Barclays and Nomura have announced they will launch an Internet shopping portal.
In the search for new revenue streams, Barclays plans to launch a Barclaycard-branded shopping portal just in time for Christmas. The two banks will invest GBP30 million to develop the site, whose target is to offer five million products from 350 retailers by the end of next year. Barclays will retain a 60% share.
Although the exact plans for the future of the portal are unclear, Barclaycard is doing well to exploit the advantages its brand provides in online expansion. In the event of a sale or flotation, Barclays’ share will increase to at least 67%, with the exact proportion depending on the valuation. Revenue will come from commission charged to merchants. Initially, the site will be launched in the UK where Barclaycard reports a customer base of eight million.
The decision to create a portal is a good idea for Barclays and merchants alike. Barclays can create new revenue streams by charging commission on sales generated through the site. Merchants can benefit from the strong Barclays brand and from access to Barclaycard’s customer base. As Egg has demonstrated, banks are in a good position to set up shopping portals. Online banking customers are clearly prepared to do business over the web. For merchants, the fact that the bank has included the merchant in its site encourages consumer confidence – the bank brand reassures customers the merchant is legitimate. The bank is also an expert in the payment process. Barclaycard in particular is in a good position to expand the service to its European cardholders, which should provide merchants with an additional eight million potential customers.
Barclays’ main competitor is Egg, which set up Egg Shop in 1999. In addition to the above-mentioned advantages, Egg also offers an Internet guarantee that completely covers Egg cardholders in the event of fraud. Egg also guarantees the delivery of goods purchased through Egg Shop merchants. Furthermore, it offers an extra 1% cash back on Egg Shop purchases. Barclays’ customer base is its greatest advantage but it will have to offer further guarantees to convince customers to shop online.
