Packaged Facts estimates that the private-label card market fell 3.5% in 2008--to $109.7 billion in receivables, after increasing 3.3% in 2007. For 2009, the report projects another decline of 0.5% to about $109.2 billion. But it also predicts a rally starting later this year--and an increase of some 12.6% to $123 billion in 2012.
"The forecast for private label is more bleak than sunny," according to a report summary, "but online shopping, rewards programs [and] improved customer service stimulating usage by under-targeted consumer groups can all contribute to growth. Issuers willing to take on more accounts can also expand their businesses by courting smaller retailers that don't currently offer store cards."
Recent retail credit card trends reported by Packaged Facts include:
• The acquisition of stores' credit card portfolios by third-party issuers. By the start of 2008, the report said, only four major retailers still managed their card programs in-house--a figure that Packaged Facts expects to soon drop down to two.
• Co-branding with Visa or MasterCard, giving customers access to large rewards programs, rather than using stores' own incentives as the primary promotional tool. But as outside card issuers start to emphasize customer relationship management over acquisitions to grow their businesses, Packaged Facts reports that "many retailers are reportedly dissatisfied by issuers' services in this arena and may even seek to reclaim their card assets."
In 2007, Packaged Facts said, only 11 private-label card issuers had receivables greater than $100 million--down from 17 in 2004 and 27 in 2001--and only three banks had receivables of more than $10 billion. Those three banks controlled roughly three-quarters of the entire market, thanks largely to a 2004-05 acquisition blitz and substantial investments in marketing, new product development and CRM during that same period.
Now, however, with the nation in a credit crunch and nothing much left to acquire, Packaged Facts notes that GE Money, after pulling ahead of Citi Retail Services into the #1 position, has put its $36-billion portfolio up for sale--with no takers. HSBC Retail Services remains in third place, but far behind the two leaders. Then comes JP Morgan Chase, which more than doubled its market share in two years, and Alliance Data.*
Packaged Facts augments its own research with analysis of consumer behavior and demographics from Simmons Market Research Bureau's Winter 2008 adult consumer survey and BIGresearch's Consumer Intentions and Actions data. Among the study's findings:
For now, according to Packaged Facts, the squeeze is on private-label cards, but some will be pinched more than others.
"In an uncertain economy, consumers may be even more reluctant to incur unnecessary debt from discretionary purchases like clothing," the researcher stated. "However, retailers (Wal-Mart, supermarkets) selling everyday items like groceries may feel the squeeze a little less."
* Editor's note: The article has been amended.