Paypal Cross-Border Consumer Research 2018 Leveraging Cross-Border Trade Insights to Increase Sales Cross Border Insights Research 2018

PayPal Cross-Border Consumer Research 2018 Leveraging cross-border trade insights to increase sales Cross Border Insights Research 2018

Advancement of technology is Understanding that we are This survey is designed to gain helping to open up commerce going through a commerce insight into 3 main areas: opportunities for everyone - revolution, PayPal in across borders, anywhere, partnership with Ipsos, anytime and via any device • How online commerce, and conducted a global 31 market specifically cross-border survey with approximately commerce is evolving 34,000 consumers to examine how people shop online and • How and why consumers shop across borders. online domestically & across borders

• How consumers pay for domestic and cross-border ©2018 PayPal Inc. Confidential and proprietary. 2 transactions Research methodology This study was conducted across 31 markets and approx. 34,000 consumers globally.

Fieldwork Sample, per market

This research was 31 markets Global Fieldwork: carried out to Sample of c.2000 in UK, Russia and Poland, Use an Internet- Mar-May 2018 the international 1 c.1000 in other markets enabled device quality standard for market Nationally representative of online population research, ISO Data weighted to adjust Online Aged 18+2 20 minute 20252:2012 for panel bias based on survey Respondents recruited questionnaire external trend data from online panels

Questionnaire

Screening Transaction & spend: Cross-border Drivers, barriers and Cross-border Past 12 Months & transactions & spend attitudes to cross- payment Next 12 Months border shopping

1.Desktop computer/Laptop/ notebook computer/Tablet /Smartphone/Some other type of mobile phone/Electronic organizer / PDA with wireless voice and data features/Games console with Internet connectivity (e.g. Wii) /Smart TV ©2018 PayPal Inc. Confidential and 2. In UAE no quotas were set, sample achieved through mail-out to sample nationally representative of general population, screened for 3 proprietary. internet use. In European countries sample representative of online population aged 18-74. The Cross-Border Opportunity

© 2014 PayPal Inc. All rights reserved. Confidential and proprietary. Online and cross-border commerce size and growth estimates US and China are the biggest markets in terms of online spend, but Japan and India are growing fast

Total domestic spend 2017 ($US bn) Compound annual growth rate: total e-commerce (CAGR) US$BN Total x-border online spend 2017 ($US bn) Compound annual growth rate: mobile commerce (CAGR) CAGR (%) 700 100 650 90 600 550 80 500 70 450 60 400 350 50 300 40 250 200 30 150 20 100 10 50 0 0 US CA UK IRE FR DE IT ES NL SE BE NO AT RU HU PL CZ GR IL UAE BR MX ARG SA IND CN JP SN HK AU PH

North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

% Shop domestically only % Shop domestic and x-border % Shop x-border only

4% 4% 5% 6% 1% 5% 7% 8% 9% 7% 9% 8% 10% 10% 8% 10% 8% 10% 8% 7% 7% 5% 8% 14% 12% 12% 12% 14% 13% 19% 16% 16%

27% 27% 34% 27% 36% 30% 35% 35% 40% 45% 40% 45% 45% 47% 54% 45% 53% 56% 49% 55% 57% 56% 50% 56% 56% 59% 62% 71% 64% 65% 94%

66% 68% 66% 62% 62% 60% 57% 57% 51% 49% 52% 50% 46% 44% 43% 40% 39% 38% 39% 37% 35% 34% 30% 33% 28% 27% 25% 21% 16% 18%

US CA UK IRE FR DE IT ES NL SE BE NO AT RU HU PL CZ GR IL UAE BR MX ARG SA IND CN JP SN HK AU PH North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

©2018 PayPal Inc. Confidential and Q27. Thinking about shopping online, from which of the following countries or regions’ websites have you purchased Source: Ipsos PayPal Insights 2018. 6 proprietary. from the past 12 months? Please include your home country if applicable.Base: Online shoppers (base size in appendix) Incidence of online cross-border shopping Consumers in the Middle East are most likely to shop cross-border

% Shop domestically only % Shop domestic and x-border % Shop x-border only

7% 9% 10% 8% 8% 14% 12%

41% 40% 44% 48% 47% 50% 56%

52% 52% 48% 43% 44% 38% 30% *Results are among all consumers surveyed in each region, not weighted for population size North Western Eastern Middle Latin Africa Asia America Europe Europe East America Pacific ©2018 PayPal Inc. Confidential and Q27. Thinking about shopping online, from which of the following country or regions’ websites have you purchased in 7 proprietary. the past 12 months? Please include your home country if applicable.Base: Online shoppers (base size in appendix) The majority of cross-border purchases are still on a computer APAC markets are more likely than most to make cross-border purchases on an alternative device

