Myer, Australia’s largest department store chain, launched its own Visa credit card in 2007 in a bid to expand its already wide customer base and ramp up its older Myer One rewards program. The card, issued by Myer’s long-time partner Latitude Financial Services, aimed to have about 100,000 customers sign on during the first year. True enough, just five weeks into its release, 15,000 members had already applied for the card, half of them switching over from the previous store card.
Less than three years later, numbers showed that buyers were slowing down: the average spend on the Myer Visa card was $2,562 per customer for the year 2009, according to the company’s prospectus for that year. This paled beside the 2009 average spending on all other credit cards, which Banking Day reported at $13,000.
These don’t necessarily point to low sales. Superbrands Australia says about 3 million Australians, or 7 percent of the population, walk into a Myer’s every day, and that on Boxing Day some 1,200 purchases are made every minute. Demand for Myer stock even shot past the $2-billion mark in October 2009.
The big plan
Obviously, these reluctant shoppers don’t hurt the retailer as much as one would think. The slowdown is actually part of the plan: Myer expected to take a loss from their Visa operations in the first two years, according to the Australian Financial Review. Their immediate goal was to gain brand loyalty by offering incentives to people who would otherwise have gone for bank-issued Visa cards or store-issued cards from its rivals.
So far, it seems to be working. Over 35,000 shoppers signed up for the Myer Visa card last year. In its 2010 full year report, Myer said the Visa card played a key role in retaining customer loyalty by offering shopping credits, which gave them more incentive to shop at Myer. On average, customers spent 28% more at the stores when armed with the Myer Visa than just the Myer One membership.
Loyalty saves business
Myer may have been right to pursue customer loyalty. New figures show that its closest rival David Jones is catching up, thanks mainly to its stronger profit lines (such as owning, rather than renting, its Melbourne and Sydney stores) and growing credit card arm. Myer’s rewards program is keeping it afloat—69 percent of its 2010 sales were made to loyalty cardholders, while David Jones members only accounted for 25 percent. Most major retailers now offer retail rewards credit cards.
The Myer Visa credit card is a stronger tool mainly because of its scope and recognition. The David Jones credit card is basic at the moment, focusing more on in-store rewards than incentives to shop. Myer’s credit card, on the other hand, offers savings vouchers, up to 62 interest-free days, and collects shopping credits from more outlets.