Private Label

Private Label regards a card of the store brand managed and processed by the company itself or in partnership with financial entities, that identifies its customers, providing them services. In general, they are pre-approved credit programs, with simplified collection and little bureaucracy when compared to conventional credit cards.

The private label card is very popular among consumers of lower income and its use grows each day. In general, its use is exclusive in a certain network of stores, which guarantees pre-approved credit for the user, eliminating bureaucracies in purchases and providing agility and speed.

The use of private label cards is ideal for those consumers of lower social classes, simply because the retail market is closer to it than the bank. With this card, purchases can be divided in installments with no interest and no down payment. In addition to that, most of the stores adopting this system do not charge annuity, which means people pay only what they use and, if they do not spend it, they do not have liens. This is one of main points that differentiate the private label cards from conventional cards, to which only a fee for the card's possession is charged.

According to studies, the interest of this type of card has grown 75% between 1998 and 2002 in credit to private consumption. In 1998, the interest of this modality was 0.9% of a private consumption of order of R$ 7.8 billions. In 2003, however, the private consumption moved up to R$ 13.2 billions and the card's use leaped to 1.6%. Until 2010 the interest of the private label participation is of 2,5%.

The explanation for this market's boom is mainly in the product's format. In average, stores demand a family monthly income as from R$ 150 and practically none of them charge for the card issuance. Besides this, the credit system offered is not so high as the conventional credit cards'. While the limit of a credit card needs to increase to reach all segments, the private label has smaller limits.

Main advantages of private label cards:

The current balances of great market retailers prove that the sectors that have grown are the ones offering credit system, financing, easy forms of payment. The rendering of services by retail companies is a trend noticeably growing abroad in the past five years, and in Brazil, a little less than two years.

Researches show that a number of credit cards issued by great stores has already surpassed the ones with traditional branches. They are 59 million private label cards against 46 millions of branched cards, according to research. The private label card billing is R$ 14.5 billions in 2003 and it can reach almost R$ 20 billions in 2006, when 80 million restricted plastic cards will be around.

With the usage of the private label cards, the consumer has access to the credit without any costs, as he/she does not pay annuity he/she can shop and even receive a different treatment taking advantage of special sales created in the loyalty program. The retailer attracts more customers when offers financial services, and sells more: first, because with credit, the customer can shop, and second, because this customer starts going to the store to do what he/she would go to the bank to do; this generates impulse shopping.

Making a record of the evolution of credit in Brazil, the growth of the sector is noticeable and reached an exorbitant level after the economy stabilized. It only reduced in 2002, due to unemployment which generated default and made financial institutions withdraw and adopt a more restrictive posture. In mid-2003, the economy stabilized again and the credit sector, since then, has been growing.

Shopping malls, following the trend of retail incorporating financial services, started launching their cards. Almost all administrating companies launched cards, put together their database and created loyalty programs. The experiences were very diversified - some malls chose private label cards, others chose co-branded cards (with traditional administrator flags).

* Parameter measured in the business-financial market in 2004.