WASHINGTON - Taking one-stop-shopping literally, Federated Department Stores Inc. plans to offer everything from securities brokerage to insurance coverage to basic banking products like checking accounts and mortgages.
One of the last commercial companies to get a federal thrift before Congress barred such deals, Federated plans to underwrite only mortgages through its FDS Bank in Mason, Ohio. All other types of loans and deposit products are being outsourced to NetBank.
Ameritrade Holding Corp. will provide securities brokerage, and insurance policies, including pet protection, will be arranged through Pivot, a Columbus, Ohio, unit of Wachovia Corp.
Federated is the latest in a series of commercial companies that have tried to crack the financial services market. Previous attempts have failed, as Sears shoppers proved more interested in buying socks than Dean Witter stocks from the retailer, and Ford customers felt more comfortable buying cars than Nationwide insurance from the automaker.
But in an interview Tuesday, Terry Gorbach, a Federated senior vice president, said the retail giant has learned from its predecessors' mistakes.
Unlike other retailers, Federated will not use its name, or its 450 stores in 34 states, to market financial products. The company's extensive research revealed that consumers do not want to buy financial products from Macy's, so Federated is farming out most of the products to other providers and selling them through an Internet site not branded to its department stores, www.iTrust.com, Mr. Gorbach said.
"We are not marketing to these customers as Bloomingdale's or Macy's," he said. "We're marketing as iTrust. "We're establishing a new presence in the financial services marketplace."
Federated plans to start by focusing on its 130,000 employees and 20 million credit card customers, but it plans to eventually target the general public.
Joseph A. Stieven, the director of financial institutions research at Stifel, Nicolaus & Co. in St. Louis, said he saw little reason to think of Federated as a threat to traditional financial services providers. "A lot of people have tried this, and people are going to find out that these banks are tougher competition than they think."
Still, the market is huge, and there is room for players like Federated, he said. "Even if they do prove to be successful, can you quantify who is it going to hurt? I just can't."
But Peter Wallison, a veteran of the wars over U.S. financial services policy and now a scholar at the American Enterprise Institute, said Federated's move should concern traditional providers, because the retailer is approaching the business in a new way, by focusing on the customer's need for a mortgage instead of the company's need to increase loan volume.
"I have a sense that the people who are looking at things from the standpoint of increasing the value of the customer relationship have a better idea of how to make money in the future than those who are just thinking about how to increase sales," he said.
Mr. Gorbach, who joined Federated in June after 20 years at American Express Co. and three years at GMAC, echoed that idea. While Federated will not try to leverage its brand, it does plan to use its expertise in marketing and satisfying customers, he said.
Federated, which has corporate offices in Cincinnati and New York, is one of the nation's leading department store retailers, with more than $18.4 billion of sales last year.
"It's bringing that culture of retail to the financial marketplace," Mr. Gorbach said. "It may be a breath of fresh air."
