The U.S. Market for Private-Label Credit Cards - 3rd Edition

Nov 1, 2002
222 Pages - Pub ID: LA762190
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This Packaged Facts report focuses on the $95 billion dollar private-label credit card industry, covering retail and oil company cards, card issuers, acquirers, and processors.

The report first provides an overview of the players in the industry- acquirers/issuers and processors- and then discusses current trends including risk management, new card technology, electronic payment patterns, and consolidations. The report next quantifies the private-label credit card market, covering market size and composition for 1998-2002.

An analysis of factors to market growth- including the increasing importance of economies of scale in private label and the resulting alliances, the Internet, emerging market opportunities, and the rapid proliferation of competition in new payment methods- establishes a framework for market growth projections for 2002-2007.

Also provided are detailed company profiles of the leading retailer, oil, and third-party card issuers, as well as demographic data on private-label cardholders, focusing on characteristics such as gender and education and income levels.

Private-label credit cards can be a difficult market - credit risks tend to be higher than in the general-purpose card market, and competition in a saturated card market is increasingly stiff. Yet retailers and card issuers remain in private-label because those risks are often countered by both profit and benefits, such as access to valuable customer purchase data. Learn why some retailers have recently given up, closed, or sold their private-label programs while others have persisted and profited, and why. Find valuable insights for adapting new technology and trends to credit operations and for keeping up with the factors that affect continued expansion in this changing market.

I. Executive Summary

    Scope and Methodology
    • Scope of Report
    • Report Methodology

    The Products

    • Private-Label Cards Traditionally Single Purpose
    • 1990s a Roller Coaster for Private Label
    • Private Label Good to Third Parties
    • Credit, Sales, and Risks
    • Private Label in the New Millennium: Changes on the Horizon
    • Technology Means New Look and Renewed Marketing
    • Diversification and the Internet
    • Privacy, Private-Label Credit Cards, and the Gramm-Leach-Bliley Act
    • Visa and MasterCard Lose Teeth in Anti-trust Ruling

    The Market

    • Market to Top $100 Billion in 2007
    • Table 1-1: U.S. Market for Private-Label Credit Cards, 1998-2007 (dollars)
    • Retailer Cards Constitute Bulk of Private-Label Market
    • … But Under 20% of Total Credit Card Business
    • 35- to 44-Year-Olds Are Largest Age Block for Private-Label Cards
    • Hispanics Account for 11% of Clothing/Specialty Store Cardholders
    • Market Is Largely Mature
    • Private-Label Cards’ Fundamental Benefits Remain Important
    • Hispanic Population Jumps 58%
    • Smart Cards Still on the Way
    • Greatest Threat May Come from Within

    The Marketers

    • Volume Concentrated in Top-Tier Marketers
    • The Leading Oil Company Card Programs
    • Positions Likely to Remain Fluid
    • Competition Multi-Leveled for Private-Label Credit Cards
    • The State of Market Consolidation
    • Oil Companies Have Strategies of Their Own
    • Co-Branding Cannibalizes Private Label
    • Kohl’s Is One to Watch
    • E-tailing Pioneer Amazon.com Extends Its Reach
    • To Co-Brand or Not to Co-Brand?
    • Automated and Online Applications on the Rise
    • Online Marketing Hits and Misses
    • Rewards Programs Remain Strong

    The Consumer

    • 20% Penetration Level for Sears Credit Cards
    • Minorities Account for 21% of Clothing/Specialty Store Card Users
    • Figure 1-1: Minority Share of Total Users for Selected Credit Card Classifications, 2002 (% of U.S. Adults): 6 Classifications
    • Affluent Skew to Gasoline Cards
    • Clothing/Specialty Store Cards: Affluence vs. Earnings

