The U.S. Market for Private Label Credit Cards, 4th Edition

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While largely mature, the market for private-label credit cards promises considerable activity at all levels for years to come. Leading retailers such as Sears and Circuit City, once committed to managing their own card programs, have moved en masse to sell their portfolios to third-party issuers like Citi Commerce Solutions and GE Card Services. And as those two financial giants battle for dominance, an assortment of smaller issuers, acquirers, and processors are carving out their own slice of the private-label market. Consumers have staged a slow exodus away from private-label cards in recent years, but new products and marketing tactics are waiting in the wings to—with any luck—reverse that trend.
This Packaged Facts report, The U.S. Market for Private Label Credit Cards, focuses on the $98 billion private-label credit card industry, covering cards issued directly by retailers as well as cards issued by third parties; to a lesser degree, consumer usage of “travel” cards (gas, air, and auto) is discussed in relation to the market overall. The report examines the latest trends in the private-label market—including widespread consolidation among market leaders, retailers’ new fondness for third-party issuers, the impact of co-branding, and new developments in “cardless” cards and so-called consumer-to-consumer credit—placing them in context in the overall credit industry. It also explores the state of private-label card marketing, detailing new application procedures, online marketing, advertising, and trends in tiered and rewards-based card programs. Also included are detailed company profiles of the leading bankcard associations and card issuers (including Citi Commerce Solutions, GE Consumer Finance, Household Retail Services, Inc., and J.P. Morgan Chase & Co.), as well as demographic data on private-label credit card holders.
Report Methodology
The information in The U.S. Market for Private Label Credit Cards is based on both primary and secondary research. Primary research involved interviews with marketing, public relations and analysts within the financial industry and consultants to the industry. Secondary research entailed data-gathering from relevant trade, business, and government sources, including company literature, data from CardSource and corporate filings.
What You’ll Get in this Report
The U.S. Market for Private Label Credit Cards identifies and assesses the economic drivers shaping the market for retail and travel cards, as well as the technological innovations and regulatory changes affecting its competitiveness and growth. In addition, the report profiles the market players as well as the market strategies and trends that will help shape its future.
Chapter 1: Executive Summary
Scope and Methodology
Scope of Report
Report Methodology
Introduction
Private-Label Card Basics
Private-Label Cards Offer Many Benefits for Retailers
Third-Party Issuers Dominate Market
The Market
Market to Top $112 Billion in 2009
Market Is Largely Mature
Greatest Growth in Store for Largest Issuers
The Marketers
Volume Concentrated Among Top-Tier Marketers
Figure 1-1: Top Marketers of Private-Label Retail Cards, 2004 (percent)
The Leading Payment Processors
Overlapping Roles of Issuers, Acquirers, Processors
The Leading Oil Company Card Programs
Competition for Private Label on Many Levels
Third-Party Consolidation Driving Market
Strategic Partnerships Helping to Grow Market Share
Marketing Trends
Shifts in Basic Private-Label Marketing
The Co-Branding Question
Rewards Programs Continue to Evolve
The Consumer
19% Penetration Level for Department Store Cards
Table 1-1: Household Penetration Rates for Selected Credit Card Classifications: Have or Use, Used in Year, and Used in Last Month, 2004 (
73% Frequent Usage Level for Gasoline Cards
Chapter 2: Introduction
Private-Label Card Overview
Scope of Report
Private-Label Card Basics
Private-Label Cards Offer Many Benefits for Retailers
Third-Party Issuers Dominate Market
Overlap with Corporate Card Market
Private-Label Risks, Rewards, and Innovation
Private-Label Payments a Low Priority for Consumers
Challenges from General-Purpose, Co-Branded Cards
Aggressive Consolidation Among Top-Tier Issuers