Average proportion of x-border purchases in past 12 month made on each device

Desktop/laptop/notebook Smartphone Tablet Other device (e.g. Smart TV, games console, feature phone)

2% 1% 2% 2% 1% 3% 2% 2% 2% 2% 2% 2% 1% 2% 2% 2% 2% 2% 3% 3% 2% 6% 6% 6% 5% 2% 4% 4% 5% 7% 8% 7% 4% 5% 5% 6% 4% 7% 7% 8% 10% 8% 11% 9% 9% 7% 11% 16% 10% 14% 14% 5% 9% 9% 11% 8% 9% 9% 5% 9% 11% 13% 14% 17% 15% 13% 23% 20% 19% 23% 24% 15% 19% 22% 21% 26% 26% 15% 22% 28% 21% 22% 20% 24% 28% 31% 28% 31% 36% 32% 39% 40% 42%

76% 77% 77% 76% 72% 73% 73% 69% 68% 69% 68% 70% 71% 72% 63% 65% 65% 66% 65% 62% 61% 61% 59% 59% 59% 50% 53% 51% 44% 46% 42%

US CA UK IRE FR DE IT ES NL SE BE NO AT RU HU PL CZ GR IL UAE BR MX ARG SA IND CN JP SN HK AU PH North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

©2018 PayPal Inc. Confidential and Q33. Thinking only about the purchases you make on websites in other countries, what proportion of your purchases in 8 proprietary. the last 12 months do you think were made using each device? Base = Cross border shoppers (size shown in appendix) The majority of cross-border purchases are still made via desktop, laptop or notebook Shoppers from the Middle East, Africa, LATAM and APAC are most likely to use a mobile device Average proportion of x-border purchases in past 12 month made on each device

Desktop/laptop/notebook Smartphone Tablet Other device (e.g. Smart TV, games console, feature phone)

3% 2% 2% 4% 3% 4% 5% 7% 10% 6% 9% 9% 12% 7% 22% 20% 21% 31% 28% 27% 32%

68% 71% 64% 59% 59% 59% 56%

*Results are among all consumers surveyed in each region, not weighted for population size North Western Eastern Middle Latin Africa Asia America Europe Europe East America Pacific

©2018 PayPal Inc. Confidential and Q33. Thinking only about the purchases you make on websites in other countries, what proportion of your purchases in 9 proprietary. the last 12 months do you think were made using each device? Base = Cross border shoppers (size shown in appendix) China and the US are the most popular cross-border destinations for Global shoppers Western European markets are the next most popular along with Japan Top online destinations among all online shoppers surveyed* (% of online shoppers have shopped in each country in past 12 months)

UK/GB China 14% 26%

USA Germany 21% 10% Japan 5% *Results are among all consumers surveyed, not weighted for population size

©2018 PayPal Inc. Confidential and Q27. Thinking about shopping online, from which of the following country or geographies’ websites have you purchased in the 10 proprietary. past 12 months? Please include your home country if applicable.Base: Online shoppers (base size in appendix) Clothing and apparel is the most popular category for cross-border purchases followed by Consumer Electronics and Toys

Top cross-border categories among all online shoppers surveyed* (% of x-border shoppers shopping x-border in each category)

Clothing/apparel, footwear and accessories 68%

Consumer electronics, computers/tablets/mobiles & 53% peripherals

Toys and hobbies 53%

Jewellery/watches 51%

Cosmetics/beauty products 46%

Collectibles, memorabilia and art 42%

Sports and outdoors equipment 40%

*Results are among all consumers surveyed, not weighted for population size ©2018 PayPal Inc. Confidential and Q28. In the past 12 months what kinds of products have you purchased from websites in other countries? 11 proprietary. Base: Cross-Border shoppers (size shown in appendix) Developed markets such as the US, UK and China exhibit a stronger preference for Global stores or those in their own language

I would not feel comfortable I prefer large 'global' stores It is not important to me if I trust online stores from making purchases from a foreign (e.g. Amazon or eBay) when the online retailer is based other countries as much as website that is not in my own purchasing from another overseas or not stores from the country I language country live in % Agree 90%

80%

70%

60%

50%

40%

30%

20%

10% US CA UK IRE FR DE IT ES NL SE BE NO AT RU HU PL CZ GR IL UAE BR MX ARG SA IND CN JP SN HK AU PH

North America Western Europe Eastern Europe Middle Latin Africa Asia Pacific East America ©2018 PayPal Inc. Confidential and Q34b/Q47. To what extent do you agree or disagree with each of the following statements? 12 proprietary. Base: Online shoppers (size shown in appendix) Attitudes to cross-border shopping vary dramatically across regions with North Americans most likely to be loyal to global or home websites and more sceptical of those from other countries

