MasterCard’s master plan to take over the world

In recent years supermarkets like Tesco’s have been offering more than just food. They now offer everything from electrical, personal finance and even in one case the ability to buy your next home.

With MasterCard’s recent decision to enter the arena of online retailer, is this a good thing for consumer or in a tricky credit market, is it a way for companies like MasterCard to reduce risk and make bumper profits?

The vanishing high street
1995 saw the online birth of Seattle Company Amazon, initially set up as a ‘one stop bookshop’ where any book currently published could be bought.

Within a short period of time Amazon started expanding it range of merchandise it sold, becoming the world’s largest online retailer.

The benefits Amazon had for the consumer, choice and value. If the item was available, Amazon would have it and cheaper than anyone else.

It wasn’t long before other retailers saw the huge benefits to the Amazon model and this introduced the consumer to the ‘virtual mall’, always on, always cheap, and always delivered a few days later.

Many experts at the time were split how much impact this would have on shopping habits, but in the 15 years since few could ignore the incredible revenue online retailing creates

The EBay effect
Around the same time as Amazon was finding its feet another internet giant was created. EBay gave the promise of the ultimate Auction site, giving many people the first chance to really sell online. For many years people became almost addicted to the idea that they could turn attic junk to cash in an easy, pain free way.

Apart from offering people the chance to auction items, it allowed people to set fixed sale prices and set up their own ‘virtual shop’.

By setting up PayPal, EBay also found a way to make money from every EBay transaction.

With every good idea, it is long often until someone offers a similar product and the same was true with Amazon Market Place. The idea was very simple, Amazon would offer, for a fee the chance to sell on Amazon.

Fees were higher than EBay’s, but Amazons reputation on quality and value proved an irresistible combination for many.

One in seven
Where Amazon and EBay settled it was not long before the like of Tesco’s would come in and offer their ‘value’ based service. Unlike EBay and Amazon, Tesco would not go down the market place route, but instead took a different stance on the same idea.

For many years Tesco had expanded in the Food retailing sector, and the only cap on profit came for the available of space to build new stores. With a bulging wallet, the online move was inevitable, but this push and success into online, not only increased profits, but showed the idea of a wide portfolio of services like never before.

Not content will selling online, Tesco’s went into communications, personal finance, insurance and even recently buying and selling of homes. Where there was money to be made Tesco wanted a piece of the money pie.

The end of the world.
In 2007 the world started its road into recession and for the first time many companies who relied on credit, not only for cash flow, but as a sale generator, felt the full effect of an ‘non credit’ world.

Rather than getting out a flexible plastic friend to pay the bill, we actually started using real money for the transaction.

Retailers like Tesco’s survived the recession in a strong position due to being a value retailer, and that people still needed to eat. There was an addition effect where people became more value conscious and companies like Tesco were able to take advantage and actually increase profits.

Some may say that there is some justice that the credit card companies and banks who suffered, as they were the ones responsible for the unsustainable credit in the first place.

Phoenix rising
Like any company hit by the recession Master Card always look for ways to secure their future and increase profits. Looking at the models by Amazon and Tesco’s, it’s only natural that MasterCard has setup its own shopping portal.

For MasterCard this gives a great way to shift more credit in an improving climate but make more money from the sale of the goods it will now sell. By taking the affiliate route, it also has zero risk.

But with all winners there are losers, and a future of no local traders is becoming a real possibility. Due to global shopping channels that can’t be beaten on price, it is often tempting to buy everything on line.

But online shopping is not always the best option.

If your food shopping turns with apples missing it’s not the end of the world. If you’re online purchased PC goes wrong, do you really want to have to ship it half way across the world to get it fixed?