I. Executive Summary

The Products
• Private-Label Cards Are Single-Purpose Cards
• Private-Label Cards the First "Charge Cards"
• Private-Label Cards Make Comeback in 1990s
• Private-Label vs. Proprietary
• Benefits of Private Label to Retailers
• Private-Label Programs Not a Cost Center
• Benefits of Private-Label to Consumers
• Benefits to Third-Party Issuers

The Market
• Receivables Contract to $83.9 Billion in 1998
• Table 1-1: Estimated Market for Private-Label Credit Cards, 1993-2003 (dollars)
• Private-Label Cards the Most Numerous
• Number of Private-Label Cards Has Grown 13%
• For Card Issuers, Plastic Means Profits
• Plastic Increasingly Offers Benefits Consumers Want
• Lower Costs Enable Small Retailers to Offer Cards
• Will Anything Revitalize Oil Cards?
• Co-Branded Cards Cannibalize Private-Label Sales

The Marketers
• Top 10 Private-Label Issuers Account for 60% of Market
• Figure 1-1: Top Private-Label Retail Card Issuers and Estimated Market Share, 1998 (percent): 4 Card Issuers
• Sears the Leader
• Mobil and Chevron Operate Leading Oil Company Programs
• Private-Label Cards Compete Against Other Types of Cards, Not Each Other
• Co-Branding Cannibalizes Private-Label
• Third-Party Private-Label Issuers Compete with Each Other
• Card Processors Move Into Private-Label Business
• Mergers and Acquisitions Consolidate Market
• Competitors Grow Market Share on Foreign Soil

Payment Processing
• Behind-the-Scenes Network Processes Card Transactions
• Total System Services Scores Two Coups in 1998
• Year 2000 Compliance a Factor in Outsourcing
• Leading Merchant Acquirers
• Ten Leading Payment Processors

The Consumer
• Nearly Three-Fourths of Adults Have/Use Credit Cards
• Cardholders Present Modestly Upscale Profile
• Sears the Most Popular Private-Label Card

Scope and Methodology
• Scope of Report
• Report Methodology

II. The Products

Private-Label Cards
• Private-Label Cards Are Single-Purpose Cards
• Private-Label Cards the First "Charge Cards"
• Private-Label Cards Make Comeback in 1990s
• Private-Label vs. Proprietary
• Benefits of Private Label to Retailers
• Private-Label Programs Not a Cost Center
• Benefits of Private-Label to Consumers
• Benefits to Third-Party Issuers
• Other Types of Private-Label Cards
• Many Private-Label Cards Issued by Third Parties
• Many Private-Label Cards Convert to Co-Branded Programs
• Other Terms Used to Describe Players in Private-Label Industry

III. The Market
Figure 3-1: Estimated Market for Private-Label Credit Cards, 1994-1998 (dollars)

Market Size and Growth
• Receivables Contract to $83.9 Billion in 1998
• Table 3-1: Estimated Market for Private-Label Credit Cards, 1994-1998 (dollars)
• Methodology
• Retailers' Cards Constitute Bulk of Private-Label Market
• Private-Label Cards the Most Numerous
• Table 3-2: Number of Plastic Payment Cards in Circulation, 1997 (number): Private-Label, General-Purpose, Debit, Corporate/Purchasing
• Number of Private-Label Cards Has Grown 13%

Factors to Market Growth
• Cards Symbolize Relationships
• For Consumers, Cards Represent Buying Power
• Cards Provide Information
• Credit Represents One-Half of Retailer Sales Volume
• For Card Issuers, Plastic Means Profits
• Plastic Increasingly Offers Benefits Consumers Want
• Lower Costs Enable Small Retailers to Offer Cards
• Many Retailers Do Not Have Card Programs
• Consumers Continue to Take On Debt
• Various Population Segments Not Saturated
• Mass Merchants Discover Private-Label
• Marketing Programs Affect Rate of Growth
• Will Anything Revitalize Oil Cards?
• Other Technology Problems Hamper Oil Cards
• Co-Branded Cards Cannibalize Private-Label Sales
• Demographic Changes May Force Retailers to Try Harder
• Personal Bankruptcies Force Retailers to Exercise Caution
• Table 3-3: Total Consumer Debt as Percentage of Personal Disposable Income, 1991-1998 (percent)
• Yet Economic Forecasts Remain Sunny
• Internet Creates Growth Opportunity for Private-Label Cards
• Figure 3-2: Projected Market for Private-Label Credit Cards, 1998-2003 (dollars)

Projected Market Growth
• Market to Grow 10% in Next Five Years
• Table 3-4: Projected Market for Private-Label Credit Cards, 1998-2003 (dollars)

