Bed Bath & Beyond Joins Merchant Customer Exchange As Retailers Pursue Mobile Payments
Bed Bath & Beyond (NASDAQ:BBBY) recently joined the mobile payment network of Merchant Customer Exchange (MCX) following Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). [1] This service allows customers to use their smartphones as payment devices. Although the service has yet to be launched, it can prove to be a very convenient transaction method as it gains broader use among retailers and customers.
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Traffic Likely To Be Unaffected By The Service
Most of Bed Bath & Beyond’s customers are the remodeling or moving to a new home. Hence, the traffic driven towards the stores comes with specific product needs unlike Wal-Mart and Target where casual customers constitute a large part of their customer base. The introduction of the mobile payment method will make the shopping experience better, but we don’t expect this to lead to an uptick in customer traffic. On the margin it may give Bed Bath & Beyond a slight advantage over specialty stores competitors such as Williams Sonoma, Pier 1 Imports and IKEA.
Limited Usage Of The MCX Mobile Wallet Service For Now
The Mobile Wallet Service can only be used by smartphone users which constitute about 50% of the total mobile phone users in the U.S. Moreover, even among smartphone users the service might not gain wide acceptance and will depend on the areas of its usage. [2] For instance, the mobile wallet service is available for only 18 merchants and so customers might not see the need to sign up for it. Whereas, if the service finds widespread usage covering a bigger swath of merchants ranging airlines, movie theaters, transportation services, parking meters, grocery stores, corner stores etc., it has a better chance of success.
Currently MCX has limited participation with 18 participants and most of them are general retailers. [3] The introduction of the Mobile Wallet Service will have certain expenses associated with it as retailers will have to install an entire mobile payment system in each of their stores in order to gain the full advantage of the convenient payment method.
Nevertheless, An Important Step
The Mobile Wallet service is still an important step in order to ensure that Bed Bath & Beyond’s customers can shop without having to carry cash or credit card to the stores which seems to be a significant future trend. Mobile payments are expected to rise to $1.3 trillion in the next 5 years. [1] Following the same trend as online shopping, the retailers will look to have mobile payment solutions in their quiver to ensure that they are competitive in every channel.
Our price estimate for Bed Bath & Beyond stands at $ 70, implying a premium of about 11% to the market price.
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Notes:- Gap, Bed Bath, other merchants join mobile wallet service, Reuters, Oct 1 2012 [↩] [↩]
- Nielsen: Smartphones Used By 50.4% of U.S. Consumers, Android 48.4% Of Them, techcrunch, May 7 2012 [↩]
- Merchant Customer Exchange’s Website [↩]