Evan Schuman's StorefrontBacktalk

When 235-store Guitar Center agreed to a PayPal proposal to offer the alternative payment method inside its stores, the music chain had very good reason to believe its shoppers would embrace PayPal in a way that the customers of other in-store PayPal retailers—including Home Depot, JCPenney, Abercrombie & Fitch, Toys”R”Us, Foot Locker and Barnes & Noble—might not. Musicians spend a lot of time buying and selling used instruments and audio gear on eBay, which means most have a healthy amount of PayPal dollars in their accounts.

Giving those shoppers an in-store option to use that PayPal currency, a place that has used (along with new) instruments and audio equipment and where said equipment can be touched and listened to before being purchased, made a lot of sense to Wes Muddle, Guitar Center’s VP for Finance. So it’s not surprising that the chain made it a priority to let every customer know about the PayPal option, through lots of store signage and associate training. And, gasp, Guitar Center is even considering offering cash incentives—though it would much rather PayPal do that instead.

The PayPal option started September 24, and Muddle has said the number of customers who are actually trying it has been small but steadily increasing. “It’s been growing every week. It’s few, but it has been growing,” he said. “It’s not anything that moves the needle, but there’s been no promotions around it yet. So once the marketing and promotions machines fully kick in, we expect that number to increase significantly.” Muddle declined to say what the actual numbers are.

The PayPal integration at Guitar Center was implemented by AJB Software Design. Shoppers have the option of using a PayPal card or entering in their mobile phone number and a 4-digit PIN. That’s just for the large chains. PayPal is only offering the more interesting functionality—such as identifying customers automatically when they arrive and authenticating them with headshots—for small boutique shops.

As with all the other early adopters, PayPal has absorbed a very high percentage of the cost of deployment at Guitar Center. Unlike the first couple of chains, though, Muddle said PayPal didn’t cover all the costs. “PayPal has assisted us in this process, but not to 100 percent,” he said.

The next big stage is to start offering specific shopper incentives to use PayPal, “whether it’s a percentage off or a dollar off or a two-for-one deal,” Muddle said. “We have not planned on that type of promotion yet, but it is something that is in our arsenal,” he said, adding that PayPal has also discussed doing its own incentives. Muddle would rather see that happen first and see how it plays out with his customers.