Battling Amex, Visa Struts Its Stuff In Chic Boutiques and Pricey Malls

First it was the travel and entertainment customer. Then it was the platinum card market. Now it is the high-end retailer that Visa wants to wrestle away from American Express Co.

From New York's Madison Avenue to Rodeo Drive in Beverly Hills, Visa U.S.A. is coaxing pricey stores to promote its brand. The idea is to boost sales on Visa cards-and thereby enrich member banks.

In the last few months, the card association has been sponsoring star- studded fashion shows, creating promotions for cards tied to famous shopping districts, and signing marketing deals with ritzy malls.

As it proceeds, Visa is deliberately treading on the turf of an old rival.

The upscale retail sector "has been a traditional area for American Express, and we are going to move into it aggressively," said Thomas C. Edwards, Visa's senior vice president of merchant relations and a former Amex executive.

Over the past seven years, he said, Visa has grabbed significant market share from American Express in the lucrative travel and entertainment market. Visa's charge volume in the T&E sector grew from $15 billion in 1990 to more than $100 billion today, he said.

Now he expects similar gains in the huge market for high-end consumer goods. Each year, Americans spend about $40 billion on pricey clothing alone, according to a study cited by Visa.

American Express, for its part, professes to be unfazed.

"We have significant share of the higher-end merchants, and that has been consistently demonstrated over time," said Cynthia Trowill, vice president-establishment services at American Express.

And some observers of the card brand wars perceive that American Express has a clear head start in devising merchant loyalty packages.

"Visa is the last one on the block," said James B. Shanahan, of Business Dynamics, Nyack, N.Y.

MasterCard International also has a program that targets upscale merchants. Through its MasterCard Exclusives program, platinum cardholders are being offered special deals at participating merchants through January.

But MasterCard has not cultivated a classy image with nearly the same gusto as its rivals. In recent months, both American Express and Visa have stepped up their efforts to develop merchant loyalty programs.

American Express has a significant leg up. Since 1991, the nonbank company has had a program that gives cardholders points toward purchases at participating merchants. The program-Membership Rewards-was recently renamed and enhanced.

This year American Express has also launched targeted programs like Custom Extras, which gives card members discounts on their statements for purchases at about 100 merchants, and Express Rewards, a similar program involving six merchants that lets retailers reward their best customers with special offers.

On top of these incentive programs, American Express often holds special sweepstakes that encourage spending at key merchants.

Taking aim at American Express' historical lead, Visa has crafted a deliberate strategy to pump up its ties to retail chains with cachet, like Cole Haan, Christian Dior, and Fendi.

"Before, we focused on the mass retailer," said Mr. Edwards, who joined Visa in 1989. "Now we are using a rifle-shot strategy."

Visa is targeting people who carry its gold, platinum, and cobranded cards, who are more likely to make big-ticket purchases. Such cardholders may or may not pay off their balances in full each month, but their activity generates significant transaction fees on the merchant side of the business.

Mr. Edwards said Visa's promotions have increased individual merchants' sales by 15%.

Visa's promotions include "Tribute to Style," an eight-week sweepstakes with 23 exclusive merchants that will award prizes like a $25,000 shopping spree on Rodeo Drive. The program ends this month.

Visa also held another contest-"Shop, Dine & Stay"-that rewarded cardholders for shopping in well-known retail districts.

Among the banks that signed up for these programs were BankAmerica Corp. and First Chicago NBD Corp. The latter sponsored the Shop & Dine sweepstakes, inviting its credit card customers to a party on Chicago's "Miracle Mile" for after-hours shopping.

Malls have become the latest proving ground. Visa signed a partnership with the Simon DeBartolo Group in July, and now Visa cardholders get discounts at the developer's 131 malls.

Last month American Express followed suit, aligning itself with the Taubman Co. Now American Express cardholders get valet parking, gift wrapping, and free gifts for making purchases at 59 malls.

Mr. Shanahan predicted that more alliances of this sort will be formed, since merchant programs are "in their infancy." Card companies, he said, are looking for ways to build balances other than the worn-out balance transfer strategy.

MasterCard does not have a partnership with a mall developer.

"A mall does not sell products," said Fred Gore, MasterCard's senior vice president in charge of merchant acceptance. "I would rather deal with the individual merchant," he said.

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