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E*Trade Sets Up Target

E*Trade's acquisitions and alliances are part of its "high touch/high tech" strategy to diversify its revenue stream, attract new customers, and democratize the financial services industry -- and, let's not forget, capture "a growing share of wallet."

By Nico Detourn (TMF Nico)
August 24, 2000

Internet broker and financial services firm E*Trade Group (Nasdaq: EGRP) announced today that it has signed a letter of intent to acquire PrivateAccounts.com, a privately held firm that provides online access to money management and investment planning services. Terms of the deal were not disclosed.

The company, along with Target Stores (NYSE: TGT), also announced the launch of a co-branded website offering personal financial services.

E*Trade says its PrivateAccounts acquisition will "further democratize the financial services industry" by allowing investors to select their own money managers rather than relying on brokers or other advisors to do that for them.

PrivateAccounts is the latest in a series of acquisitions by E*Trade in its "high touch/high tech" strategy to diversify its revenue stream. It will help attract new customers and give existing customers more reasons to keep their long-term investing dollars in E*Trade accounts, the company said.

E*Trade expects the new range of services to appeal to affluent consumers with over $100,000 to invest. In addition, PrivateAccounts gives independent financial advisors the ability to offer their clients private-label services on the advisor's website.

Becoming part of the E*Trade family lifts PrivateAccounts to the top tier of online financial services, where it will have access to its new parent's global customer base. "E*Trade understands probably better than any other financial services company the real needs of today's sophisticated consumer, and how the combination of technology and human insights and service can be efficiently leveraged to meet those needs," said Doug Baker, PrivateAccounts' president and CEO.

Targeting the wallet zone
The co-branded financial services site launched today by E*Trade and "upscale discount retailer" Target is the online component of a strategic marketing alliance announced in May.

The companies say target.etrade.com, the first product of their partnership, exemplifies their shared philosophy of "empowering people to take control of their lives, financial or otherwise, with the appropriate tools, information and education to help them along the way."

The alliance also allows each company to leverage the other's customers and give them "a convenient, value-added way" to manage their financial lives as they shop.

"We know through our popular registry services, Club Wedd and Lullaby Club, that Target guests trust our products to support them in major life events," said Jerry Storch, Target's president of financial services and new businesses. "Providing resources that will enable our guests to receive brokerage and banking services" is an extension of Target's philosophy, he said.

The companies also believe that the integration of E*Trade's online technology and experience with the Target's in-store experience "represents a powerful new business model."

Key to this new model will be a pilot E*Trade "financial services zone" at the SuperTarget store in Roswell, Ga. Set to open in September, the pilot will offer E*Trade services to Target customers and allow the company to test its "physical space concept while supporting its Web-based business." The rollout of financial services zones in additional SuperTarget stores is "possible," the company said.

In contrast to the "affluent" customers of E*Trade's new PrivateAccounts acquisition, where the minimum account is $100,000, the online-meets-offline alliance of E*Trade and Target is aiming for customers described only as "upscale." Introductory incentives at target.etrade.com offer a $100 Target GiftCard for opening a minimum $1000 brokerage account. Those opting for the $500 minimum get $25 deposited into the account.

But affluence and one's location on life's scale are relative, of course. In the effort to diversify revenue streams and capture what E*Trade Chairman and CEO Christos Cotsakos calls "a growing share of wallet," every customer accounts.

Your Turn:
As E*Trade continues to branch out and expand its offerings, does diversification risk becoming "diworsification"? Or does it make the company stronger? Expand your thoughts on the company's discussion board.

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