    Looking Ahead

    • Trends and Opportunities

II. The Products

    Private-Label Cards
    • Scope of Report
    • Private-Label Cards Traditionally Single Purpose
    • 1990s a Roller Coaster for Private Label
    • Two Ways to Issue Private-Label Cards
    • Players in the Private-Label Industry: Issuers and Acquirers
    • Front-Office, Payment Processing, and Back-Office
    • Behind-the-Scenes Network Processes Card Transactions
    • Many Private-Label Cards Issued by Third Parties
    • Private Label Good to Third Parties
    • Private-Label Cards Remain Important to Retailers
    • Competition for Accounts Means Retailers Still Benefit
    • Not Just for Third-Parties
    • Private-Label Credit Cards Convert to Co-Branded Cards
    • Benefits of Private Label to Consumers
    • Other Types of Private-Label Cards

    Private-Label Pitfalls

    • Credit, Sales, and Risk
    • Charge-offs on the Rise
    • Spiegel Discovers Risks First-Hand
    • Third Parties and Co-Branding Help Manage Credit Risks
    • New Private-Label Card Launches Continue

    Private Label in the New Millennium

    • Change on Hand for Private Label
    • Consolidation Trends Continue
    • Technology Means New Look and Renewed Marketing
    • Technology Helps Counter Risks
    • Customer Management Spending Projected in the Billions
    • Alternatives to Private-Label Cards Mean Declining Share
    • Diversification and the Internet

    Payment Processing in the New Millennium

    • Payment Options Proliferate
    • Alliances and Consolidation Shape Competition
    • Total System Services Adopts Authentication Technology
    • Study Analyzes Electronic Payment Patterns
    • Emerging Payment Methods in Retail
    • Gas Companies Turn to Payment by Radio Frequency
    • Payroll Cards
    • Electronic Bill Presentment and Payment

    The Regulatory Environment

    • Privacy, Private-Label Credit Cards, and the Gramm-Leach-Bliley Act
    • Visa and MasterCard Lose Teeth in Anti-trust Ruling
    • Ruling May Suggest Direction in Wal-Mart Suit

III. THE MARKET

  • Figure 3-1: U.S. Market for Private-Label Credit Cards, 1998-2002 (dollars)

