PayPal Aims to Connect More US Merchants with Chinese Consumers

August 3, 2015         By: Mike Dautner

Last week, PayPal hosted an event pertaining to their future plans in China.

What we learned is that the apparent rapid growth in the Chinese market is a prime opportunity for retailers within the US. Now, merchants have access like never before in reaching Chinese consumers online, and ultimately increasing their sales in China.

The sky is the limit for PayPal who currently stand as the only platform capable of connecting 10 million merchants worldwide to consumers in hundreds of markets.

In order to gain a finer understanding of the Chinese consumer, PayPal commissioned two research projects within the past year in partnership with Ipsos MORI and Nielsen’s Harris Poll. The study focused on habits of buyers in 22 countries, particularly within the Chinese market.

One major finding regarding the research conducted is that the Chinese consumer is inherently in demand of authentic, trustworthy brands and products from the US. Authenticity is of the three major motivations behind the Chinese consumer’s desire to purchase US products online. Products that originate in the US reflect the culture from which they came, which is apparently very appealing to the Chinese consumer. The second draw is the quality of US products. Chinese consumers are aware of the superiority of certain US products, fueling their desires for such items. The last factor is value. Paying fair prices for high quality items is extremely attractive to Chinese consumers.

The way in which the Chinese consumer learns of these cross-border purchase options varies drastically as well. Topping the data was use of online search engines at nearly 60 percent. Personal recommendations follow at just over 40 percent. Social Media, along with familiar and unfamiliar US sites round out the data.

More interesting perhaps is the actual products the Chinese consumers are buying from US retailers.

The top US retail product categories include the most frequent of purchasing, clothing, apparel, footwear, and accessories at 53 percent. Next, consumer electronics including computers/laptops and mobile devices comprises 46 percent. Last, cosmetics and beauty products result in 41 percent.

PayPal projects online sales to increase at an overall rate of more than 20 percent through 2016, with even distributed expansion across a wide spectrum of retail sectors.

Over half of Chinese online shoppers plan to begin or increase their cross-border purchasing. What better way for them to meet these online shopping aspirations than through a safe and secure payment method like PayPal? With Convenience, security, and built in purchase protections guide, PayPal offers what competitors cannot.

Payment Week wanted to go deeper regarding PayPal’s mission in China, so we conducted a brief Q&A with the Director of Global Merchant & Cross-Border Trade Initiatives, Melissa O’Malley.

Why is the Chinese consumer so adamant regarding the purchasing of US brands and products?

 Our research with Nielsen shows that when buying from the U.S., more than half of Chinese online consumers have done so for “higher product quality” (55 percent), “authenticity” and “value” (both 53 percent).

 The research shows there is clearly a high level of trust in US goods. Consumers in China know that when buy directly from the United States, not only are they going to get a high-quality product, but the product will be authentic.

This is especially reassuring when they consider buying domestically, where many online Chinese marketplaces face ongoing issues with selling counterfeit goods. For example, concerns surrounding locally-made products such as milk have caused concern about domestic product security.

 Why is social media a major outlet for PayPal? How does it benefit you, and through which social media platforms do you mainly operate?

Consumers are consistently turning to their mobile devices to gather information, have quick conversations, and be entertained. Social media provides us an opportunity to offer all of these experiences, so PayPal uses social media to stay connected with our consumer, merchant and developer partners with ongoing, two-way communication. As a global company, our social media platforms extend across Facebook, Weibo, LinkedIn, YouKu, YouTube, WeChat, Twitter, Instagram, Pinterest, Snapchat, Vine, Tumblr, Periscope.

How do you plan to integrate Chinese Holidays and personal events into your advertising and marketing of PayPal? Are they a major opportunity for PayPal to profit in China?

We see Chinese consumer spending around domestic holidays as a key opportunity and have a number of initiatives dedicated to driving merchant awareness and enabling them to grow their sales in China. Look no further for opportunity than Singles Day, the domestic holiday in which Chinese consumers spent nearly $10 billion globally in a 24-hour period last year – a figure that dwarfs Black Friday and Cyber Monday sales combined.

For Singles Day last year, we launched the “Wu Jing Gou”, or Borderless Shopping, portal which enables merchants from outside of China to showcase sales and merchandise to Chinese consumers looking to buy cross-border. To promote the deals, we also teamed up with China UnionPay to promote global merchants on its shopping platform, giving Chinese consumers the opportunity to securely and seamlessly pay with their preferred local payment option.

Another example of our global initiatives to support merchants tapping into the global trade opportunity is PayPal’s PassPort, a free website we launched last year designed to educating and empowering small businesses to expand their global sales. PassPort can help merchants explore new international sales opportunities, learn about sales peaks and holidays beyond their borders, understand gift giving traditions country by country, and tap into new or additional commerce cycles and sales trends.

Who are the “Haitao” shoppers? How do their shopping tendencies benefit PayPal?

Our internal research shows that 99 percent of haitao shoppers (Chinese consumers who purchase cross-border) fall into three categories: married with children, single, and married without children. Whether they are single, dating, married or parents, one thing remains true of all haitao consumers: they want high quality, authentic goods – and they are willing to pay for them.

The data speaks for itself: the biggest growth market for US merchants in terms of total online retail spend is China. Haitao shoppers are known for their significant shopping cart size: in a typical transaction, 53 percent of Chinese cross-border consumers have purchased clothing, apparel, footwear and accessories – spending on average $485; followed by electronics (46 percent) spending on average $1,229; and 41 percent purchase cosmetics/beauty products, spending $512.

Are there currently any competitors who can provide similar online payment services on the same scale as PayPal?

Only PayPal is in a position to reimagine financial services, making it simpler, safer, and cheaper for people to spend, save, manage, and move money around the globe. Our unique assets include:

  • Scalable Two-Sided Network and Platform: technology- and payment-agnostic payment platform, processing 4 billion payments, including 1 billion mobile payments last year.
  • Brand: the #1 trusted digital wallet.
  • Risk Management: comprehensive solutions.
  • Data and Analytics: reducing fraud and building stronger merchant/customer engagements.
  • Global Regulatory Compliance: PayPal is compliant in more than 200 markets worldwide.
  • 24×7 Customer Support: 8,000 people providing customer support globally.
  • Digital Payments Expertise: 17 years of experience.