But Second-Tier Companies Standing By
CRM Development Remains Key to Private-Label Growth
Online Ventures Bring New Private-Label Strategies
Target Deals a Blow to Smart Cards
Other New Technology Struggling to Break Through
Internet Security and Innovation
Diversification
The Regulatory Environment
Repercussions of Anti-Trust Rulings
Merchants Pushing for More
Gramm-Leach-Bliley and Simplified Notices
Chapter 3: The Market
Market Size and Composition
Note on Methodology
Market Approaches $100 Billion in 2004
Figure 3-1: U.S. Market for Private-Label Credit Cards, 2000-2004 (in billions of dollars)
Table 3-1: U.S. Market for Private-Label Credit Cards, 2000-2004 (in billions of dollars)
Private-Label Less Than 15% of Total Card Market
Proprietary Cards Generate Low Volume But Big Transactions
Factors to Market Growth
Market Is Largely Mature
Retailers Recognize Benefits of Scale
Greatest Growth in Store for Largest Issuers
Second-Tier Issuers Focus on Specialty, Smaller Retailers
Cardless Cards and C2C Credit
Online Purchasing Makes Private-Label More Appealing
Smart Cards May Have Missed Their Window
M-Commerce Still on Hold, Other Technologies in the Wings
Consumer Credit Quality on the Rise
Increased Buying Power of Minority Populations
Confronting Debit, Payroll, and Co-branded Cards
New Products, Promotions, and Possibilities
Figure 3-2: Projected U.S. Market for Private-Label Credit Cards, 2004-2009 (in billions of dollars)
Projected Market Growth
Market to Top $112 Billion in 2009
Table 3-2: Projected U.S. Market for Private-Label Credit Cards, 2004-2009 (in billions of dollars)
Chapter 4: The Marketers
Overview
Volume Concentrated Among Top-Tier Marketers
The Leading Payment Processors
Overlapping Roles of Issuers, Acquirers, Processors
The Leading Oil Company Card Programs
Table 4-1:
Marketer Shares
Top Two Private-Label Issuers Account for 69% of Market
Figure 4-1: Top Marketers of Private-Label Retail Cards, 2004 (percent)
Table 4-2a: Top Marketers of Private-Label Retail Cards: Estimated Receivables and Market Share, 2004 (in billions of dollars)
Table 4-2b: Top Marketers of Private-Label Retail Cards: Estimated Market Share, 2000 vs. 2004 (percent)
Rankings Beginning to Solidify
The Competitive Situation
Competition for Private Label on Many Levels
Third-Party Consolidation Driving Market
Strategic Partnerships Helping to Grow Market Share
In-House Control Still Offers Competitive Advantages
Competitors Seek Growth in International Arena
Marketing Trends
Shifts in Basic Private-Label Marketing
The Co-Branding Question
Rewards Programs Continue to Evolve
Maximum Flexibility in All Facets of Card Membership
The Hard Sell Pays Off
Attracting Customers with Easier Application Procedures
Advertising Trends
Chapter 5: Competitor Profiles
Competitor Profile: Alliance Data Systems Corp.
Corporate Overview
Private-Label Growth
A Winning Focus on Marketing
New Venture in Utility Services
Co-Branding Worries Unfounded, Says ADS
Competitor Profile: Citi Commerce Solutions (Citigroup, Inc.)
Corporate Overview
Citi Scores Coup with Sears Acquisition
Citi Expands, Holds Tight to Acquisitions
Relying on Old Tactics
Competitor Profile: Federated Department Stores, Inc.
Corporate Overview
Federated Loses Share to May, Focuses on Existing Operations
Website Leads Way to Wider Changes
Partnership with Cosi Brings New Opportunities
Competitor Profile: First Data Merchant Services Corp.
(First Data Corp.)
Corporate Overview
Playing on a Larger Field
Competitor Profile: GE Consumer Finance
(General Electric Co.)
Corporate Overview
A New Start
Product and Marketing Innovations
New Directions, Expanded Services
New Competition from Old Ally
Competitor Profile: HSBC North America Holdings, Inc.
Corporate Overview
Integration with HSBC Pays Off
Competitor Profile: J.P. Morgan Chase & Co.
Corporate Overview
The ARC Advantage
Refuting Rumors
Competitor Profile: The May Department Stores
Corporate Overview
Marshall Field’s Deal Shakes Up Proprietary Program Rankings
Competitor Profile: Shoppers Charge Accounts Co.
(
Corporate Overview
Full Service for Smaller Operations
Reaching Out to Business Clients
Competitor Profile: Target Financial Services (Target Corp.)
Corporate Overview
Target’s Not-So-Smart Card
New Formats, New Opportunities
Competitor Profile: Total System Services, Inc.
