Kmart, one of the nation's largest discount retailers, is experimenting with a private-label credit card program to attract more customers and increase sales.

Beneficial National Bank USA, Wilmington, Del., will begin issuing the Kmart credit card March 22 in 11 test markets, including 166 stores.

If the pilot program is successful, the store card will be widely available for Kmart shoppers in August.

"We expect over time they would be one of our top five clients, perhaps over a three-year period," Susan Artmann, chief financial officer and senior vice president of Beneficial National, said of the retailer.

Ms. Artmann said a cobranding strategy with MasterCard and Visa had been considered but rejected.

Earlier this year, Dayton Hudson's Target stores went that route, testing a cobranded Visa card issued by First Bank System Inc.

"A private label program was considered a stronger match with the strategy" of the store and the bank, she said. "Kmart's customers match closely with BNB USA's."

David Robertson, president of The Nilson Report, an industry newsletter based in Oxnard, Calif., said,"In the current business climate in the United States, having a card program is critically important to retailers of all kinds."

Kmart Corp.'s total sales last year reached $34.65 billion, up almost $2 billion from the previous year, but they were still dwarfed by Wal-Mart, which reported sales of $94.75 billion.

Monroe Greenstein, vice president and senior analyst for Lazard Freres, said Kmart's private-label card could be a revenue-generator for the store, which has been doing poorly compared with its competitors.

There is no annual fee for the Kmart card, which has an interest rate of 12.15% above prime, or 20.4%.

The card will be marketed in the test sites using "pre-approved" direct- mail offers and in-store promotions. Although the customer benefits will vary according to test site, a bank spokesman said, a 4% to 6% rebate will be available for frequent buyers.

Beneficial National Bank USA, a unit of Beneficial Corp., has $2.3 billion in total receivables and five million cardholders. It is ranked sixth among the private-label issuers, according to The Nilson Report.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.