Target Corp.'s credit-card portfolio hurt its performance in the recession, as delinquencies and defaults soared.
Now, the discounter sees credit cards as an important way to spur sales as the country slowly climbs out of the economic doldrums.
This fall, customers using Target-branded credit cards will a get 5% discount on every purchase at its stores. Gauging by the results of an eight-month test Target recently concluded in Kansas City, the company expects the program to drive a 1% to 2% nationwide increase in sales at stores open at least a year by luring shoppers to its stores more frequently to take advantage of the savings.
"A 5% discount every day on every transaction is unique in the retail world and has the power to drive profitable sales to Target," said Terry Scully, president of Target Financial Services.
In addition to leading to meaningful sales gains, some Wall Street analysts think Target's credit-card rewards program will be a powerful low-price hook that competitors would have trouble matching. Wal-Mart Stores Inc., in particular, has a larger base of lower-income shoppers who would be hard-pressed to qualify for a credit card.
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