Pick n Pay store card launched
Driving top-line sales growth has never been tougher for retailers. Pick n Pay is aiming to tackle this challenge in part with its just introduced store card, which comes with the lure of interest-free short-term credit.
Driving top-line sales growth has never been tougher for retailers. Pick n Pay is aiming to tackle this challenge in part with its justintroduced store card, which comes with the lure of interestfree short-term credit.
It is not the first store card offered by a food retailer. Also out there are store-card credit offerings from Woolworths and Massmart’s Game and Makro divisions.
However, Pick n Pay has clearly done some hard bargaining with the credit provider, BNP Paribas’s RCS division, to make sure its store card is the most cost-effective in its sector.
“We have worked with RCS to design a product that has the lowest possible monthly fee and no hidden costs,” said Pick n Pay deputy CEO Richard van Rensburg in a media statement.
He continued: “Pick n Pay will not earn income from the credit-granting process.”
Pick n Pay’s store card, which for customers granted credit will be incorporated into their Smart Shopper loyalty card, carries no charge for opening, no transaction charges, no admin fees and only a R10 monthly account fee for active users.
By comparison, Game’s card has a joining fee of R100 and a R27-R68 monthly fee, while a Makro card has a R100 joining fee and a R27-R50 monthly fee. Massmart has also outsourced credit extension to RCS.
Woolworths’ store card comes with a joining fee of R75-R100 and a R15.50-R30 monthly fee. Unlike Pick n Pay and Massmart, Woolworths, which also offers a full-house Visa credit card, carries its own credit risk on a debtors book of more than R2bn.
Pick n Pay customers who qualify for a store card will get an interest-free holiday of up to 55 days if the balance on their account is paid in full each month. After that things become expensive with interest at a whopping 20.75% a year kicking in.
The 55-day interest-free period and the 20.75% interest rate, the maximum laid down by the national credit regulator, are standard fare across all store cards. Beyond lower costs, where Pick n Pay is aiming to gain an edge over its competitors in winning over consumers is with a big discount offer to first-time users of its store card.
It is a discount offer not to be sneezed at: R200 off any purchase of R500 or more. It is a potentially costly offer for Pick n Pay, which will be picking up the costs.
While RCS’ strict credit vetting rules will ensure far fewer than the 7-million Smart Shopper card users will become store-card users, it is plausible there could be at least 1-million users all eager to claim their R200 discount.