    Market Size and Composition
    • Note on Methodology
    • Market at $95.5 Billion in 2002
    • Table 3-1: U.S. Market for Private-Label Credit Cards, 1998-2002 (dollars)
    • Retailer Cards Constitute Bulk of Private-Label Market
    • … But Under 20% of Total Credit Card Business
    • 2.5 Private-Label Cards Per Cardholder
    • Table 3-2: Estimated Number of Payment Cards Per Cardholder: Private-Label, General-Purpose, and Debit, 2001
    • Private-Label Cards 9% of Total Electronic Transactions
    • Table 3-3: Payment Cards and Transaction Volume, 2001 (number): Private Label, General Purpose, Debit, Gas
    • Alternatives to Private-Label Cards Mean Declining Share
    • 35- to 44-Year-Olds Are Largest Age Block for Private-Label Cards
    • Women Account for 69% of Other Department Store Cardholders
    • Hispanics Account for 11% of Clothing/Specialty Store Cardholders
    • South Accounts for 38.5% of Gasoline Cardholders
    • 35.7% of Sears Cardholders Have High School Degree Only
    • $75K-$99K and $100K-$149K Are Largest Blocks by Household Income
    • Marrieds Represent Over 70% of Sears, J.C. Penney, and Gasoline Cardholders
    • Two-Person Households at 42% of Gasoline Cardholders
    • House Dwellers Account for 85% of J.C. Penney Cardholders
    • Table 3-4a: Distribution of Usage by Age Bracket for Selected Credit Card Classifications: Overall, Sears, and Other Department Store Credit Cards, 2002 (percent): From Age 18 to Age 75+
    • Table 3-4b: Distribution of Usage by Age Bracket for Selected Credit Card Classifications: J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards, 2002 (percent): From Age 18 to Age 75+
    • Table 3-5: Distribution of Usage by Gender for Selected Credit Card Classifications, 2002 (percent): Overall, Sears, Other Department Store, J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards
    • Table 3-6a: Distribution of Usage by Race/Ethnicity for Selected Credit Card Classifications: Overall, Sears, and Other Department Store Credit Cards, 2002 (percent): White/Not Hispanic, All Minorities, Hispanic, Black, Asian
    • Table 3-6b: Distribution of Usage by Race/Ethnicity for Selected Credit Card Classifications: J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards, 2002 (percent): White/Not Hispanic, All Minorities, Hispanic, Black, Asian
    • Table 3-7a: Distribution of Usage by Region for Selected Credit Card Classifications: Overall, Sears, and Other Department Store Credit Cards, 2002 (percent): South, Midwest, West, Northeast
    • Table 3-7b: Distribution of Usage by Region for Selected Credit Card Classifications: J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards, 2002 (percent): South, Midwest, West, Northeast
    • Table 3-8a: Distribution of Usage by Educational Attainment for Selected Credit Card Classifications: Overall, Sears, and Other Department Store Credit Cards, 2002 (percent): 6 Classifications
    • Table 3-8b: Distribution of Usage by Educational Attainment for Selected Credit Card Classifications: J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards, 2002 (percent): 6 Classifications
    • Table 3-9a: Distribution of Usage by Household Income Bracket for Selected Credit Card Classifications: Overall, Sears, and Other Department Store Credit Cards, 2002 (percent): 11 Classifications
    • Table 3-9b: Distribution of Usage by Household Income Bracket for Selected Credit Card Classifications: J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards, 2002 (percent): 11 Classifications
    • Table 3-10a: Distribution of Usage by Marital Status for Selected Credit Card Classifications: Overall, Sears, and Other Department Store Credit Cards, 2002 (percent): 4 Classifications
    • Table 3-10b: Distribution of Usage by Marital Status for Selected Credit Card Classifications: J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards, 2002 (percent): 4 Classifications
    • Table 3-11a: Distribution of Usage by Household Size for Selected Credit Card Classifications: Overall, Sears, and Other Department Store Credit Cards, 2002 (percent): 4 Classifications
    • Table 3-11b: Distribution of Usage by Household Size for Selected Credit Card Classifications: J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards, 2002 (percent): 4 Classifications
    • Table 3-12: Distribution of Usage by Type of Residence for Selected Credit Card Classifications, 2002 (percent): Overall, Sears, Other Department Store, J.C. Penney, Gasoline, and Clothing/Specialty Store Credit Cards

    Factors to Market Growth

    • Market Is Largely Mature
    • Pros and Cons of Credit Profits
    • Cards Represent Buying Power for Consumers
    • Private-Label Cards’ Fundamental Benefits Remain Important
    • New Retailers Continue to Offer Private-Label Cards
    • Hispanic Population Jumps 58%
    • Buying Power Grows Across the Board
    • Internet Spawning Private-Label "Cardless" Credit
    • Contactless Payment Tokens May Boost Gasoline Market
    • Debit Cards Mushroom in Popularity
    • Smart Cards Still on the Way
    • Additional Card-Replacement Technologies on the Rise
    • M-Commerce an Additional Factor
    • Payroll and Stored-Value Cards Another Alternative
    • Greatest Threat May Come from Multiple Cards Within
    • The Question of the Economy
    • Figure 3-2: Projected U.S. Market for Private-Label Credit Cards, 2002-2007 (dollars)

    Projected Market Growth

    • Market to Top $100 Billion in 2005
    • Table 3-13: Projected U.S. Market for Private-Label Credit Cards, 2002-2007 (dollars)

IV. Marketing Overview

    The Marketers
    • Volume Concentrated in Top-Tier Marketers
    • Top Four Account for Two-Thirds of Market
    • Five Players in $2 Billion Range
    • The Leading Payment Processors
    • Second-Tier Issuers
    • Some Card Processors Also Issue Cards
    • The Leading Oil Company Card Programs
    • Table 4-1: U.S. Private-Label Credit Card Market: Selected Marketers and Brands, 2002

