January 30, 2009, 12:00 AM

Maxed out

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Engle also took advantage of Bill Me Later’s deferred-payment expertise to offer customers using the private label card 90-day, no-interest payment terms on orders of $99 or more. “Since our average price point is around $65, that becomes an enticement for the consumer to buy up,” Engle says. He says the average order value on the cards is as much as 30% higher than on other customers’ purchases, and that cardholders buy 20% more frequently.

Bill Me Later can approve some consumers for the private label card that might get turned down by Visa or MasterCard issuers because the JTV card carries a higher interest rate, giving Bill Me Later the flexibility to lend to riskier consumers, Engle says. He says the interest rate on the JTV card is 21%, versus 14%-15% for most cards carrying the major card brands.

To avoid embarrassment, when a customer calls in to Jewelry TV the agent uses the caller’s phone number, or ZIP code if she has it, to check on the likelihood that a resident of that area would qualify for the private label card. If the person is a good candidate, the agent offers the card and the approval rate is around 95%, Engle says. But Bill Me Later, which targets consumers with strong credit, turns down at least half of consumers who ask for the card on their own, Engle says.

Engle says he generally pays Bill Me Later lower fees on the private label card than he would on Visa- or MasterCard-branded cards. The fee on a private label purchase with no promotional financing is about 1.5%, he says, versus about 2% for bank-issued cards. With 60-day free financing, the private label fee would be about 2% and 2.5% for a 90-day-same-as-cash offer.

The best part, Engle says, is that consumers who take his Jewelry TV card now have credit lines, typically $1,500 to $4,000, that they can use only to buy from him. While eventually cardholders may exhaust their credit limits, Engle says, “because it’s a fresh program with all new cards, we’re good for another 12 months. And I think that will weather us through this economic storm.”

It has mainly been large multi-channel retailers that have issued private label cards in the past, according to a recent report by Javelin Strategy & Research. But Bill Me Later is getting more calls these days about private label programs from web merchants, especially those that sell higher-priced merchandise, says Mark Lavelle, vice president of corporate development.

No credit needed

But many consumers are avoiding debt, so Engle and other e-retailers are also adding other payment options as they try to save as many sales as possible. Jewelry TV added PayPal last spring and within a few months PayPal represented 10% of web purchases, with 85% of those customers new to Jewelry TV, he says. Wine Enthusiast added PayPal in October and it quickly shot up to 10%-12% of sales, says Juliano.

PayPal is not a pure alternative to credit, as half of PayPal accounts are funded through credit cards, PayPal says. Other PayPal users fund their accounts through bank accounts or in other ways, often by selling on eBay, PayPal’s parent company, and accepting payment via PayPal.

Buy.com also reported more consumers turning to alternatives to credit cards in the recent holiday season. Wisot says most of the 40% sales growth it reported as of Dec. 17 was from such payment methods as PayPal, Bill Me Later and eBillMe, which enables consumers to pay for purchases through bank bill-pay systems.

Buying on time made a comeback at online jewelry retailer Goldspeed.com. CEO Neil Kugelman says a layaway program it has had for years showed new life this year, growing 10% over a year earlier. Juliano of Wine Enthusiast says he is now exploring layaway programs that let consumers pay in installments, receiving the item once it’s paid in full.

No one option is for every shopper, but more alternatives seem to help. Consumers complete purchases 14% more often when a retailer offers three or more payment choices, compared with merchants that offer one or two, according to a January 2008 survey of online retailers by CyberSource Corp., a specialist in electronic payments and risk management.

With many consumers carrying less-potent credit cards in the months ahead, or none at all, retailers have more reason than ever to mix in new payment options beyond Visa and MasterCard.


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