Barclays joins Nomura to open online shopping mall

Barclays Bank became the latest Old Economy name to launch a New Economy idea yesterday when it unveiled plans to start an internet shopping portal offering more than one million products.

Barclays Bank became the latest Old Economy name to launch a New Economy idea yesterday when it unveiled plans to start an internet shopping portal offering more than one million products.

The online shopping centre will be a joint venture between Barclaycard, the credit card company and Nomura, the Japanese investment bank. The site will start trading in the next few weeks with around 50 retailers, rising to a target of 350 shops serving 500,000 customers. The idea is to take advantage the growth in online shopping which is forecast to reach £12.5bn by 2005, according to Verdict, the retail analysts.

But will it really work? The announcement came on the day a new survey from the Trading Standards Institute found internet shopping to be slow, expensive and plagued with problems. The study attempted to make 102 purchase online. Of these 38 per cent failed to arrive on time while 17 per cent did not arrive at all. Barclays' move also coincided with a fresh collapse in confidence in consumer-oriented internet ventures following the news that Boxman, the pan-European CD e-tailer is seeking voluntary liquidation.

It is not only Barclays' timing which could be questioned. Internet experts are uncertain as to the value of internet shopping malls saying they are a dated concept which have little value as the consumers' familiarity with the internet increases.

As Mike Honor, retail analyst at Forrester Research, points out: "Shopping centres work in the physical world because they group stores together conveniently. It's not the same online. It is just so easy to click from one site to another."

Sachin Shah, a retail partner at PricewaterhouseCoopers, agrees: "There are quite a few of these things around and none has been really successful. The people who will win in this area are the likes of AOL and Yahoo! which use their technology to create dynamic malls. Does Barclays have the technology of a Yahoo! or an AOL? And will it really be able to generate similar levels of traffic?"

Seema Williams, a retail analyst at Forrester in the US, says shopping portals have met with limited success in America too. AT&T and Mastercard have tried and failed, she says, as they were unable to add any additional services that made it worth going to an online mall rather than a retailer's website directly. "It is very difficult for intermediaries to offer any extra service in the retail chain," she says. "Apart from AOL and Yahoo!, nobody counts."

All this is rather wounding to Bob Potts, Barclaycard's chief executive, who is rather pleased with his, as yet unnamed, portal. He says the shopping centre is a natural opportunity for Barclaycard as it has been e-enabling its business for some time. Barclaycard is investing £20m in the venture with a further £10m coming from Nomura. Revenues will come from online advertising and a cut of the sales made via the site. The plan is to be profitable within two years.

Mr Potts says a key asset will be the trust consumers have in the Barclaycard brand. This, he says, will help shoppers overcome their fear of credit card fraud, which has been a major barrier to online shopping.

It is true that Barclaycard will offer a guarantee that shoppers will not be liable for any charges related to an online credit card fraud. But then this is available to all its customers anyway, wherever they shop.

Some analysts say the key to Barclaycard's success will be its ability to build critical mass. Philip Turnbull, of retail consultants Kurt Salmon Associates, says if Barclays can recruit 350 retailers to its site it will become a significant draw. "They will need to have a diverse collection of stores too," he adds.

Another advantage is that Barclaycard already has a customer base of 8 million customers in Europe, with 300,000 UK customers using its online account service. This provides a ready database of potential shopping customers to target.

Mr Turnbull says grouping stores together does have some merits. "Going on to one site will lead to some time savings for customers," he says.

Another weakness is that shoppers will have to pay separately at each participating retailer and arrange delivery separately too. If Barclaycard can consolidate these services that would be a major step forward, analysts say.

It is questionable, however, whether consumers will really seek out a shopping centre just because it happens to be backed by a bank. IBM tried an online shopping mall several years ago and then abandoned it.

Barclays has already failed once with an online shopping centre. Its launch of Barclaysquare in 1995 was widely criticised at the time with one analyst describing it as "an appalling embarrassment". The central criticism was the small number of participating retailers, which included Toys R Us and Argos but little else. The concept of trying to mirror "real" malls with online "streets" with names such as "Flamingo Drive" was also considered risible.

Barclaysquare still limps along but Barclays says its new venture will be more powerful and include a search engine that will enable customers to seek out the best prices. Again this is nothing new, Shopsmart.com is a shopping directory which lists 1,000 UK stores. A search engine also provides a price comparison service.

Many analysts believe a more plausible approach is the concept of the specialist portal as announced yesterday by Boots and Granada Media. This enables Boots to access a new distribution channel while giving Granada valuable content to broadcast. The virtue here is that, rather than offering a commodity product like a shopping mall, the content will be added value advice and information backed by the trusted Boots brand name. That will be much harder for rivals to copy.