IV. The Marketers

Marketer and Brand Share
• Top 10 Private-Label Issuers Account for 60% of Market
• Table 4-1: Top 10 Private-Label Retail Store-Card Issuers and Estimated Market Share, January 1, 1998 (dollars and percent)
• Sears the Leader
• GE Capital Retailer Financial Services
• Household Retail Services USA
• JCPenney Co., Inc.
• The Associates
• Dayton Hudson Corp
• Banc One Private Label Credit Services
• Federated Department Stores
• May Department Stores Co
• Alliance Data Systems
• Mobil and Chevron Operate Leading Oil Company Programs
• Table 4-2: Leading Private-Label Oil Company Card Issuers: By Charge Volume, January 1, 1998 (number and dollars): Top 15 Issuers

Competitive Overview
• Private-Label Cards Compete Against Other Types of Cards, Not Each Other
• Co-Branding Cannibalizes Private-Label
• Third-Party Private-Label Issuers Compete with Each Other
• Cost, Year 2000 Issues Prompt Outsourcing
• Card Processors Move Into Private-Label Business
• Mergers and Acquisitions Consolidate Market
• "Reaffirmation Crisis" Stings Private-Label Leaders
• Competitors Grow Market Share on Foreign Soil
• Citicorp Renews Commitment to Private-Label

Competitive Profile: Sears Merchandise Group
• Grandfather of Private-Label Cards
• Card Program Specifics
• Sears Ambivalent About Premium Card Program
• Sears Card Pivotal to Retailer's Strategy
• Nevertheless, Not All Cardholders Active
• Starter Card Aimed at Younger Consumers and Those Establishing Credit
• Launch of Co-Branded Wal-Mart Card Prompts Sears to Re-Think Strategy
• Yet Credit Problems Have Affected Sears' Bottom Line
• Sears Outsources Its Processing

Competitive Profile: GE Capital Retailer Financial Services
• Second-Place PL Issuer Is Largest Third-Party Issuer
• GE Offers Clients Complete Range of Private-Label Services
• Card-Processing Services
• Offers Clients Internet Credit Application Processing Toolkit

Competitive Profile: Household Retail Services USA
• Merger Vaults Issuer Into Third Place
• Household Also a Leading General-Purpose Card Issuer
• Beneficial Adds to Private-Label and Financing Strength
• Specifics on Only Two Programs Available
• Personal Touch Proves Effective
• Venture Also Hangs Hopes on Private-Label Card

Competitive Profile: JCPenney Co., Inc
• The Fourth-Largest Private-Label Issuer
• Program Specifics
• "Privilege Card" Rewards Most Loyal Shoppers
• Retailer Handles All Processing In-House
• JCPenney Card Honored at Eckerd Drugstores
• And by JCPenney Catalog
• Company Offers Secured Co-Branded Visa Card Through Associates
• Electronic Catalog
• Retailer Strives for Synergy Among Store, Drugstore, and Catalog
• Retailer Believes to Have Year 2000 Problem Resolved by Year-End 1998

Competitive Profile: The Associates
• Second-Tier Issuer Muscles Its Way Into Top Five
• SPS a Well-Established Third-Party Issuer
• The Associates Also a Sophisticated Player
• Two-Tier Program Offered to Texaco Cardholders

Competitive Profile: Dayton Hudson Corp
• Sixth-Ranked Issuer One of 1997's Few Growth Issuers
• Target's Reward Program Benefits Education
• Mervyn's Card Rewards Cardholders

Competitive Profile: Banc One Private Label Credit Services
• The Seventh-Largest Private-Label Issuer
• A Unique Client List
• Offers Full Menu of Services
• Signs Deal with First Data

Competitive Profile: Federated Dept. Stores
• Department Store Leader Is Eighth-Largest Private-Label Issuer
• Centralized Processing Leads to Centralized Reward Program
• Company Also Adopts Gift Cards

Competitive Profile: The May Department Stores Co.
• Ninth-Largest Program Has Declined in Recent Years
• 50% of Sales Generated by Private-Label Cards

Competitive Profile: Alliance Data Systems
• Payment Processor Now Operates 42 Private-Label Programs
• Growth Through Acquisition
• Acquires Harmonic Systems, Inc.

