China is one of more than 20 countries to which Newegg plans to expand its marketplace in 2017.
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Discover offers merchants present on its Shop Center site access to Discover’s card base. Shop Center clearly puts merchants in an area where cardholders are ready to shop, a move that many analysts believe is the key to converting browsers to buyers and driving online sales.
Adding value online
While it seems that some card companies are making headway by signing deal after deal, not every one is expected to be a winner. “Everyone is scrambling to put these online deals together, but a lot won’t necessarily hold,” says David Pecaut, senior vice president, electronic commerce practice, The Boston Consulting Group, Toronto. Still, Pecaut concedes that creating brand awareness via links with major online merchants is the best way to take credit cards into a new domain.
Overall, retailers are looking to get the most out of their card company deals. “Any merchant has to look at the costs of attracting and retaining a customer,” says Thomas C. Edwards, chief marketing officer at Phoenix-based skymall.com, the electronic commerce arm of SkyMall Inc., and a former Visa executive.
The merchant, in seeking out card deals, must consider creating value to get consumers to try shopping on the merchant site. To do that, the merchant can see the card associations, and their support network of acquirers and banks, as the conduit.
“If you look at the varying channels, you have the association model with Visa and MasterCard financial institutions and the American Express and Discover model with direct relationships with merchants and cardholders,” notes Edwards. “The objective is to use those partnerships to stimulate usage and retention. If we can provide great value-added offers that make cardholders feel secure then we will continue to have those customers.”
And incentives are the weapons that the various card companies are using to fight for share of consumers’ wallets on the Web. For example, American Express made a minority investment last November in Mountain View, Calif.-based SaveSmart, a provider of interactive promotions technology, which automatically applies discounts to credit cardholder statements. The two companies started a pilot last June that provides local discounts and special offers to cardholders in the San Francisco area. Called American Express Online Offers, cardholders can enroll in the service by visiting the AmEx Web site.
When in doubt, discount
Last summer, MasterCard also did a one-time multiple merchant promotion with Santa Clara-based Yoyodyne, an online marketing company now owned by Yahoo. The promotion offered free space on Yoyodyne’s EZSpree shopping Web site to about 400 online merchants, including Barbecue Source, Virtual Vineyards and CD World. The program attracted 500,000 shoppers, who received special discounts for using MasterCard to pay online. The results of that one-time promotion are still being analyzed, says MasterCard’s Flanagan, noting that the association is more likely to stick to long-term deals in the future. One thing remains true. “Whether consumers are online or offline,” he adds, “discounts are always important to get people to shop.”
Aside from providing banner and card preference messages on portal sites, Visa also negotiates with online merchants for discount deals for its cardholders, many of which are centered on special events or holidays. In March, Reel.com ran a special campaign offering Visa cardholders discounts on Academy Award-nominated video releases. Visa did a similar discount campaign for Oscar-nominated soundtrack albums with Music Boulevard (which has since merged with CDnow).
Currently, Visa has close to 40 merchant relationships and plans to do about 10 online merchant promotions per year, mostly centered around holidays. Later this year, Visa also plans to launch Visa Rewards online, which will have a dozen different promotions with between 50 to 60 merchants.
Working the consumer side of the equation to generate interest in online shopping is only one side of the e-commerce coin. American Express has partnered with Pasadena, Calif.-based TicketMaster Online-CitySearch, a provider of locally developed online city guides, to help traditional merchants set up an online presence where eventually its cardholders can shop. After a pilot run in New York City, CitySearch rolled out nationally in March.
“AmEx has a unique opportunity to drive new customers to merchants,” says Levine. “What the associations don’t have is a direct relationship with both their customers and their merchant partners.” Unlike Visa and MasterCard, which sign financial service companies to issue credit cards with their brand, American Express issues its own cards and acts as the issuing bank. American Express also signs its own merchants for processing services, while the associations also rely on member banks to sign card-accepting merchants under the brand.
The power of brand
With so many different tactics and no blueprint to get consumers to use their cards to shop online, the card companies have their Internet crusade cut out for them. Because Visa was quickest out of the blocks in striking up online relationships, it has the early jump on its rivals. “The power of brand is being the first one out there,” says CyberDialogue’s Clemente.
Even while the first waves of online marketing attacks are under way, the war has not yet escalated enough to declare a victor. “There is some opportunity for a shakeup,” Clemente adds. The right deals in the online arena coupled with the right amount of promotion in the offline world could launch any of the card companies into the lead. But if consumers and merchants move into online shopping in the grand waves that are predicted, then the brand with the most power behind it-in terms of trust, utility, discounts and security-could end up with the most online market share.
With these players’ credit history, it should be one heckuva fight.