    Marketer Shares

    • Top 2 Private-Label Issuers Account for 51% of Market
    • Table 4-2: Top Marketers of Private-Label Retail Cards: Estimated Receivables and Market Share, 2002(dollars and percent): 11 Marketers
    • Positions Likely to Remain Fluid

    The Competitive Situation

    • Competition Multi-Leveled for Private-Label Credit Cards
    • The State of Market Consolidation
    • Oil Companies Have Strategies of Their Own
    • Phillips Tries Additional Strategy to Acquire Cardholders
    • Third-Party Issuers Stress Services
    • Co-Branding Cannibalizes Private Label
    • When Sears Acts, Will Others Follow?
    • Kohl’s Is One to Watch
    • E-tailing Pioneer Amazon.com Extends Its Reach
    • Eyes on Amazon
    • Terms and Interest Rates Are Competitive Forces for Retailers
    • Spiegel’s Private-Label Program on the Block
    • New Products Raise Question Marks
    • Competitors Seek Growth in International Arena

    Marketing Trends

    • Private-Label Marketing Remains Largely Unchanged
    • To Co-Brand or Not to Co-Brand?
    • Household International Markets Through Best Buy
    • Automated and Online Applications on the Rise
    • Online Marketing Hits and Misses
    • Colorful Cards Attract Attention
    • Rewards Programs Remain Strong
    • Tiered Cards Remain Popular
    • 0% Financing Continues to Pay Off
    • Potential in Niche and Minority Markets
    • Advertising Expenditures Not Tracked in Private Label
    • Card Applications and Point-of-Sale Displays
    • With Trade Advertising, Customization Is Key to Differentiation

V. Competitive Profiles

    Alliance Data Systems Corp.
    • Corporate Overview
    • Private-Label Growth
    • Relative Newcomer Has Wide Reach
    • Upbeat Strategy Results in New Clients
    • Alliance Leery of Co-Branded Store Cards

    Citi Commerce Solutions (Citigroup, Inc.)

    • Corporate Overview
    • Aggressive Strategies for Citi Commerce
    • Rapid Growth for Citigroup
    • Cross-Selling a Primary Strategy for Citigroup
    • Customer Service Sites Also Cross-Selling
    • Citi Concentrates on Services
    • Customers Sign Up at Citi’s Website for Oil Cards
    • Cross-Selling Appears to Be a Long-Term Strategy for Opening Hispanic Market

    Conseco Finance Corp. (Conseco, Inc.)

    • Corporate Overview
    • Conseco an Issuer of a Different Color
    • Conseco Finance Offers Additional Products
    • Conseco Differs in Additional Ways
    • Conseco Offers Rewards

    Federated Department Stores, Inc.

    • Corporate Overview
    • Federated Stores’ Private-Label Program Remains Independent
    • Federated Has Long and Turbulent History
    • Fingerhut Private-Label Experiment Unsuccessful
    • Fingerhut’s Fulfillment Business Actual Objective
    • Federated Cuts Bait
    • Federated Goes Internet from New Angle
    • Federated Enters Other Financial Markets

    First Data Merchant Services Corp. (First Data Corp.)

    • Corporate Overview
    • First Data Merchant Services Processes Billions
    • First Data an Industry Unto Itself
    • Citi Signs with First Data

    GE Card Services (General Electric Co./GE Consumer Finance)

    • Corporate Overview
    • The GE Card Program
    • GE Card Services and GE Consumer Finance
    • Difficult Times for GE
    • GE Card Capital Focus of Criticism
    • GE Fighting Back
    • Customer Initiative
    • 2002 Slow for GE Card Services
    • Montgomery Ward Lawsuit
    • GE Card Direction in Question

    Household Retail Services, Inc. (Household International, Inc.)

    • Corporate Overview
    • The Household Retail Services Division
    • Acquisition Spree in 2001
    • Household Signs Saks

    May Department Stores Co.

    • Corporate Overview
    • Private-Label Numbers Decline Across the Board
    • May as Department Store Retailer

    Sears, Roebuck and Co.

