Sears Catalogue to Accept Visa and MasterCard
Sears, Roebuck & Co. on Tuesday said that it will for the first time accept Visa and MasterCard for catalogue orders, a step that is expected to revive catalogue sales at the possible expense of the chain’s own highly successful charge card.
Sears said it will open the door to the widely used bank-issued cards on May 15 as part of a plan to streamline its catalogue business. The company said it intends to close catalogue pickup desks at its 860 retail stores next month, eliminating 4,900 jobs.
The move is another in a long series of cutbacks and changes at Sears intended to improve profit at the nation’s second-largest retailer, behind Wal-Mart. Over the last 18 months, Sears has eliminated more than 43,000 jobs in an effort to cut annual expenses by up to $940 million.
Analysts said moves announced Tuesday should provide a boost to Sears’ ailing catalogue operation while making it more competitive with other general merchandise catalogues, such as those put out by J. C. Penney and Spiegel. Revenue from Sears’ catalogue business in the United States fell by more than 8% last year, to $3.5 billion from $3.8 billion in 1990.
A Sears spokeswoman said the chain had no plans to accept bank-issued cards in its retail stores, now the exclusive domain of its own charge card and the Sears-owned Discover card. Analysts said the Chicago-based chain is the only major retailer that does not accept Visa and MasterCard.
The decision to take bank-issued cards for catalogue purchases “is a major breakthrough for them,” said James J. Daly, managing editor of Credit Card News, an industry newsletter. “There’s been pressure on Sears for years to at least look at whether they should accept the cards, but they held out.”
That policy has helped make the Sears card a success. Unlike most of its competitors, Sears makes money on its credit card business. It reaped $393.5 million from its credit card operations last year, accounting for one-third of the entire company’s net income. The Discover card is also an important money maker for Sears.
Sears said its decision to accept Visa and MasterCard would not cut into profits at its own credit card businesses. “We are giving our customers an option but we do not feel the Sears card will be affected. The Sears card continues to grow,” spokeswoman Marcy Grossman said.
Industry analysts said it was inevitable that revenue from the Sears store card would suffer, particularly if Sears decides to accept the widely held bank-issued cards in its stores. “Eventually, there will be a negative effect on the Sears card,” New York retail industry analyst Walter Loeb said. “It will be used less.”
But most analysts agreed that the introduction of Visa and MasterCard will not hurt Discover, which has attracted a loyal following among consumers for a program that gives cardholders rebates on purchases. “Discover has more than proven itself,” Daly said. “I do not see this cutting into Discover at all.”
Grossman said Sears hopes to attract new catalogue customers by accepting Visa and MasterCard. The company also hopes the move will encourage current catalogue customers to buy more. Customers with small credit lines on their Sears card now have “a second line of credit they can use,” Grossman said.
Sears said the elimination of the pickup desks will free 600,000 square feet for retail space. The company expects to be able to place nearly all of the 250 full-time and 4,650 part-time employees affected in other store positions.
Sears said that while catalogue customers will still pick up such large items as refrigerators and lawn mowers at the store, anything small enough to be sent through the mail will be shipped, usually within 24 hours.
