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E-Commerce in Japan: Small Websites

2 March, 2009, Written by 0 comment

With the recession biting hard, people everywhere are becoming more cost conscious and more aware that online shopping can deliver significant savings. This article provides a comparison of two of the most popular online payment processing systems for small businesses.

PAYPAL

If you have just a small product range and want to keep it simple, PayPal could be a good payment solution for your website.

The Pros:

  • You don’t need an SSL certificate. The payment is transacted on PayPal’s site.
  • You don’t need to worry about storing and protecting customer credit card details.
  • There are no annual fees or setup fees. PayPal simply deducts a percentage of your sales.
  • You can withdraw funds from your PayPal account to a bank account in Japan or many other countries.

The Cons:

  • Some people have strong negative attitudes to PayPal. There is a whole website devoted to PayPal grievances. However, before you get turned off, bear in mind that for every unhappy PayPal experience there are far greater numbers of people who have been using the service for years without trouble. Nevertheless, a percentage of your customers may have misgivings about using it.
  • It’s not well known in Japan. Even though PayPal has a complete Japanese language version and they’ve been doing their best to promote it, public awareness of PayPal is still low compared to English speaking countries.

Note:

Contrary to what some people may try to tell you, you can accept credit card payments through PayPal. Its not even necessary for customers to register a PayPal account. All that’s necessary is for your business to register as a Premier or Business account with PayPal. Customers are given the choice of paying by credit card or to pay from their own PayPal account.

GOOGLE CHECKOUT

An alternative to PayPal that has emerged in the last few years is Google Checkout. Unfortunately for business owners though, if you don’t have a U.S. or a U.K. bank account, you won’t be able to use this option just yet. Their web page says that they intend to expand the service to other countries in the future though, so its worth keeping an eye on.

Google Checkout starts with all the same benefits of PayPal such as no SSL requirement, no need to retain customer credit card information and so on. In addition to those:

The Pros:

  • Better brand recognition/brand image than PayPal. Especially in Japan.
  • Payment processing discounts with Google Adwords. Google will allow you to accept sales revenue equivalent to 10 times your previous month’s Adwords spending without incurring any processing charges.
  • The ability to display a Google Checkout badge on Google Adwords links. The company claims that this improves click through and conversion rates by 10% and 40% respectively.
  • Cost. Google Checkout is cheaper. They charge 2% plus 20 cents per transaction. PayPal rates vary depending on the type of service you have with them, your annual sales turnover and whether the revenue is “cross border” or not. Generally you can expect to pay more using PayPal.

The Cons

  • Unavailable to businesses without US or UK bank accounts (currently).
  • Requires users to sign up with a Google Account. A lot of customers may already have a G-mail account or a Google account for some other reason. Those that don’t are forced to create one before they can complete the sale.
  • Can’t process credit card details by fax or phone. PayPal on the other hand has a “virtual terminal” service for U.S. based merchants at least.

WHICH ONE SHOULD I CHOOSE?

The other features of the two services are broadly similar. They both offer fraud prevention checking and release of funds to business owners within a few days of transaction. They both offer email notification services to customer and business owner. Google Checkout and PayPal both offer Japanese/English payment and administration interfaces.

Choosing between PayPal and Google Checkout probably comes down to your location. If you are outside the U.S. or U.K. you will have little choice but to go with PayPal. If you are located in either of those countries but selling to Japan, the best choice might be to offer both types of payment button on your site. Doing so gives customers more choice about how to complete the transaction. Some studies suggest that this can significantly improve conversion rates.

UPDATE:

Google Checkout was discontinued on November 20, 2013. The company offers a new solution for certain payments called Google Wallet.

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