80%

70%

60%

50%

40%

30%

20%

10% North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

©2018 PayPal Inc. Confidential and Q34b/Q47. To what extent do you agree or disagree with each of the following statements? 13 proprietary. Base: Online shoppers (size shown in appendix) Cost is the main driver of cross-border shopping with availability also featuring for almost half Top reasons for shopping from other countries, among all cross-border shoppers surveyed* (% selecting each statement)

#1 Better Prices (72%)

#2 Access to items not available in my country (49%)

#3 I can discover new and interesting products (34%)

#4 Higher product quality (29%)

#5 Shipping is more affordable (24%)

*Results are among all consumers surveyed, not weighted for population size

Q34c. You say you have made purchases online from the “country”/”countries” shown at the top of the “column”/”columns” on the right. Please select your 14 main reasons for shopping on websites from this/these “country”/”countries” rather than the country where you live Base: Cross Border shoppers spending in each country. Savings, shipping and security continue to drive international sales amongst cross- border shoppers Top potential drivers for cross-border purchasing, among all cross-border shoppers surveyed* (% selecting each statement)

#1 Cheapest total cost (including shipping) (44%)

#2 Free shipping (44%)

#3 Secure way to pay (38%)

#4 Can find items that are hard to find locally (38%)

#5 Costs shown / payment possible in your local currency (34%)

Q39. Which, if any, of the following would make you more likely to buy from a website in another country? 15 © 2014 PayPal Inc. All rights reserved. Confidential and proprietary. *Results are among all consumers Base: Online shoppers in each country. surveyed, not weighted for population size Cost and concerns around speed and quality of delivery are the most cited deterrents for shoppers Top barriers to shopping cross-border, among all cross-border shoppers surveyed* (% selecting each statement)

#1 Delivery shipping costs (25%)

#2 Delivery time not fast enough (24%)

#3 Concern that I may not receive the item (24%)

#4 Having to pay customs duties/ fees and/ or taxes (24%)

#5 Difficult process for returning products (22%)

*Results are among all consumers surveyed, Q36. Which, if any, of the following reasons prevent you from making purchases from websites in another country (more often)? 16 © 2014 PayPal Inc. All rights reserved. Confidential and proprietary. Base: Online shoppers in each country. not weighted for population size Three in four would prefer to have an option to pay in local currency while six in 10 check conversion rates before paying suggesting currency is as much of a barrier as the foreign language Attitudes to currency conversion among all online shoppers surveyed* (% of online shoppers who agree with each statement)

I would prefer to have the option of paying either in local currency or my own currency 76%

I check currency conversion rates before paying in foreign currencies 62%

I would not feel comfortable buying from a foreign website that is 57% not in my own language I have paid in a foreign currency in the past 47%

I would not feel comfortable paying in a foreign currency 47%

My bank charges me for paying in foreign currencies 47%

I have bought on websites not in my own language in the past 43% Fees charged by Paypal are generally lower than other payment methods 35% PayPal charges me for paying in foreign currencies 27% *Results are among all consumers surveyed, not weighted for population size ©2018 PayPal Inc. Q47. Please state whether you agree or disagree with each of the following statements Confidential and 17 proprietary. about shopping online in other countries: Base: Online shoppers in each country Security and convenience are key factors in determining preferred payment method for cross-border shopping Reasons for payment method preference among all cross-border shoppers surveyed* (% of all x-border shoppers who gave a preference selecting each statement)

Secure way to pay 44%

Convenient way to pay 36%

Reasons for payment method preferenceAccepted among by most all retailers cross-border shoppers surveyed30%

Payment is processed quickly 29%

Well-known, trusted brand 27% Purchase protection (e.g. can claim a refund if item is not received 24% or not as described) Faster checkout 24%

I don’t have to share my personal or financial details with the seller 23%

I can see what price I will be paying in my own currency 18%

Habit 18% *Results are among all consumers surveyed, not weighted for population size ©2018 PayPal Inc. Q44d. For what reasons is this your preferred payment method for online transactions/purchases from websites in another Confidential and 18 proprietary. country? Base: Cross Border Shoppers with a preference Security and trusted payment are more common drivers for those purchasing cross border in Africa whilst in Europe shoppers are less likely to mention security concerns

