gap between offline and online commerce. The technology makes offline transactions more personalized, and payment flexible for the end user. These offerings provide businesses the potential for more transactions and greater customer loyalty over time.
On March 15, PayPal unveiled PayPal Here, a global mobile payments solution that allows small businesses to accept almost any form of payment. The new service includes a free app and fully encrypted thumb-sized card reader, which turns any iPhone, and soon Android smartphone, into a mobile payment solution.
PayPal Here is a cost effective payment solution for small merchants, yet powerful enough to allow them to accept credit, debit, PayPal and checks.
"PayPal Here opens up a brand new market, with clear early success. It allows the company to address a brand new market opportunity, one that's mostly restricted to cash," Jefferies analyst Youssef Squali wrote in a note to clients.
While the service is still in limited rollout phase, management acknowledged that thousands of merchants were already using it, that it was taking over 1,000 sign-ups per hour with over 50,000 merchants so far.
PayPal Here should prove a formidable competitor to market leader Square. Unlike Square, PayPal's design is more flexible as it accepts checks and debit cards, and lower fees of 1.7-2.7 percent versus Square's at 2.75 percent.
Meanwhile, PayPal's newly redesigned digital wallet will be rolled out in May, and will support more forms of payments, allow a grace period of up to 7 days, installment payments and flexibility around changing the mode of payment after the transaction is completed.
"Given its lower funding cost, we view this as a strong competitive advantage," Squali noted.
Paypal highlighted its apps at its Shopping Showcase yesterday. Apps highlighted include Grocery store solution, which combines geo-location with consumer loyalty programs, and helps stores track purchases and offer relevant discounts.
Fashion store solution, which lets a shopper scan a QR code on the window to learn more about a product, reserve it, and find out if they're pre-approved for a personalized payment method.
Coffee shop solution, a geo-location technology, which lets stores send offers to customers when they're nearby, making it convenient for both the user and merchant.
To work effectively, most of these apps require that users opt in and share select personal information with merchants of their choice. Though, this could be a hurdle to adoption at first, but should be easy to overcome as customers begin to appreciate the value that such targeting provides.
Depending on the funding mix, these POS solutions could negatively impact gross margins short-term; however, Squali said segment operating margins of 25-26 percent should be maintained or increased over time.