Sam's Club, the Wal-Mart subsidiary that is the nation's largest discount warehouse chain, launched a private label credit card program last Friday.
General Electric Capital Corp., Stamford, Conn., a leading private label issuer with more than 300 retail clients and about 80 million cards, will own the receivables and make credit decisions.
Last year, competitor Warehouse Club began accepting MasterCard and Visa after Fedco Membership Stores, another discount warehouse chain with a private label card, started taking the bank cards. B.J.'s Wholesale Club, a Boston-based rival, recently began marketing a cobranded card with Beneficial National Bank.
K Mart, Wal-Mart's retail nemesis, is rumored to be searching for a partner to issue a private label or cobranded card. Prospective partners include GE Capital and Citicorp, sources said.
Sam's Club, which had total sales of $19 billion in fiscal 1994, accepted only Discover cards at its 431 outlets before deciding to market its own. Wal-Mart accepts all general purpose cards.
Determining that a cobranded card would raise costs and ultimately prices of merchandise, Sam's Club bowed to customer pressure for credit by offering a low-budget alternative.
The line of credit is added to the members' existing bar-coded membership card, which eliminates the need for issuing a separate piece of plastic. Members apply for credit in the store and their picture identification cards automatically become private label cards.
At the point of sale, transactions are transmitted to GE Capital's processing system. No additional equipment is required. The companies said the picture on the card and other features provide enough security.
The program offers credit for individuals and businesses. Consumers pay no annual fee for a card that carries an interest rate of prime plus 12.9%. However, cardholders must continue to pay Sam's $10 annual membership fee.
Small businesses can apply for a card that carries a 19.8% fixed rate and a $10 administration fee, plus a membership fees for each cardholder.
Fortune 1000 companies can apply for direct credit, which offers a pay by month plan with no interest and a $100 administrative fee, plus a membership fee per cardholder.
The small-business program provides electronic copies of invoices with statements. The direct program provides invoice-level detail, allowing each division within a company to pay by check from its own budget.
Cari Steele, marketing manager for Sam's Club credit programs, said the cards give shoppers a convenient method to "extend their buying power" for purchasing big-ticket items.
Ms. Steele said that compared to cobranded cards, "We felt this was a more complete program with three different vehicles, meeting the needs of all our shoppers, including the business customers."
Ms. Steele pointed out that a large portion of Sam's Club members are business customers, including restaurateurs, convenience store owners, and others needing to buy supplies in bulk. The warehouse sells everything from crates of lettuce and toilet paper to large-screen televisions and tires.
Ms. Steele noted that "most importantly, the private label program doesn't affect the price of Sam's Club merchandise."
James L. Accomando, a Fairfield Conn.-based consultant said, "When you come out with private label, that is the card you want people to use when they come to your store." He continued, "This will make it even harder for MasterCard and Visa to break into Sam's locations."
