A quick look at some numbers for Household, the big consumer financial services operation based in Illinois, and it’s pretty obvious that there are some heavy duty resources at the offices in Prospect Heights, Ill. Here are some key statistics:
Key statistics about Household:
n 2003 Receivables: $14.7 billion n 2003 Credit Sales: $16.8 billion n Active Cardholders: 15 million
n Credit Transactions/Day: 250,000
n Key Partners include Kawasaki, Polaris, Suzuki, Yamaha, Best Buy, CompUSA, Costco, Microsoft, and Sony.
Household is the retail services arm of London, England-based Household International, a 125-year-old financial services powerhouse. It’s one of the largest financial institutions in the world with its 80 or so companies holding assets worth nearly one trillion dollars.
Household is divided into three segments: Consumer, credit card services and international. The consumer segment provides consumer lending and retail services among other businesses and includes such well-known names as Household Finance and Beneficial. Last year, the consumer business reported net income of $1.8 billion.
Household fully manages its partners’ retail credit needs, allowing its partners to focus on their core businesses and continue to own and define the customer experience.
Take Kawasaki Motor USA, which recently signed another multi-year contract with Household to handle its private-label financing. Kawasaki has been working with Household since 1989.
Since the relationship began, Kawasaki’s private label program has helped improve and maintain Kawasaki’s market with:
n 400% growth in private label credit sales volume in the last 5 years
n 300% growth over the past 5 years in the number of customers who carry Kawasaki’s Good Times private label card
n 150% growth in private label credit card share in the last 3 years
Household increased private label card share for Kawasaki through an integrated “test and learn” marketing strategy.
building private label business
For retailers and OEMs that sell their products at the retail level, private label credit card programs often can generate more customers and more dollars per purchase than any other transaction method.
And according to recent industry statistics, turning over the operation of those card programs to private-label credit experts tend to yield better results.
The May 2004 edition of The Nilson Report found that retailers that operate their own store card portfolios lost ground in 2003, with receivables decreasing 61% to $15 billion. But private-label issuers that operate programs for retailers reported a 37% increase in 2003 receivables to $74 billion.
In June 2003, store-owned credit cards represented only 16% of the total $89 billion private label credit card market, according to Nilson.
Richard Klesse, head of Household’s retail services group, said the company’s programs with OEMs are constantly adjusted to meet market demand. “If an OEM wants to push excess inventory, for example,” he says, “we would put together programs and execute them with the dealer network.”
Household also can handle direct mail promotional programs for OEMs to increase consumer traffic to dealers. “We can handle the whole thing almost completely,” he says, “or the OEM may do everything.” Campaigns can range from individual mailings to statement stuffers.
Household provides both installment loans for machines and revolving credit card programs for consumers. In evaluating credit, Klesse says Household tries to be as aggressive as possible in approving consumer credit. “We try to take the maximum risk we can because that’s a sale for the dealer.”
Risk depends, in part, upon a consumer’s ability to repay the loan, and that is tied to interest rates. Even though the Federal Reserve recently increased rates, Klesse doesn’t see a big impact on lending this year. “Rates will go up more this year , but it shouldn’t have a big impact at all.” PSB