    • Corporate Overview
    • The Sears MasterCard: An Auspicious Debut
    • A Broader Role for the Sears Store Card
    • Other Bold Changes Also Seen as Risky

    Shoppers Charge Accounts Co. (Hudson United Bancorp)

    • Corporate Overview
    • Shoppers Charge Serves a Specific Niche
    • Flurry of Activity Boosts Shoppers’ Portfolio
    • Shoppers Finds Opportunities Where Others Find Waste

    Target Financial Services (Target Corp.)

    • Corporate Overview
    • 40%-50% Growth in Credit Card Receivables
    • Target’s Smart Card Visa

    Total System Services, Inc.

    • Corporate Overview
    • 17% of U.S. Retail Cards
    • Consolidation Forces TSYS International

VI. The Consumer

    Private-Label Credit Card Demographics
    • Note on Simmons Market Research Bureau Data
    • 20% Penetration Level for Sears Credit Cards
    • Women Constitute 75% of Clothing/Specialty Store Cardholders
    • Figure 6-1: Female Share of Total Users for Selected Credit Card Classifications, 2002 (% of U.S. Adults): 6 Classifications
    • Minorities Account for 21% of Clothing/Specialty Store Card Users
    • Figure 6-2: Minority Share of Total Users for Selected Credit Card Classifications, 2002 (% of U.S. Adults): 6 Classifications
    • 4 Million Hispanic Users of Sears Cards
    • Sears and Penney vs. Other Department Store Cards
    • Affluent Skew to Gasoline Cards
    • Clothing/Specialty Store Cards: Affluence vs. Earnings
    • Top Indicators by Gender
    • Marital Status and Home Ownership as Indicators Within Minority Communities
    • Table 6-1: Usage Rate and Number of Users for Selected Credit Card Classifications, 2002 (% and # of U.S. Adults): 6 Classifications
    • Table 6-2: Usage Rate and Number of Users for Selected Credit Card Classifications: By Gender, 2002 (% and # of U.S. Adults): 6 Classifications
    • Table 6-3: Usage Rate for Selected Credit Card Classifications: By Race/Ethnicity, 2002 (% of U.S. Adults): White/Not Hispanic, Black, Hispanic, Asian
    • Table 6-4: Number of Users for Selected Credit Card Classifications: By Race/Ethnicity, 2002 (U.S. Adults): White/Not Hispanic, Black, Hispanic, Asian
    • Table 6-5: Demographic Characteristics Favoring Use of Credit Cards, 2002 (U.S. Adults)
    • Table 6-6: Demographic Characteristics Favoring Use of Sears Credit Card, 2002 (U.S. Adults)
    • Table 6-7: Demographic Characteristics Favoring Use of Other Department Store Credit Cards, 2002 (U.S. Adults)
    • Table 6-8: Demographic Characteristics Favoring Use of J.C. Penney Credit Card, 2002 (U.S. Adults)
    • Table 6-9: Demographic Characteristics Favoring Use of Gasoline Credit Cards, 2002 (U.S. Households)
    • Table 6-10: Demographic Characteristics Favoring Use of Clothing/Specialty Store Credit Cards, 2002 (U.S. Adults)
    • Table 6-11: Top Indicators Among Women for Use of Selected Credit Card Classifications, 2002 (U.S. Adults)
    • Table 6-12: Top Indicators Among Men for Use of Selected Credit Card Classifications, 2002 (U.S. Adults)
    • Table 6-13: Top Indicators Within Minority Populations for Use of Selected Credit Card Classifications, 2002 (U.S. Adults)

VII. Looking Ahead

    Trends and Opportunities
    • Keeping It Simple
    • Private-Label Directions and Technological Updates
    • Third-Party vs. Retailer Issuers
    • Demographic Diversity
    • Opportunities in Co-Branding
    • Playing It Smart
    • Opportunities Online
    • Extending the Reach
    • Seeing Past the Sequoias

Appendix I: Examples Of Consumer Promotions

Appendix II: Addresses Of Selected Marketers

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