There's nothing that gets Jackie Hoegger's juices
flowing faster than trying to find new ways to improve Vive Paris,
the upscale women's boutique she founded in Witchita Falls,
Texas, several years ago. So after extensive research, Hoegger
decided one way to differentiate her two-store company from
competitors was to offer the Vive Paris credit card. "The
credit card is another way to get our name out there and keep us on
the cutting edge," explains Hoegger. "We designed our own
card because I wanted it to reek of femininity and beauty. When
[our customer] opens up her wallet, I wanted her to say, 'Oh my
gosh, what a pretty card.'"
With annual revenues of $1 million and a business pulling in
customers from up to 100 miles away, Hoegger is a prime candidate
for a private-label credit card, according to Stewart Armstrong of
CrediCard National Bank, a San Antonio-based limited-purpose bank
that only finances private-label cards and that set up the program
for Vive Paris. "Our ideal client is an owner who wants to
integrate a private-label card into how they sell and service their
customers--an owner who knows their customers well and is trying to
get repeat business from a core group."
Finding a credit card financing company like CrediCard requires
some digging, because the number of firms offering private-label
cards to start-up and entrepreneurial firms has shrunk considerably
as the finance industry has consolidated. But they do exist:
there's CDS Group/Myreceivables.com, Bank of
Louisiana and Shoppers Charge Accounts Co., to name a few.
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And once you find potential underwriters, there's a laundry
list of other considerations: meeting minimum charge volumes,
determining start-up and ongoing costs, and deciding whether you
want a company that specializes in your industry. "[Such
companies] understand the seasonality and nuances of the businesses
you're serving," says Edward Fechner, senior vice
president of sales and new business at Shoppers Charge Account Co.
in Mahwah, New Jersey.
You'll also need to determine how much money and effort
you'll put into marketing the card. Leonard Leff of CDS Group
suggests a company initially invest at least $500 a month to
advertise the new credit card.
All the underwriters we talked to for this piece want
entrepreneurs to proactively solicit potential card holders, but
remember, this is a credit application, and having the customer
demographics to attract financiers is critical. If your customers
are young and/or have a skimpy credit history, they may not be
approved, unless you're willing to assume part of the risk.
Says Fechner, "You could create a lot of ill will for
[yourself] if you have to say no to better than 50 percent of your
customers."
Once you evaluate your business and find an appropriate
underwriter, the benefits of a private-label card are many, says
Robert Buss, vice president of credit cards at Bank of Louisiana.
"Your customers will have a relationship with you that
they'll have with no other merchant," he says. "With
in-house cards, you can reach your customers directly. You
can't do that with Visa or MasterCard. If you want to run a
sale on shoes, for example, you can mail an insert with the
statement."
You can also advertise the benefits of your card to card users,
such as deferred billing, frequent-buyer programs, skip-a-payment
programs or any other promotional ideas you implement. And Hoegger
discovered another bottom-line benefit: "It took away my
receivables," she says. "The credit card cut them by
about 50 percent, which means we can pay our invoices
faster."
As with any business decision, you'll need to weigh the pros
and cons of establishing an in-house credit card. In the end, what
matters most is whether the card will push your bottom line further
into the black.