Boston, MA
September 2004

Private Label Initiatives Drive New Competition in the Store Card Market


Over the past five years, a major shift occurred in the ownership of the store card receivables.  During this time, third-party private label companies acquired store card receivables from the retailers that manage their portfolios in-house.  While private label companies only manage the 39 percent share of the total in 1996, they increased their share of the market to 84 percent in 2003.

In addition to private label companies’ compelling case to retailers about their ability to market, service, and process store cards more efficiently, rising capital requirements due to the slowdown in the US economy and retailers’ shift in their strategy to focus back on the core business — retailing — have changed the way the market looks today.

The US private label companies continue to acquire store card portfolios.  The competition is hotter than ever among the top three players.  They also face strong competition from bank card and co-branded card issuers.  As the gap between the value provided by the general purpose cards and that of store cards widens, it becomes more challenging for store card programs to compete with general purpose card programs.

Evren Bayri, Director of Mercator Advisory Group’s Credit Advisory Service comments, “Third party private label companies are well-poised to overcome these challenges as they take control of retail credit.  They can act as independent sponsors, which can manage coalition credit card programs for retailers or develop other types of programs leveraging their scale and focus.  Innovative products such as GE Consumer Finance’s ‘dual card’ is a good example that signals the future for store credit products.”

This report contains 19 pages and 15 exhibits.

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