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

The payment company's survey shows unexpected shipping charges lead to shopping cart abandonment at online stores. Plus, what leads to buy-button anxiety
7/3/2009 9:21:00 AM By: Dave Webb

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.

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