“Going Directly At The Beast”—WePay Takes on PayPal with New Tools for Online Merchants

7/21/11Follow @wroush

WePay emerged from the Y Combinator venture incubator in late 2009 with a plan to make it simpler for people to round up money online from groups of other people; think of a carpool driver collecting gas money from his riders, for example. Well, you can still use it for that. But as it turned out, there was one particular category of money-collectors who really liked the Palo Alto, CA-based startup’s services: small merchants.

So WePay introduced a new product this week tailored especially for them. Called WePay Stores, it lets anyone set up a Web-based e-retailing operation in just a few steps.

The startup is marketing the service as a simpler, cheaper alternative to merchandising platforms like eBay, Shopify, Etsy, and Eventbrite. But most of all, it’s going up against PayPal—the eBay subsidiary known not only for helping consumers send and receive cash digitally, but for its payment processing services, widely used by e-retailers, government offices, political campaigns, nonprofits, and even banks.

WePay’s knock on PayPal is that it’s complicated and expensive to set up a merchant account and add PayPal buttons to an existing website. WePay says it only takes a few minutes to set up a store on its site; the startup will host the store for free, keep track of customers’ shopping carts, and handle credit-card or e-check payments when they’re done.

The startup keeps 3.5 percent of each transaction. That’s slightly higher than PayPal’s fee (1.9 percent to 2.9 percent, plus $0.30 per transaction), but the flip side is that WePay doesn’t levy any monthly charges or setup fees, the way PayPal and eBay do.

One of the first businesses to use WePay Stores is Startup Tees, which sells T-shirts bearing the logos of Silicon Valley companies like Heroku, Reddit, Hipmunk, and Dropbox. (It’s probably no coincidence that most of the featured companies are Y Combinator alumni.) “It literally took us a few minutes to build a store on WePay and drop it into our site—and it brought in a few hundred dollars of revenue within the first few hours,” said Zach Johnston, co-founder of Startup Tees, in a statement.

WePay has 33 employees these days, and has raised more than $9 million in venture funding from Highland Capital, August Capital, and individual investors. To hear co-founder Rich Aberman tell it, the startup isn’t shifting away from its original mission, but rather getting closer to its essence.

Even before introducing WePay Stores, the startup had already quietly dropped its early emphasis on group payments, Aberman says, having discovered through conversations with customers that the service’s real selling point was its ease of use compared to other online payment systems. Even users who really were using WePay to manage group payments didn’t think of what they were doing that way, he says: “They’re just looking for ‘the easiest way to collect money online.’” From there, he says, it was a short step to providing merchant tools for the subset of users who wanted to sell things online.

I interviewed Aberman about the news yesterday via e-mail; here’s the full Q&A.

Xconomy: Describe the changes this week.

Rich Aberman: For a long time, we qualified the PayPal comparison by saying that we’re focused on helping normal consumers collect money from friends, supporters, fans, members, et cetera, while PayPal is focused on helping merchants accept payments online for products and services. But today we’re going directly at the beast by announcing WePay Stores—a suite of tools intended to make it easy for merchants to sell items online. We found that our focus on simplicity and transparency resonates with merchants as well as consumers.

We think this is in-line with our current strategy of providing both payments (like PayPal) and the tools that people use to actually collect money—such as … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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