Extra Credit: Boutiques Begin Issuing Store Credit Cards
Consumers pack their wallets with credit cards offered by major department stores and national chain retailers, but a handful of boutique owners bet shoppers will make extra space for cards for high-end specialty stores.
Marc Goldstein, owner of the Madison boutiques, four high-end stores in Los Angeles, will offer a store card in mid-June. “It will build loyalty,” Goldstein said of his upcoming private label card, which offers a system of bonus points for each purchase made.
Retailer Tamara Michel also plans to offer a store card as one of the promotions for her specialty women’s apparel boutique 4, which will open in Menlo Park, Calif., in late June.
“It’s like a frequent flyer card, tracking the cumulative dollars they spend,” Michel said, describing her store card. “Once they hit milestones, we’ll send them a certificate for a dollar amount or a free item in store. The more they spend, the more we reward them.”
Michel said the costs of creating a store card system are minimal. Individual cards cost 50 cents to produce and she’s giving her customers the choice to avoid the plastic and register an account solely in the store’s database.
Like Goldstein, Michel thinks cards forge bonds between retailers and shoppers. Shoppers will provide personal information such as birthdays, clothes size and favorite designers on their card registration forms. Eventually the retailers will get enough information on their clients’ wardrobe needs and preferences that the retailers will be able to serve as personal shoppers for their clients.
Retail analyst Thomas Filandro said anecdotal evidence supported store cards building customer loyalty. “Does it ensure retailers will consistently get the customer back? Absolutely not,” said Filandro, who tracks retail business trends for New York–based Susquehanna Financial Group. “However, customers with credit cards are typically more active, they shop more often and the quality of their sales are stronger.”
Boutiques have opportunities to offer store credit programs because the market for credit cards has experienced slow growth recently. Many of the issuers, most prominently banks, are seeking new growth opportunities, said Bob Lime, a credit analyst with First Annapolis, a Linthicum, Md.–based management consulting firm for the financial services industry.
However, the boutique market may represent slim pickings for banks. Lime estimated sales on a mature store card program range 15 to 20 percent of a retailer’s revenue. If the retailer earns $5 million, only $1 million is charged on the card. “It’s hard for the bank to make money if the store is pumping out only a few million dollars,” Lime said.
Niche and regional banks support the smaller businesses’ store cards. They’re attracted to dealing with boutiques if their customers consistently buy large quantities of big ticket items, if the banks have a good preexisting relationship with the retailer or if there’s a high prestige factor in being associated with the retailer. —A.A.