Barriers to shopping or shopping more often Drivers for shopping online Reasons for Payment method preference (% domestic shoppers/cross-border shoppers with a preferred (% online shoppers selecting each as a barrier) (% online shoppers selecting each as making them more likely to shop) payment method selecting each as a reason for their domestic/cross-border payment preference ) 19% 46% 49% Concern about security 14% 43% 53% 16% Secure way 43% 47% of my financial or 19% 42% Secure way to Pay 42% 24% to Pay 57% 53% personal details 26% 50% 42% 22% 47% 48%

19% 27% 24% Shopping Shopping 14% 21% I don’t have to share my 28% Concern about identify 19% Visible, trusted 19% 26% 21% 23% personal or financial 24% 24% 38% 29%

theft/fraud payment logo preference payment

Drivers for Domestic for Drivers Barriers to Domestic to Barriers 25% 22% domestic for Reasons details with the seller 24% 24% 28% 20%

21% 35% 47% Concern about security 14% 37% 48% 13% Secure way 35% 38%

of my financial or 16% 38% Secure way to Pay 38%

border border border border 15% border 48% 46%

to Pay - - personal details 15% - 46% 39%

17% 39% 43% preference

22% 22% 27% Shopping Shopping 17% 18% I don’t have to share my 26% Concern about identify 16% Visible, trusted 16% 20% 18% 20% personal or financial 22% theft/fraud 19% payment logo 36% 25%

18% 21% payment details with the seller 22%

Barriers to Cross to Barriers Cross for Drivers 20% 26% cross for Reasons 20% Q36/36b. Which, if any, of the following reasons prevent you Q39/Q39a. Which, if any, of the following would make you Q44c/Q44d. For what reasons is x your preferred payment method for from making purchases from websites in your own country/ in more likely to buy from a website in your own country/in online transactions/purchases from websites in your own country/in another country (more often)? Base = All online shoppers another country? Base = All online shoppers another country? Base = All domestic/cross-border shoppers who have a ©2018 PayPal Inc. preference Confidential and *Results are among all consumers surveyed in the region, 19 proprietary. not weighted for population size Likelihood to continue without PayPal varies considerably by market with Germany, Netherlands and Australia having a particularly strong affinity to the brand

Very likely Quite likely Not very likely Not at all likely

100% 8% 11% 11% 8% 9% 10% 7% 8% 13% 14%12% 14%15%12%17%16% 13% 16% 14%13%14% 21% 21% 24%22% 21% 28% 29% 29% 36% 80% 44% 27% 28% 32% 14% 25% 35%27% 30% 33% 35% 37% 32% 31% 32% 29% 27% 37%37%42% 30% 46% 60% 35% 27% 33% 28% 61% 29% 59% 41% 37% 36% 49% 37% 40% 31% 38% 30%32% 30% 27%34% 28%30% 26% 31% 38% 30% 28%28% 36% 37% 30% 44% 26% 24% 20% 34% 31% 15% 29% 13% 19% 25% 20% 17% 19% 21%17%18%22% 17% 18% 20% 19% 13% 20% 15% 12%11% 12% 15% 14% 10% 8% 10% 6% 8% 9% 6% 0% 2% 4% 4% 4% 2% 3% US CA UK IRE FR DE IT ES NL SE BE NO AT RU HU PL CZ GR IL UAE BR MX ARG SA IND CN JP SN HK AU PH

North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

©2018 PayPal Inc. Q44E. Please now imagine that you are about to make a purchase from a website in another country, and PayPal is not Confidential and an accepted payment method. How likely would you be to continue with the payment if PayPal was not available as a Source: Ipsos PayPal Insights 2018. proprietary. method of payment? Reimbursement of payment and availability of PayPal are considered the most attractive incentives for using PayPal cross-border

Incentives for Choosing PayPal (%)

PayPal being offered as a payment option on websites where I shop 33%

Ability to get money back if an item does not arrive or is not as described 33%

Ability to make a payment without putting in my card details 30%

Ability to claim a refund on postage from PayPal if I have to return the purchase 21%

PayPal always displays any additional fees (e.g. tax, customs fees/duties) for international 21% purchases before checkout

Lower fees for paying in a different currency 20%

Better currency conversion rate compared to other payment methods 17%

PayPal One Touch for faster checkout, where you can skip entering your login and billing 15% information

Ability to earn my normal loyalty points/cash back from my credit card 13%

Source: Ipsos PayPal Insights 2018 ©2018 PayPal Inc. Q46. Thinking about PayPal as a method of payment for online purchases, which of the following, if any, would be most Confidential and likely to make you choose to use PayPal instead of other payment methods for making purchases from websites in other 21 proprietary. countries? Base All online shoppers (25,228) Reimbursement of payment and availability of PayPal feature consistently as the most attractive incentives, closely followed by convenience of payment