Competitive Profile: Chevron Co. USA
• Largest Proprietary Oil Card Issuer
• But Issuer Doing Little to Promote Card Use

Competitive Profile: Mobil Oil Credit Corp.
• Second-Largest Oil-Card Issuer
• Mobil Offers Variety of Payment Options
• Mobil's Private-Label Card

Marketing and New Product Trends
• To Co-Brand or Not to Co-Brand?
• Many Private-Label Issuers Add Enhancement Programs
• HERO Strives for More Ambitious Rewards
• Something for Everyone
• Going Platinum
• Neiman Marcus Throws in the Jaguar
• Steeped Rebates Reward Higher Spending Levels
• Take-Ones, In-Store Applications Generate Most New Cardholders
• But Activation a Major Challenge
• Abandonment of 0% Financing
• Private-Label Issuers Hold No Grudge Against "Convenience Users"
• Issuers Raise Interest Income by Reducing Minimum Payments
• But Most Private-Label Cards Carry Hefty APRs
• But Private-Label Issuers May Hike Late and Over-Limit Fees
• Yet Low Interest Rates Key to Revolving Balances
• At Least One Private-Label Issuer Rebates to Charitable Causes
• Stored-Value Private-Label Cards
• Internet Popularity Expands Opportunities for Private Label

Consumer Advertising Expenditures and Positioning
• No Industry Data on Private-Label Advertising Expenditures
• Rewards, Instant Approval, No Annual Fee Are Frequent Sales Points

Trade Advertising
• Customized Solutions the Most Prominent Theme

V. Payment Processing

Overview
• Behind-the-Scenes Network Processes Card Transactions
• Front-Office vs. Back-Office
• Merchant Acquirers and Payment Processors Often Overlap
• Yet One-Stop Shopping Still Not the Norm
• Payment Processing a Less Risky Means of Profiting from Plastic
• Mergers, Acquisitions, and Portfolio Sales Shape Competition in this Segment
• Card Associations Respond
• Total System Services Scores Two Coups in 1998
• Year 2000 Compliance a Factor in Outsourcing
• Leading Merchant Acquirers
• Ten Leading Payment Processors

Competitive Focus: First Data Corporation
• Industry Leader Covers All Processing Aspects
• Company Active in Seven Business Areas, Five Related to Plastic Payment Cards
• Domestic Card Issuer Services
• Domestic Merchant Processing Services
• International Card Services
• Payment Instruments Include Fleet Services and Electronic Payments Specialty Services
• Electronic Bill Presentment and Payment
• First Data Continuously Grows Its Business by Enhancing Customers' Businesses

VI. The Consumer

Ownership and Use of Credit Cards
• Note on Simmons Market Research Bureau Data
• Data Presented for Nine Private-Label Cards
• Nearly Three-Fourths of Adults Have/Use Credit Cards
• Age, Marital Status, Education Have Bearing on Card Ownership
• Cardholders Present Modestly Upscale Profile
• 80% of Cardholders Have Used Cards in Last 30 Days
• New Cardholders Present Young Profile
• Sears the Most Popular Private-Label Card
• Table 6-1: Consumer Ownership and Use of Credit Cards by Type, 1998 (number and percent): 19 Types
• Table 6-2: Demographic Characteristics Favoring Ownership and Use of Credit Cards (U.S. Adult Population): Have/Use, Acquired Last 12 Months, Used Last 30 Days/12 Months

Private-Label Cardholders: By Card Type
• Private-Label Cardholders Present Slightly Different Profile
• Sears Profile Typical of Department Store Cardholder
• JCPenney Profile Reflects More Career-Oriented Women
• Most Upscale Profile Presented by Other Department Store Cardholders
• Montgomery Ward Cardholder Profile Skews Older, Less Affluent
• Specialty Retail Cardholders Present Profile of Upscale Female
• Gasoline Cardholders Also Upscale
• Air Travel Cards Skew Female
• College Educated Sales Personnel Typify Auto Rental Cardholders
• Hotel Cardholders Likely to Be Professional Males
• Table 6-3a: Demographic Characteristics Favoring Ownership and Use of Private-Label Credit Cards (U.S. Adult Population): Sears, JCPenny, Other Department Store, Montgomery Ward
• Table 6-3b: Demographic Characteristics Favoring Ownership and Use of Private-Label Credit Cards (U.S. Adult Population): Other Specialty Retailer, Gasoline, Air Travel, Auto Rental
• Table 6-3c: Demographic Characteristics Favoring Ownership and Use of Credit Cards by Type: Any (U.S. Adult Population): Hotel

Consumer Use of Plastic Payment Cards at Retail
• Growth of Plastic Termed "Astronomical"
• Nearly Half of All Families Have Credit Card Debt
• Younger to Middle-Aged Heads of Household More Likely to Carry Debt
• Majority of Cardholders Admit to Carrying a Balance
• Most Think Americans Use Credit Cards Too Much
• ...But Don't Plan to Change Their Ways
• Rewards, Interest Rate Dictate Use
• Younger Shoppers Rely Less on Credit Cards, Are More Open to Debit Cards
• Nearly Half of Private-Label Cardholders Carry a Balance
• Many Private-Label Cards Go Unused

Appendix I: Examples of Consumer and Trade Advertising and Promotions

Appendix II: Addresses of Selected Companies