Brand Extension Brings PayPal to Brick-and-Mortar Retailers

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Posted May 30, 2012
Susan Gunelius

PayPal is coming to a store near you. Fifteen retailers will allow consumers to pay for purchases via PayPal at brick-and-mortar stores according to an Advertising Age report. There are many ways to extend a brand, and this seems like a great strategy for PayPal to offer its 110 million users additional ways to use its payment service. The brand extension could lead to new customers, too.

brick-and-mortar retail

The 15 brands that have signed on to accept PayPal at their physical retail stores include Home Depot, Barnes and Noble, Toys 'R Us, JC Penney, Foot Locker, Rooms to Go, Office Depot, Abercrombie & Fitch, Aeropostale, American Eagle Outfitters, Jos. A Bank Clothiers, Nine West, Advance Auto Parts, Guitar Center, and Jamba Juice. Customers could begin paying via PayPal at Home Depot stores this week, and the service will roll out through other partner retailers within the next few months.

Currently, the new offering will enable consumers to pay via a PayPal plastic card linked directly to their PayPal accounts or with a phone number and PIN at the cash register. In the future, PayPal plans to enhance the brand extension into brick-and-mortar retail stores with brand loyalty programs and mobile promotions. This brand extension strategy is a natural progression for PayPal which also partners with point-of-sale software companies to enable small businesses to accept PayPal for purchase payments. Approximately, 50,000 small business merchants have the ability to accept PayPal as a result of these partnerships.

Extending the PayPal brand to brick-and-mortar locations is a coup for its parent company, eBay. By making it easy for consumers to use PayPal in as many transaction experiences as possible, PayPal has the opportunity to build a deep relationship with consumers. Ultimately, PayPal could become the go-to payment method for consumers, and the days of needing to carry cash or a credit card with you could become obsolete. In other words, the benefits of extending the brand far exceed the risks.

This is a big step in a centralized brand extension strategy for PayPal, and with competitors like Google Wallet trying to establish a foothold in the same market, it remains to be seen if one brand will rise to the top or if this will become a multi-player category. Currently, retailers aren't showing a preference, but rather are testing each brand's payment options.

Chances are the brand that can move the fastest and be most flexible will be the leader from retailers' perspectives, but from consumers' perspectives, ease-of-use, trust, and "extras" are likely to be most important. This is where brand extension research will play the company can ensure the right extras are offered in order to encourage people to use PayPal rather than reach for their credit card or debit card when they're making a purchase in a store.

Looking at the PayPal brand extension into brick-and-mortar retail stores through a long term lens, it could be argued that PayPal isn't competing with credit cards like VISA, American Express, and MasterCard at all. Instead, the PayPal strategy could be to replace credit cards at the cash register. Since PayPal account holders can link their accounts to bank accounts and credit cards, those physical cards could become obsolete. That's the long-term strategy that PayPal should focus on -- not just being a payment option but being the only choice because the others are superfluous.

Image: pipp

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