Corporate Overview
Switching to TS2
Chapter 6: The Consumer
The Private-Label Cardholder: Introduction
Simmons Market Research Bureau Data
19% Penetration Level for Department Store Cards
Table 6-1: Household Penetration Rates for Selected Credit Card Classifications: Have or Use, Used in Year, and Used in Last Month, 2004 (
73% Frequent Usage Level for Gasoline Cards
Figure 6-1: Percentage of Overall Card Users Who Use Cards Monthly: Selected Credit Card Classifications, 2004 (
Consumer Focus: Overview of Demographics
55-64 the Prime Age Bracket
Women Post Index of 140 for Clothing/Specialty Cards
Asians Post Index of 119 for Clothing/Specialty Cards
Northeast the Top Region
Downscale Skew for Sears
Skew to Two-Person Households
Table 6-2a: Indices for Use of Selected Credit Card Classifications in Last Year: By Adult Age Bracket, 2004 (
Table 6-2b: Indices for Use of Selected Credit Card Classifications in Last Year: By Adult Age Bracket, 2004 (
Table 6-3: Indices for Use of Selected Credit Card Classifications in Last Year: By Gender, 2004 (
Table 6-4: Indices for Use of Selected Credit Card Classifications in Last Year: By Race/Ethnicity, 2004 (
Table 6-5a: Indices for Use of Selected Credit Card Classifications in Last Year: By Region, 2004 (
Table 6-5b: Indices for Use of Selected Credit Card Classifications in Last Year: By Region, 2004 (
Table 6-6a: Indices for Use of Selected Credit Card Classifications in Last Year: By Household Income Bracket (in Thousands), 2004 (
Table 6-6b: Indices for Use of Selected Credit Card Classifications in Last Year: By Household Income Bracket (in Thousands), 2004 (
Table 6-6c: Indices for Use of Selected Credit Card Classifications in Last Year: By Household Income Bracket (in Thousands), 2004 (
Table 6-7: Indices for Use of Selected Credit Card Classifications in Last Year: By Household Size, 2004 (
Consumer Focus: Demographics by Card Type
Department Store Cards vs. Credit Cards Overall
Sears vs. J.C. Penney
Middle-of-the-Road Incomes for Gasoline Cardholders
Clothing/Specialty Cards: Household vs. Individual Incomes
Table 6-8: Demographic Characteristics Favoring Use of Credit Cards: In Last Year, 2004 (
Table 6-9: Demographic Characteristics Favoring Use of Credit Cards: In Last Month, 2004 (
Table 6-10: Demographic Characteristics Favoring Use of Department Store Credit Cards: In Last Year, 2004 (
Table 6-11: Demographic Characteristics Favoring Use of Department Store Credit Cards: In Last Month, 2004 (
Table 6-12: Demographic Characteristics Favoring Use of Sears Credit Cards: In Last Year, 2004 (
Table 6-13: Demographic Characteristics Favoring Use of Sears Credit Cards: In Last Month, 2004 (
Table 6-14: Demographic Characteristics Favoring Use of J.C. Penney Credit Cards: In Last Year, 2004 (
Table 6-15: Demographic Characteristics Favoring Use of J.C. Penney Credit Cards: In Last Month, 2004 (
Table 6-16: Demographic Characteristics Favoring Use of Gasoline Credit Cards: In Last Year, 2004 (
Table 6-17: Demographic Characteristics Favoring Use of Gasoline Credit Cards: In Last Month, 2004 (
Table 6-18: Demographic Characteristics Favoring Use of Clothing/Specialty Store Credit Cards: In Last Year, 2004 (
Table 6-19: Demographic Characteristics Favoring Use of Clothing/Specialty Store Credit Cards: In Last Month, 2004 (
Consumer Focus: Cardholder Attitudes
Clothing/Specialty Cardholders as Avid Shoppers
Department Store Cardholders More Loyal
J.C. Penney Window Shoppers, Family Shoppers
Table 6-20: Indices by Credit Card Classification for Agreement with Statement: "I Use Internet to Help Plan Shopping Trips," 2004 (
Table 6-21: Indices by Credit Card Classification for Agreement with Statement: "Tend to Spend Long Periods of Time in Store Browsing," 2004 (
Table 6-22: Indices by Credit Card Classification for Agreement with Statement: "Store’s Environment Makes a Difference in Whether I Shop There," 2004 (
Table 6-23: Indices by Credit Card Classification for Agreement with Statement: "I Only Shop in Favorite Stores; They Have the Brands I Like," 2004 (
Table 6-24: Indices by Credit Card Classification for Agreement with Statement: "I’m Drawn to Stores, Don’t Shop by Sales," 2004 (
Table 6-25: Indices by Credit Card Classification for Agreement with Statement: "Head Right to Clearance Rack When Entering a Store," 2004 (
Table 6-26: Indices by Credit Card Classification for Agreement with Statement: "I Go Shopping Frequently," 2004 (
Table 6-27: Indices by Credit Card Classification for Agreement with Statement: "Even When I Don’t Purchase, I Enjoy Shopping," 2004 (
Table 6-28: Indices by Credit Card Classification for Agreement with Statement: "I Prefer to Shop with My Family," 2004 (
Table 6-29: Indices by Credit Card Classification for Agreement with Statement: "I Prefer to Shop with Friends," 2004 (
Chapter 7: Looking Ahead
Trends and Opportunities
Third-Party Issuers Take the Reins
Room to Grow with Smaller Merchants
Reaching New Populations
Lessons Learned from High-Tech Gimmicks
CRM the Key to Growth
Appendix: Addresses of Selected Marketers