Western Union Finds it's Niche in an Online World

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PHILADELPHIA -- The Western Union executive was used to the drill at trade shows.

Delegate David Dwek last week walked up to the Western Union booth at the eTail 2005 e-commerce conference in Philadelphia. The New York-based direct marketing veteran had a question for the Western Union sales executive.

"My concern is that are we adding too many options in the checking-out process? Are we asking people to do too much?" he said. "You've got CheckFree, you've got Bill Me Later, you've got PayPal, you've got credit cards. At what time do you turn your payment process into something more complicated?"

The marketing director at electronics retailer etronics Inc. had just concluded a tour of the exhibit hall, showing particular interest in the myriad payment services. Exhibitors included PayPal, Bill Me Later, Paymentech, CheckFree and Pay By Touch.

Dwek's worry was legitimate. Online retailers, like offline, offer payment options such as credit card, check and money order. Add to that new options like PayPal and Bill Me Later. Then there's Western Union, which for more than 150 years has transferred cash from point A to point B for a fee.

"One of the fundamental rules of direct response is that choice depresses response," Dwek said.

So what did Allan Cohen, Chicago-based national account executive for business development at Western Union Payment Services, have to say? "You turn around and say, 'I have a credit card, but I can't buy that' [because] your credit card is maxxed out."

Of course, consumers may feel uncomfortable paying via credit cards or any other payment mechanisms. Western Union is another option to gain business that otherwise would not come to the retailer.

Owned by First Data, the company recorded $3 billion in fees in 2004 from money transfer. Its services are particularly suited to consumers unused to other payment options, who don't have credit cards, bank accounts or simply like cash.

The market for the cash payment option is there. Nearly 50 million U.S. adults don't have credit cards, according to Western Union. Thirty-two percent of consumers prefer to pay with cash. Payment by ACH increased 22 percent from 2000 to 2003. And CODs can be costly and risky.

Unsurprisingly, Western Union sees a continued need for its presence in the market. The company invariably buys a booth at major DM and e-commerce shows.

"People are becoming more aware of Western Union's role within the whole online retail space," Cohen said. "Their initial reaction is, 'Why wouldn't we want to be able to offer Western Union cash payment options to our customers?'"

To sweeten the deal for consumers, certain retailers offer consumers a 15 percent discount if they use Western Union. That way, cash changes hands quickly and the costs associated with credit card transactions are not incurred.

It boils down to the retailer's audience.

"We fit a certain demographic, and Western Union will not make a sale for us," Dwek said. "If you have a $9.95 product, Western Union is not for you."

Etronics.com is a discount retailer, specializing in electronics like televisions and cameras. The average order size is $250. The discount retail business is tough as it is. Plus, Dwek isn't sure that adding one more option makes customer-acquisition sense.

"To what extent can adding multiple choices make sense versus opening up to an audience that may not have been buying from us," he said. "That's the thing we've got to offset."

What tips did he have for Western Union? Have more testimonials displayed at the booth, he said. Case studies also help. Online retailers need validation to make room for yet another payment option.

"Try to say this is what happens if you do this, these are the benefits if you do this and you can say we've done this before," Dwek told an attentive Cohen. "I come from a very mature [traditional DM] industry. This [e-commerce] is a very immature industry. This why vendors should step up to the plate."

Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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