ANTenna Blog -- Business & E-Business

Small and midsize businesses can compete online, if they know what they're doing. To get some tips, I talked to Eddie Davis, senior director of SMB merchant services for PayPal, which works with 73 million of online buyers and hundreds of thousands -- he wouldn't say exactly how many -- of online merchants. Davis says PayPal has distilled its experience into a set of tips for SMBs looking to boost their online business.

Davis says his company is uniquely positioned to know what works online. Operating in 190 markets using 19 different currencies, PayPal adds tens of thousands of new merchants each month -- the company processes 15% of all U.S. e-commerce transactions. Most SMBs use PayPal to process credit cards as well as PayPal payments, Davis says. And no, not all of it is on eBay -- less than half, in fact.

E-Commerce Tip #1: Add customer reviews to your site. According to Davis, this is "most important, in my opinion." Obviously, many consumers do Web research before making a buying decision. Davis says that reading user reviews on your site can help "convert browsers to buyers" by "validating their satisfaction with product and vendor choices." That means that by reading what other people think, it will make them feel better about pulling the trigger for themselves. Just be careful what you wish for, as many retailers have learned from Yelp and other sites, customer reviews of your company can be a two-edged sword.

E-Commerce Tip #2: Keep an eye on the competition using online tools. All SMBs need to track their competitors, and Davis says that new online tools can help you see what competitors are trying to get leads and promote their brands. He suggests using tools such as Compete, NetPeriscope and Hitwise to monitor how the competition is doing. The more you know, the better you can position your business or site to take advantage of any opportunities that might arise in a changing competitive environment.

E-Commerce Tip #3: Match keywords to buyer needs. Not just so that people who come to your site via search find what they were looking for, but also to reassure them. Davis suggests using reassuring language about low prices, guarantees, privacy policies, free shipping, easy returns, and other key concerns right up front so that customers won't be surprised during the buying process. With consumer confidence at record lows, PayPal says, be sure that the language you use on your site reassures and comforts your customers -- particularly in regards to value.

E-Commerce Tip #4: Test your templates. It turns out that site design, information architecture, and layout really do matter. Davis puts it very simply: "What goes where affects conversions," so improving your site can have a huge impact. Instead of doing a major site overhaul every few months, however, he suggests continually testing your templates using "heat-mapping" tools like Crazy Egg to see how people actually use your Web pages. Once you know how buyers use your site, you can make incremental tweaks to improve your performance without expensive and time-consuming redesigns.

E-Commerce Tip #5: Review your metrics regularly. You can't optimize your e-commerce efforts if you don't know how their doing. Davis suggests using analytics packages to continually analyze your performance, both in absolute terms, and month to month and year over year. You can use that information to drive site improvements, product offerings, and marketing efforts.

Of course, Davis also offered a couple of "bonus" tips based around PayPal services:

PayPal Tip #1: Go global. Especially if you're not selling products that have to be shipped overseas, the global market can offer a great way to boost sales – if you can deal with the hassles of shipping, nternational currency conversations, and increasingly complex trade laws and regulations.

PayPal Tip #2: Make sure you accept credit cards. This sounds like a no brainer, but many startups and sole proprietorships may not qualify for traditional merchant accounts, while others may not want to pay the associated fees. On the first issue Davis says PayPal often offers these accounts where traditional banks may not: Unlike the banks, Davis says, PayPal sees both sides of Internet transactions -- both buyer and merchant. "With a 10-year history, we feel comfortable getting people up and running with a lot less requirements than traditional merchant accounts. We can do it because we have such a broad knowledge base" of online buying and selling patterns so we can tell if something is fishy." Oh, and they also put limits on the accounts, such as no transactions over a certain amount. As for the cost issue, which has often deterred b-to-b mechants in particular, the advantage of getting paid right away may more than make up for the costs. And Davis claims that because PayPal doesn't charge set up fees and minimums, it can be cheaper for small-volume merchants

PayPal Tip #3: Exploit the "found money effect." According to Davis, when customers have leftover money in their PayPal account, they don't treat it like "real" money and part with it more easily. "They're looking for places to spend their PayPal money," he says.

That actually makes sense to me. Think about it: aren't you more willing to spend the last few bucks remaining on that gift card stuck in the back of your wallet? That's one reason I don't have a personal PayPal account...