Barclaycard’s Indigo Square is to buy UK’s ShopSmart for GBP2 million.
The deal perfectly sums up the dotcom doldrums: one of the best known Internet brands sells out to an offline company for less than 2% value estimated before the collapse of Internet stocks. Not that Barclaycard is complaining. It has found a real bargain, winning ShopSmart’s 500,000 monthly visitors for a pinch. Can Indigo Square, Barclaycard’s online shopping mall, not only retain these visitors but turn them into spenders?
ShopSmart and Indigo Square have a close strategic fit. ShopSmart’s store reviews will add important content to Indigo, which it certainly lacks at the moment. Moreover, many of the partners for the two sites overlap, so their integration should be fairly straightforward.
The major difference between the two sites is that ShopSmart uses a live price comparison engine while Indigo catalogs partners’ prices. By adapting the ShopSmart engine to all of its partners Indigo could make the site much more powerful for consumers, who are more likely to believe they are getting the best possible prices by using a comparison engine than simply looking at a list of prices.
Indigo Square was originally conceived to add value for Barclaycard customers. Barclaycard was well positioned to launch a shopping portal because of customer trust in the Barclays brand, its experience in managing relationships, its knowledge of payments and its access to other European markets. Any revenue that came from merchant commissions is an added gain. The plan is to leverage Barclaycard’s existing customer base (and now ShapSmart’s as well) before eventually selling off the site for a profit.
For the moment, though, Indigo just doesn’t have the flair or the brand to attract enough customers and make it viable even if it does have the backing of an offline company. And ShopSmart’s brand alone is unlikely to do the trick. Indigo must prove that it is the champion of the online shopper and put ShopSmart’s engine through its paces. Only if shoppers believe they really are getting the best price possible will ShopSmart’s 500,000 visitors become customers.