Being able to claim a PayPal being offered as a Being able to make a Being able to get money PayPal always displays refund on postage payment option on payment without putting in back if an item does not any additional fees (e.g. from PayPal if I have to websites where I shop my card details arrive or is not as tax, customs fees/duties) return the purchase described for international purchases before % Agree checkout 60%

50%

40%

30%

20%

10%

0% US CA UK IRE FR DE IT ES NL SE BE NO AT RU HU PL CZ GR IL UAE BR MX ARG SA IND CN JP SN HK AU PH

North America Western Europe Eastern Europe Middle Latin Africa Asia Pacific East America ©2018 PayPal Inc. Q46. Thinking about PayPal as a method of payment for online purchases, which of the following, if any, would be most Confidential and likely to make you choose to use PayPal instead of other payment methods for making purchases from websites in other 22 proprietary. countries? Base in appendix Appendix

23 Global technical note This technical note (or a reference to it) should be included with all press releases

Weighted base: Total Online X-border Weighted base: Total Online X-border On Behalf of PayPal, Ipsos interviewed a shoppers shoppers shoppers shoppers representative quota sample1 of c.1000-2000 (34,052 Western Europe 11000 9199 5279 Eastern Europe 5000 4047 2286 in total) adults (aged 18 or over2) who use an internet UK 1000 849 320 Russia 1000 802 558 enabled device3 in each of 31 countries (USA, Canada, Ireland 1000 822 690 Hungary 1000 787 449 UK, Ireland, France, Germany, Italy, Spain, France 1000 810 325 Poland 1000 827 315 Netherlands, Sweden, Belgium, Norway, Austria, Russia, Hungary, Poland, Czech Republic, Greece, Germany 1000 815 257 Czech Republic 1000 798 404 Israel, UAE, Brazil, Mexico, Argentina, South Africa, Belgium 1000 806 580 Greece 1000 833 560 India, China, Japan, Singapore, Hong Kong, Australia, Netherlands 1000 836 409 Middle East 2000 1597 1117 Philippines). Interviews were conducted online Spain 1000 830 502 Israel 1000 786 623 between 13th March and 1st May 2018. Norway 1000 895 582 UAE 1000 811 494 Data was weighted in all countries to adjust for panel bias based on external trend data on incidence of Italy 1000 842 451 Africa 1000 691 428 online shoppers in each country. Sweden 1000 853 475 South Africa 1000 691 428 Austria 1000 843 688 APAC 7000 5918 2845 1 In most countries quotas were applied on age crossed with gender and region representative of online population. No region quota was LATAM 3000 2197 1146 India 1000 873 300 applied in SA, Singapore & RU. In UAE no quotas were set but the Mexico 1000 743 489 China 1000 861 367 survey was mailed out to a nationally representative of offline sample who were screened for internet usage Brazil 1000 763 363 Singapore 1000 844 618 Argentina 1000 692 295 Japan 1000 911 56 2 Aged 18-74 in all European countries North America 2000 1579 762 Hong Kong 1000 838 629 3Desktop computer/Laptop/ notebook computer/Tablet USA 1000 805 274 Australia 1000 781 473 /Smartphone/Some other type of mobile phone/Electronic organizer / PDA with wireless voice and data features/Games console with Canada 1000 774 488 Philippines 1000 811 403 Internet connectivity (e.g. Wii) 24 TOTAL 31000 25228 13863 Market sizing estimate and forecast: methodology Estimating and forecasting online and mobile sales

Inputs Survey Data Forecast Modelling To build the forecast we look at We use the survey data to add From these inputs, we model relationships between key purchase behaviour (penetration category sales growth, changes to macro-economic indicators. and average spend per head) to the online/mobile population, and • Total and online population understand the size and growth in online/mobile spend for development (Source: The World projection of future category those populations to forecast total Bank). spend. online and mobile spending. We • GDP per capita development • Category online purchase assume that the current rates of penetration adoption amongst non-users (Source: The World Bank). • Average category spend continues and as the level of • Total and online retail sales • Smartphone penetration adoption reaches the upper limits (Source: ONS Report). • Tablet penetration we reach saturation.

• Total online spend includes mobile spend. Mobile spend includes spend on both smartphones and tablets. • Estimations/forecast based on the following meta categories: Groceries, Food, drink & Alcohol; Health & Beauty; Clothing, Footwear & Accessories; Event tickets; Travel & transportation; Household goods; Leisure, Hobbies & Outdoors; Baby/Children’s Supplies; Entertainment; and Consumer Electronics.