The Ultimate Survivors

  If the card industry had its own version of the TV show, "Survivor," the retail card would be my pick. Back in June of 1989, this magazine ran on its cover a picture of an anxious-looking purple dinosaur (no, it wasn't Barney) under the headline, "Are Store Cards Headed for Extinction?"
  Well, retail cards certainly haven't become extinct in the intervening 14 years. In fact, there are still more than 500 million store cards around, according to our affiliate, the Card Industry Directory.
  But the conventional wisdom has been that consumers just don't want narrow-use cards anymore. There is ample evidence for that, especially in the steady stream of retailer annual reports showing declining percentages of sales on proprietary plastic. Easy-to-get general-purpose cards have displaced store and oil cards as the first cards many young adults use.
  Also, the concept of the retailer-run credit program received a body blow this summer when Sears, Roebuck and Co., the long-time king of the store card, announced plans to sell its huge card portfolio to Citigroup Inc.
  But millions of consumers still want an exclusive line of credit, even if the APR is higher than a bank card's. And despite all the changes in retailing, including the rise of big boxes and the struggles of the old-line department stores, retailers still say that holders of their cards are their most loyal customers.
  So rather than going away, the store card business more accurately is going through a transformation that will accommodate the desires of both consumers and retailers. As our cover story beginning on page 32 notes, the exit of Sears means that the third-party retail card processors that have been building market share for years are now truly the dominant forces in private-label credit.
  But some retailers, most notably Target Corp., remain highly committed to the retailer-owned credit program. Target's main effort, however, is centered on a Visa chip card. That may be disconcerting to store card purists, but it reflects the market's evolution: consumer preference for a card with broad utility, as well as the retailer's desire for an exclusive marketing link with customers.
  Meanwhile, processors such as Alliance Data Systems are testing a host of new payment-related products and services such as ATM-like kiosks in 7-Eleven convenience stores. And, in a new twist on cobranding, Starbucks and Bank One Corp. have just launched a combined stored-value and credit card, an industry first (page 40).
  No question, the bare-bones, low-credit-limit store card is taking a back seat to the flashier payment upstarts. But instead of extinction, we are seeing the evolution of retail credit from a narrow product line into something that offers a whole range of payment options and loyalty features. Instead of running these programs directly, many retailers are now at ease with letting competent third parties run them.
  The newer programs have the same purpose as the old ones-to get more customers into the store more often. Isn't that what private-label is all about?