credit card cobranding. The prominent retailer, which would never have offered a bank card brand in the years it owned the competing Discover program, will launch a Visa product next year, the trade magazine Brandweek reported last week. Sears, which divested Dean Witter, Discover & Co. in 1994, would not confirm the report, but it was corroborated by several card industry sources. And, in a smaller but also highly symbolic advance for cobranding, Montgomery Ward & Co. said it is testing a MasterCard issued by GE Capital. Applications were mailed in October to selected Ward customers. Sears, the nation's second-largest retailer and issuer of 57 million of its own card accounts - more than any other proprietary credit program - would be a big coup for Visa, industry observers said. Though Visa also declined to verify the Brandweek report, Michael Auriemma, president of Auriemma Consulting Group in Westbury, N.Y., said he had "heard from a variety of sources that it's true." Mr. Auriemma said the Sears-Visa deal would be "devastating to MasterCard," which beat Visa to the cobranding punch in the early 1990s. "Visa has clearly turned the tables in the last 18 months," the consultant said. "With each victory it gets harder for MasterCard to catch up." Even so, Michael O'Brien, a MasterCard spokesman said the association has had "an outstanding year," adding 130 cobranded and affinity programs. But many of the prominent retailers that are flocking to cobranding have chosen Visa, including Blockbuster Entertainment, Caldor, Federated Department Stores, and Toys R Us. American Express snared the much sought after Delta Airlines and Hilton Hotels. MasterCard's catch, Montgomery Ward, once ranked with Sears and J.C. Penney in chain retailing's big three, but it has lost its former luster. The Chicago-based company still owns 380 stores in 39 states and has about 13 million proprietary accounts, issued by GE Capital, according to The Nilson Report, an Oxnard, Calif.-based newsletter. Publisher Spencer Nilson said Montgomery Ward and Orchard Bank have been issuing a secured MasterCard for the past year. Montgomery Ward is offering MasterCard applicants a 2% rebate for in- store purchases and 1% for general purchases, but interest rates were not disclosed. Mr. Auriemma said the Montgomery Ward program "could be a good one," but he added, "the last Montgomery Ward shopper I knew was my grandmother, and that was 30 years ago." Comparing the Sears and Ward strategies, Anita Boomstein, a cobranding consultant and partner with Hughes Hubbard & Reed in New York, said, "Until we know the size and marketing dollars behind each one, it's hard to say which will have more impact." She pointed out that volume of accounts and publicity will be determining factors. She added that if the cobranded programs are intended as alternatives to the retailers' proprietary cards, they'll be less meaningful. James L. Accomando, a Fairfield Conn.-based consultant, said about half of the accounts on both retailers' books are inactive. "I'd bet Sears and Montgomery Ward will not let a bank go after their active accounts," he said. "That would be cannibalization." With 800 stores and $54.6 billion annual sales, Sears is topped only by Wal-Mart Stores Inc., which has some 2,000 stores and $83.4 billion in sales. Its size was a major attraction for Visa, said Mr. Auriemma, but he believes MasterCard would have been a better match. "Visa tries to be upscale and does a very good job," he said. Sears tries to be the everyman store and ... MasterCard is the everyman card." The Visa choice "says something about Sears' analysis of the credit card market and what they need to do to remain competitive," Ms. Boomstein said. No details on Sears' program have been released. The card may be issued by American National Bank of Arizona, a bank Sears acquired in 1993, or by a financial institution partner. Kristine K. Crow, formerly a MasterCard cobranding specialist, recently joined Sears, heightening speculation about a launch, but sources said Sears will likely name another executive to run its Visa program. Jan Drummond, a spokeswoman for Sears in Hoffman Estates, Ill., said the company is "exploring cobranding as an option" but has not made any decisions. She said Ms. Crow starts work this week as manager of market and product development "to bring more value to (the Sears) card for our cardholders and shareholders." Sears started testing its revolving charge card program in 1953 and extended it to all Sears stores in 1959. SearsCharge was the only card the retailer accepted until it launched Discover in 1986. For decades it resisted accepting bank cards and American Express. Eventually, however, tests convinced the retailer it could add to its sales by accepting outside cards. In July 1993 when Sears was doing $32 billion in annual sales, Sears announced that it would accept MasterCard, Visa, and American Express cards.

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