Practical Ecommerce

Google Checkout: Expert Cites Positives and Negatives

Michael E. Shatz is a long-time credit-card-industry veteran. He is now founder and CEO of The Merchant’s Guide, a Mass.-based consulting firm that advises online merchants on credit card and other payment issues. We recently spoke with him about Checkout, Google’s non-bank payment exchange.

PeC: As a payments consultant, would you advise an ecommerce client to offer Google Checkout?

Michael E. Shatz

Michael E. Shatz

Shatz: “Sure, under certain circumstances. For instance, if the merchant were a moderate-to-heavy user of Google AdWords, I would definitely suggest it. That’s because the Google Checkout badge appears with these ads and this helps conversions.

“Another thing to consider is that it’s an alternative payment method and as with all APMs, there’s an opportunity for sales uplift. In this case, where you have a badge on the ad, there’s a reasonably good chance that a percentage of these conversions will be incremental, that is, it won’t necessarily cannibalize the credit card sales. The conversion is great; however, it’s not great if you’re cannibalizing credit card sales just because I like to use Google better. By presenting a badge at the time of the Google AdWords ad, I think that you increase the chance that it’s going to be an incremental sale.

“But there are also negatives for Google Checkout. They are the same as the negatives for other APMs, such as PayPal. The first is pricing. Both Google and PayPal publicly advertise tiered pricing schemes that are virtually identical. Small merchants pay 2.9 percent plus $0.30. 2.9 percent is a bit steep if you are selling a high-ticket value product. The $0.30 fixed fee hurts if you are selling a small ticket item. Large merchants pay 1.9 percent, which helps with high-ticket items, but the $0.30 fixed fee stays the same for all tiers. This makes it a tough sell for merchant selling, say, $10 items. It adds another 3 percent to the fee.

“Of course, small merchants must weigh these potentially expensive fees against any monthly fees they would have to pay many payment processors. These monthly fees can be steep, up to $30 per month. APMs provide some level of anonymity for the consumer. That is one of the big selling points to the consumer. I think merchants want all of their customer information and they are not getting it.”

PeC: If a merchant isn’t using AdWords, does that change your calculus of Google Checkout?

Shatz: “Sure, it does. I’m a big advocate of alternative payment methods. If the customer did not use AdWords, then I might be more likely to have them try PayPal first because of their large installed base, but I might advise both and see what happens. A lot of it would be determined by the level of effort for the merchant to integrate the payment method to their shopping cart or into their ecommerce platform. So, in most cases, it’s a no-brainer and there’s no harm in adding it. You can always get rid of it afterwards.”

PeC: Critics of Google Checkout might say something like this. They would say that for merchants to be using Google Checkout, you inject kind of a third party, namely Google, between yourself and your customer and in time that could be harmful in that if a cart doesn’t include Google Checkout. Is that a fair criticism?

Shatz: “In certain cases, it probably is. I don’t think that any merchant relishes the idea of any entity coming between them and their customers, although historically, merchants have been fine letting credit card companies do this. Kind of the key distinction of Google Checkout and PayPal is that they restrict the merchants from seeing some of the customer data and many merchants just don’t like that.

“On the other hand, merchants do enjoy the incremental sales. So, in my view, it’s a balance and merchants can choose for themselves. Now, I don’t believe that having Google Checkout will actually determine whether or not a customer buys from a merchant unless it is the only payment option available and they don’t want to use it. I would never recommend offering a single payment option to customers, especially just a wallet. I think the combination of credit cards, wallets and other options are the best way to go.”

PeC: Any other thoughts on Google Checkout?

Shatz: “Just in general, talking about alternative payment methods, I’d say that given the new card act that Congress recently passed and the President signed, I believe that the number of issued credit cards and the available credit on these cards is going to decrease significantly. I think that because this is happening that alternative payments methods like Google Checkout and PayPal, will play a greater role in ecommerce.

“So, again, where it is technically feasible, I would encourage merchants to explore offering all the major payment types including the major credit card brands, PayPal, Google Checkout, Bill Me Later, and so forth. I mean, not all of these are good for all merchants, but during a recession, you can almost push incremental sales aside and say given the economic situation, merchants may actually be saving some sales using alternative payment methods because they don’t have much credit, they don’t have as many credit cards, so on and so forth.

“While Google doesn’t have the user base of PayPal, I don’t see the harm in offering it, and they do have a huge user base for AdWords. When you look at PayPal, which I just said has a big, kind of nebulous, user base, some active, some not, you have the same thing on the other side with Google Checkout in the sense that there is just a huge installed base of AdWords users. They are the biggest. Virtually everybody uses Google and that’s a big plus.

“Another thing that’s good is that not all alternative payment types, Google Checkout included, are right for every merchant. Merchants should talk to each other about their experiences with these APMs, especially merchants that sell things that are similar if they are willing to do that. So, birds of a feather kind of thing and that’s a big advantage there.”

Practical Ecommerce

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  1. LexiConn August 10, 2009 Reply

    Google Checkout also imposes other restrictions on the shopping cart such as not being able to display cart totals with tax included, no discrimination between coupon codes and gift certificates, no support for unique one time use coupons, a 3 second time limit to receive realtime shipping rates, and a few other technical limitations.

    These are a few other reasons to ponder before deciding to integrate Google Checkout into your existing cart solution.

  2. lce_commerce August 13, 2009 Reply

    we have integrated both paypal and google checkout into our new e-commerce enabled banner ad…

    one of our goals was to be the first application built in adobe flex/air to integrate with the google api and receive google checkout certification…
    paypal integration took about 3 days and certification was very easy… google checkout has been a very tedious process and while we feel we are probably a day away from certification i can honestly say that until google changes the 3 second rule for shipping rates other developers will continue to shy away from integration… luckily, we have done it already for merchants looking to use google checkout.

  3. Matt Jones August 13, 2009 Reply

    Great article. My site is on a Yahoo Store…and I’m pretty sure the user agreements prohibit the use of G Checkout on Yahoo Stores. If Google wants to eat into PayPal’s market share you would think they would want all e-stores to have the option to use G Checkout.


  4. Greg Percifield August 14, 2009 Reply

    Music Forte has used Google Checkout for a few years. Last year, GC accounted for almost 20% of our total sales. However, something has changed, and that percentage is now near only 1%.

    Last year, Google Checkout was producing twice as many sales as PayPal. This year it is quite the opposite. I wrote to Google about this concern, and they replied that our account and website was in perfect standing. I wonder if anybody else has seen a tremendous decrease in sales from Google Checkout.

    I also wanted to note that surprisingly, Google Checkout does not provide an automatic redirect page after somebody completes an order. If you use conversion tracking for programs such as Commission Junction, you’ll need to do some extra work, as members won’t wind up on your "thank you" page. Instead, if they click to return, they will wind up on your homepage.

    Regardless, I like features such as being able to send Google Invoices, and I’m hanging on to Checkout to see how it performs this holiday season.

  5. Mike September 7, 2009 Reply

    Merchants outside of the United States cannot use Google Checkout. That’s the major pain point for us.

    When you compare the costs of processing with PayPal to the costs of opening a merchant account, you’ll see that PayPal’s fees are competitive. Furthermore, PayPal is the simple solution to the PCI problem.