When he became president of credit at Sears, Roebuck and Co. last year, Steven D. Goldstein was well aware of how the retailer had revitalized itself through new store designs, sales strategies, and advertising.
Now it was time to think about doing something similar with the Sears Card.
The problem was not market penetration. No bank, retailer, or other organization has more credit cards in circulation, and Sears has long viewed its card account base of 50 million as a major contributor to profits.
But Mr. Goldstein's goal was to increase usage, and hence market share, which required an image change for what has been perceived as the basic retail card for middle America.
"Last year, even though we approved over six million accounts, we turned down more than 10 million," said Mr. Goldstein, 45. He ran up against the fact that "the Sears Card had become a one-size-fits-all product."
Of the company's $33.8 billion in 1996 revenue from merchandise sales and services, 60.2% were made with a Sears Card, up from 59.7% in 1995.
Mr. Goldstein, a former American Express executive, wants to entice the 40% of consumers who pay with other cards or cash to use the Sears Card.
To that end, Sears is testing a "starter card" for people who have little or no credit history, and a line of credit designed for purchases of big-ticket items.
Last year, it branched out with a a cobranded MasterCard that pays rebates for shopping at Sears.
Sears has come around to credit strategies and marketing approaches that other retailers have been using for years, said an executive at a competing organization, who asked to remain anonymous.
Historically, the Hoffman Estates, Ill.-based Sears credit operation could afford to remain aloof and change at its own leisurely pace. It stayed ahead of the retail card crowd. Receivables grew 12.7% in 1996, to $26.7 billion. The average account balance rose by $59, to $971.
The next largest in the store card game, GE Capital Services, had $15 billion of outstandings in all of its private-label programs in 1995, according to the most recent data on the field published by The Nilson Report of Oxnard, Calif. Third-ranked J.C. Penney had $5.1 billion on its cards that year.
In Mr. Goldstein's sights are new categories of Sears customers-a younger generation who grew up with discount stores like Mandee and Express-and a surging population of immigrants with little or no credit experience.
The starter card is fashioned with low credit lines-under $1,000-and a range of interest rates slightly higher than the standard 21%.
Sears has also bolstered its customer service and collections to provide more hand-holding to new cardholders who need help and education in managing their credit.
Sears expects that after 12 or 13 months, holders of the starter card will be able to "graduate" to a higher credit limit with a lower interest rate.
Sears' "image was probably middle-class to lower-middle-class, but clearly they have changed their advertising to emphasize a different mix," said Anita Boomstein, a partner with the New York law firm Hughes, Hubbard & Reed.
In the stores, Sears has added upscale, more profitable name-brand clothing. One industry insider said it reflects chief executive officer Arthur C. Martinez's desire to remake Sears into an institution not just about tools and washing machines.
Segmenting the card and the customer base "is part of Sears' reinvention," said Frances M. Dale, president of Entandem Consulting in Reston, Va.
The Sears Card may have had big numbers, but it was stuck in old demographics.
It was not until 1993 that Sears joined the rest of the retailing establishment and began accepting MasterCard, Visa, and American Express. (Discover was the only general-purpose card Sears accepted-because it invented it.)
The retailer had historically relied heavily on its proprietary card, which evolved out of the early days of retailing when charge plans were used to cement customer loyalty.
Coming so late to accepting general-purpose cards might have spelled doom for any ordinary retailer, but Sears had the luxury of having accounts in tens of millions of households. In areas like Philadelphia its presence is said to be as prominent as Visa's or MasterCard's.
While Sears has welcomed the other cards in its stores, it has done little to encourage their use, said industry observers. However, it took another step in favor of a bank card brand last year when it began testing the Sears MasterCard, issued by an affiliated bank in Phoenix.
"I think the (cobranded) MasterCard is an admission on Sears' part that they do need to recognize other brands than just Sears," said Stanley Anderson, president of Anderson and Associates in Arvada, Colo.
But Sears is bucking the downtrend in store and private-label cards, said Mr. Goldstein, partly because of its own strong identity.
"The customer does not differentiate between Sears as a place to shop and the Sears Card. It's sort of one and the same," he said.
Mr. Goldstein said many cardholders also have a deep affinity with Sears because it issued them credit before anyone else did.
"It used to be true that having a Sears Card was a sign of having good credit, but I don't know if that is true today," said Mr. Anderson.
Sears "has never said it publicly, but they have had to work harder now because more people are carrying cobranded cards," said Joseph C. Ronning, analyst at New York-based Brown Brothers Harriman & Co.
Mr. Ronning said Sears is adapting to new realities, and while it has done a good job maintaining market share it is now working to broaden the cardholder base.
Sears brought on to its staff several people who understood the bank card business on a national level, said David Robertson, president of The Nilson Report.
"They have taken their time to see what credit means to Sears in terms of private-label and how best to integrate general purpose credit."
Mr. Goldstein said both the starter card and Sears MasterCard are performing well in tests and Sears will look to make a firm decision on extensive rollouts this summer.
But he hastened to add that Sears is "not necessarily going to issue a different piece of plastic for every product."
Even if the new products are successful, they will still be niche items, said one market observer. "Sears is the 600-pound gorilla. With these products they will be a 660-pound gorilla."
Mr. Robertson said the Sears MasterCard is not expected to be a blockbuster.
"Sears would probably be very happy if it could develop a bank card portfolio that was 25% of their private-label business," he said. "It would rank in the top 20 among bank card issuers."
"The real growth opportunity has to do with an even closer integration between the credit business and the other, merchant sides of our business," said Mr. Goldstein.
"The more we can sell, the more we can finance, the more we can service," he said. "It becomes a virtual circle."
