The National Retail Federation, the leading trade group for department and specialty stores, has struck a deal with Card Establishment Services for relatively low "group rates" on credit card processing services delivered to small and mid-sized retailers.

Card Establishment Services, a merchant processing company formerly owned by Citicorp, will provide the discounts on transactions authorized through its SpecNet satellite service.

The service will be of the most benefit to retailers that do not generate sufficient sales volume to qualify for the low prices charged to larger competitors.

Buying Group

"We're seeing a variety of industry groups where merchants are banding together and moving forward as a buying group," said John C. Elliot, the chairman and chief executive officer of Melville, N.Y.-based CES.

"By buying as a group, they leverage the entire group," Mr. Elliott said.

About 66% of the companies in the National Retail Federation have $100 million or less in annual sales, according to John Sohikian, director of the NRF's SpecNet program. In common with some banking trade groups, the association has put a priority on developing programs that can help smaller companies band together for better deals on services.

"The real purpose behind these programs is to bring power to the small retailer," Mr. Sohikian said. "Kmart can do very well on their own, thank you."

The Washington-based retailing trade group focused first on technology and telecommunications programs, creating partnerships with MCI for phone service; Sterling Software for store communications; AEI Music for in-store audio; Hughes Network Systems for the SpecNet satellite service; and now with CES for transaction processing.

Federation members using one or more of these services include Walden Books, Gantos, Eddie Bauer, Woolworth's Victoria's Secret, Nobody Beats the Wiz, and Merry Go 'Round.

The CES program is tied in with Hughes' SpecNet, in which 200 of the retail federation's members already participate. The federation has 1,500 direct members and about 50,000 altogether, including those that come in through state agencies and other umbrella groups.

Slightly more than half of the 150,000 merchants under contract to CES are retailers, and Mr. Elliott said many of those are already NRF members.

In addition to credit and debit card processing, CES also handles electronic check verification, signature image capture, and online transaction history through CES Link. According to The Nilson Report and Credit Card News, two industry newsletters, CES ranks third overall among merchant processors, behind after Nabanco and National City Processing Co.

Fueled by its acquisition in April of Harbridge Merchant Services, CES has increased its merchant penetration substantially from the yearend 1992 data shown in the table.

CES beat out five other bidders for the retail federation alliance because of its track record, its experience with satellite communications and with the retailing industry, its flexibility, and its aggressive pricing, Mr. Sohikian said.

Although he would not disclose the numbers, Mr. Sohikian said the CES rates were "phenomenal for our target market."

"They really recognize that today's small to mid-size retailer is tomorrow's big retailer," Mr. Sohikian said. "Who knew Home Depot 10 years ago? And today they're eating everybody's lunch."

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