Target has established itself as an innovator in the market, whether it is merchandising, brand management, or loyalty schemes. And, as they settle into the second year of their private label payment strategy, the company is forecasting a jump into double digit usage next year.
“More than 9 percent of sales now come from REDcard holders, and that should rise to more than 12 percent next year, Chief Financial Officer Douglas Scovanner said during a New York meeting with Wall Street analysts that was also webcast.”
The impact of their focus on private-label over co-branding along with a 5 percent discount across the board, offers top and bottom line benefits to the company, who projects that their earnings will double in the next six years.
What does this mean to the payments industry? Perhaps not as much as one might think since there is a convergence of factors that are making the success of this strategy possible. Those include owning a bank charter, selling commodities like food and drugs, expanding regional footprints through initiatives like their urban store openings, and strong brand equity. In other words, not easily duplicated across the broader landscape.
However, as with any successful endeavor, we may see components of this strategy leak into the market. Case in point, Lowe’s 5 percent discount on their private label card.