Strong Market For Private-Label Credit

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A strong market for consumer electronics, major appliances and personal computers has resulted in a booming business for private-label credit cards, as more retailers offer such cards, and in turn, more consumers are using these promotions to save money.

With the expansion of private-label credit cards in the electronics/appliance marketplace consumers are now very familiar with the advantages of such promotions, and buy with an eye not only toward the best product value but the best financing deal when shopping.

According to leading executives in the credit business, all of this bodes well for the industry. "Each year, as consumers become more familiar with credit promotions, the promotions become an increasingly natural part of the business for retailers," said Brent McNitt, E&A program manager for Transamerica. "This translates into focus upon the use of credit promotions in their daily business. This year has shown no reason for Transamerica to see this trend changing."

Phil Layher, senior VP of business and client development for Associates Commerce Solutions (ACS) Retail Credit Services Division, predicts "prospects for the remainder of the year are excellent." He added, "Our consumer electronics business has seen the largest increase in growth in our history during the first five months of the year."

The types of promotions that are attracting consumers are varied, but Layher pointed out a main thread: "Customer incentives, discounts, Internet rebates and special promotions [such as] six- and 12-month same-as-cash [deals] are driving the business. The zero percent offers are very popular with consumers and can stimulate an increase in sales volumes." Associates works with clients, he noted, to establish "other customer incentives for their particular business."

While zero percent, one-year-no-payment deals are popular in advertising, Transamerica's McNitt said, "Longer no-payment, no-interest programs are becoming less and less popular with both consumers and retailers. Many instead opt for shorter time periods, such as six months with no interest."

As for the hardware that is driving the credit business, Layher said, "computer sales are leading the way, with consumer electronics items a close second."

Looking to the summer months, McNitt noted that "during the late spring and early summer, air conditioners become a hot product for financing."

E-tailing is gradually changing the face of electronics/appliance retailing, and its effects are being felt on the consumer credit business. Dave Luster, consumer finance executive with Transamerica, said his company "is committed to helping clients develop sales through all of their ventures, including e-commerce. We currently have a successful e-commerce application system in use."

Layher of ACS commented, "E-tailing is a great opportunity for private-label credit. This is especially true for ACS. Our "Apply and Buy" product allows our client's customers to open an account and make purchases online in a matter of minutes with just one visit to our client's website."

He added, "ACS is rapidly expanding our offering of these products to support our existing clients and using them to launch new card programs such as Hifi.com."

Illustrating the popularity and potential power of private-label credit card and financing programs, last week Home Depot -- which has become a player in the major appliance business -- announced the Home Improvement Loan Account that will be available in all of its U.S. stores by the fall.

The program offers competitive fixed rates, credit lines between $3,000 and $30,000, repayment periods of up to 10 years and no prepayment penalties. Products that can be bought with the Account at Home Depot include materials, design services and installation. The chain reported that customers may be pre-qualified without obligation to activate the loan account and that it has partnered with GE Capital Financial, a subsidiary of GE Capital, to launch this program.

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