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Fifteen major retailers to challenge Google Wallet

August 17, 2012

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In a bold and unexpected initiative that could open up a new path in the ongoing bricks-and-mortar versus eCommerce war, a consortium of fifteen major retailers have joined forces to develop a new mobile payment system to directly compete against Google Wallet.

The group, which includes such American giants as 7-Eleven, Best Buy, CVS, Lowe's, Shell, Target and Walmart, has formed a new company called Merchant Customer Exchange (MCX), which will offer a mobile-commerce solution under the same name.

"Combined, these participating member merchants already serve nearly every smartphone-enabled American on a daily basis, offering MCX the merchants the ability to offer a mobile-commerce solution that truly works for consumers," the group's website says.

In a press release issued on August 15, the group said that the combined annual sales of its founding members totaled around $1 trillion. Obviously, the MCX members would like to hang onto as much of that market as possible as the industry for mobile payments rapidly grows.

According to a Juniper Research report, although sales of physical goods by mobile phone are only expected to account for about 4 percent of retail transactions by 2017, they will amount to more than $1.3 trillion in total revenue.

But so far, MCX has shared little about how its payment system will work, except to say that development of its mobile application is underway, and that it will offer a flexible solution that will offer merchants a customizable platform with the features and functionality needed to best meet mobile consumers' needs.

The one telling statement it has made is that its application "will be available through virtually any smartphone." This would seem to indicate that whatever form the MCX system takes, it will not be based on Near Field Communication (NFC), the pay-by-tap technology that powers Google Wallet.

Currently, NFC is only available on a relatively select group of mobile handsets, which doesn't include any current iPhone models. More likely, MCX will involve technologies that are already built into most smartphones, such as SMS messaging, web-mediated transactions, or camera-based technologies such as QR codes.

In addition to Google Wallet, MCX faces competition from a number of other challengers. Leading the pack is ISIS, a payment system backed by mobile carriers AT&T, T-Mobile, Verizon and Square, a startup currently valued at $3.25 billion, which last week received a $25 million investment from coffee megachain Starbucks.

The key to success for any of them will be convincing consumers to adopt the technology. MCX says it believes it can do that by providing an efficient system that works across a variety of brick-and-mortar businesses, including retail, casual dining, and fuel stations, in addition to allowing eCommerce transactions.

"As merchants, no one understands our customers' shopping and payment experience better than we do," said Best Buy's Mark Williams, "and we're confident that together we can develop a technology solution that makes that experience more engaging, convenient and efficient."

In other ecommerce news

Comparison website Kelkoo says that eCommerce sales grew 14 percent to almsot £50 billion in the United Kingdom in 2011.

British online shoppers spent about £1,400 last year and Kelkoo is predicting that's going to rise again in 2012. Kelkoo is also forecasting that the U.K. will satisfy its shopping urges online to the tune of about £56.5 billion this year, with each online shopper spending an average of about £1,450 on 43 items.

"Itís perfectly natural to see consumer's appetite for online shopping growing year on year," says Richard Stables, CEO at Kelkoo.

"This isn't because people in the U.K. are spending more money but that simply they are shopping in the most convenient and affordable way for their individual needs," added Stables.

He added that the trend is similar throughout Europe-- online sales across the continent rose about 18 percent to Ä200.52 billion last year, and the growth is expected to reach approximately Ä232.76 billion this year.

"Of course, this could potentially have some ongoing negative impact in traditional brick and mortar stores, an issue which is forcing retailers to bring the two channels much closer together," he added.

But Kelkoo's mostly optimistic predictions today are borne out by the most recent quarterly report from eBay. The online giant announced positive numbers for the last three months of 2011, when its net income rose to $1.98 billion from $559 million in the final quarter of 2010.

Admittedly, some of that cash came from the sale of eBay's remaining stake in Skype, but leaving aside some of those gains and items such as stock-based compensation expenses, income still rose 41 percent to $789 million, nevertheless.

Even though eBay is doing well, it's staying calm on its future forecasts as it can't expect to emerge totally unscathed from the second dip in the economic downturn and the growing Euro crisis that is overhanging everyone's heads these days.

It's expecting revenue of $3.05 billion to $3.15 billion in the three months ending in March, and full year revenue in 2012 of $13.7 billion to $14 billion, compared to full year reported revenue of just $11.65 billion last year.

But while all of this is happening, things are looking gloomier than ever over at Comet, the high-tech retailer owned by French firm Kesa Electrical. The Christmas period wasn't good to the U.K. chain, with same-store sales dropping 14.5 percent.

Kesa has already agreed to offload the loss-making outfit to a private equity firm but the new numbers have increased its debts over the agreed threshold by £10 million to £15 million, costs that Kesa will have to bear.

Apart from the tech industry, other U.K. retailers have also reported feeling some pain over the holiday season, with Tescos, Homebase, Mothercare and Argos all announcing lower sales when compared to the same period in 2010.

Source: Kelcoo.

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