|
Shop at Merrill -- no bull
|
 |
October 28, 1999: 10:52 a.m. ET
Once-resistant broker offers online shopping for much more than stocks
By Staff Writer Alex Frew McMillan
|
NEW YORK (CNNfn) - Looking for a satin Wonderbra? Perchance you yearn for a bottle of reserve Epernay champagne with creamy flavors and a complex aroma of ripe fruit and roasted nuts? And Pokemon, Pokemon, Pokemon stuff for the kids? You can shop for them all at Merrill Lynch.
Yes, Merrill Lynch. The company that long resisted moving its brokerage services online has gone all out to make sure their customers stop for some shopping after they've stepped onto their site to trade their stocks or check their balances. Think of it as a virtual mall.
The brokerage house started linking to retailers as far back as last November, when it connected to four online stores. But its online-retailing site, shopmerrill, only really moved into high gear at the end of September. That's when Merrill linked with Foster City, Calif.-based software developer Inktomi (INKT) to produce a "shopping engine" that searches for the best price of products.
Merrill (MER) now has links - either to co-branded Web pages or straight to the site -- to 450 online retailers. They offer a broad range of consumer products, from companies such as Barnes & Noble.com, ESPN, eToys, PetQuarters.com and BabyCenter. Merrill says that gives its customers access to 8 million products.
Merrill just links to the sites, acting like an online mall, or what some call a shopping portal. Customers that use Merrill's Visa Signature credit card to buy online get three bonus points for every dollar they spend, three times as many as they get when they use the card in the real world. It also has special promotions -- on Wednesday and Thursday, it is offering 10 bonus points per dollar spent online.
Customers can redeem the points for golf clubs, NASCAR driving lessons, travel, to pay Merrill Lynch fees and so on. Though anyone can use Merrill's site to get prices, customers have to have a cash-management brokerage account with Merrill to get the credit card and enroll in the rewards plan. The card carries a $75 annual fee, but is free for customers who have more than $250,000 under management or who have opted for Merrill's new flat-fee online brokerage accounts unveiled in June.
Merrill has 350,000 Signature cardholders and 550,000 customers signed up to access accounts online. It won't say how many customers use its site to shop online or how much they've bought. But Merrill claims the $1.5 trillion it has on deposit from all its customers means they have significant buying power. Around a quarter of its customers shop online somewhere.
"What we're trying to do is to aggregate the buying power of our clients and turn that into extra value," said Randal Langdon, senior director of Merrill Lynch's digital business-development group. Though Merrill customers get the same retail prices as anyone going straight to the store, retailers do give some bonuses -- $10 off a $50 purchase, perhaps -- or free delivery.
Online brokerage E*Trade links, via its Web site, to a handful of retailers such as Compaq and Amazon.com. Other than that, there's little precedent for brokerages linking to retailers, even though online brokers are trying many different strategies to attract customers.
And for good reason, some say. "They have enough trouble building an online brokerage. And now they want to build an online mall? Give me a break," said James Punishill, an online-brokerage analyst with Forrester Research.
The idea might fit with Merrill Lynch's demographics if the brokerage sticks to high-end watches and could guarantee sought-after products, something it doesn't do at the moment.
"If they could get better access to Porsche Boxsters or Mercedes SUVs … people would be all over that," Punishill said. But Merrill's attempt to sell day-to-day products won't work, he thinks. "When I'm trading stocks, I'm not thinking about buying books and drugs. That's the way it goes."
Merrill is clearly keen to get its hands on the 17 million households that Forrester predicts will shop online by year-end. They'll spend $20.2 billion with online retailers this year, about $4 billion of that coming between Thanksgiving and Christmas.
Hence Merrill's 10:1 bonus points offer Oct. 27 and 28, which it expects to duplicate later this year, as well as rolling out similar deals as the shopping season gets going. "We kind of view this as Merrill Lynch ringing the opening bell on the holiday season," Langdon said. He doesn't think it's unusual for a company associated with sage financial advice to start peddling, oh, pet food.
"The Web is creating communities. The Web is creating convergence," he said. People won't come to Merrill only for the rewards program, he said, but it might make them stay with the site longer. Once people get comfortable with an online site, they'll use it more and more, and Merrill has a dependable image. Once customers leave Merrill's Web site, many people head to a retailer anyway, he said.
"The Internet makes for very strange bedfellows," said Scott Silverman, vice president of Internet retailing for the trade group National Retail Federation. "At this point nothing surprises me."
One thing Merrill has going for it is that financial services and retail have been the two most-successful industries moving onto the Web. And people who trade stocks online are highly likely to do their shopping online, Silverman thinks.
But Merrill's is another in a long line of unproven ideas of how to sell on the Internet, Silverman said. There are plenty of online malls, diversified retailers, bulk-buying groups and the like for Merrill to go up against.
"As the industry matures, I don't know if this will make sense or not," he said. It would make more sense for Merrill to sell business-related products. Another section of Merrill's site, the eBusiness page, focuses on small-business and business-to-business products.
With a strong brand in providing valuable advice, Merrill runs the risk of diluting its brand and, worse, linking with retailers that don't deliver the same kind of service.
Ultimately Merrill might get a small revenue stream from "monetizing" its customers and getting paid for delivering them to retailers, said Anthony Noto, a retail analyst with Goldman Sachs. And monetizing customers -- leveraging them into other, noncore sources of revenue -- is the holy grail of Internet commerce at the moment. Adding online links to retailers that handle inventory and fulfilling orders also costs very little.
David Cooperstein, director of e-commerce research at Forrester, said he's surprised Merrill Lynch has made a push into shopping. This looks a little 'me, too,' he thinks.
"Their brand name doesn't carry into retail," Copperstein said, "and the jury is still out on whether shopping portals work." It would make more sense if Merrill's site offered advice about shopping, perhaps, he suggested, in line with the advice they give on financial matters.
Otherwise hooking to retailers randomly could put people off, he thinks. If you went into a Merrill branch office and saw ads for Barnes & Noble books and Omaha Steaks on your broker's desk, you'd wonder what was going on, he pointed out.
Langdon said the online mall idea is part of the push to give customers as many options as the company can, and part of the overall push to bring the brokerage into the online world. "We are fundamentally positioning Merrill Lynch for the future," he said
Analysts aren't united that Merrill's move into shopping won't work. If it encourages people to use their credit card or to open Merrill Lynch brokerage accounts, all well and good, said Dan Burke, who rates online brokerages for Gomez Advisors. He expects other brokerages to follow suit with retail partnerships in their effort to build "relationships" with customers.
And the online world is so new, he believes Merrill doesn't really have an image it can damage. "Times have changed," he said. "I don't think Merrill needs to worry about their ivory towers and protecting them."
|
|
|
|
|
 |
|
