Why Bread Thinks Private-Label Cards Are Ready For Disruption

The reason private label works so well in stores, Bread CEO and Co-founder Josh Abramowitz told PYMNTS’ Karen Webster, is because they are so well-integrated with the physical retail environments for which they were created. They are easy for consumers to use, they are white-labeled so they create a bond with the customers and – most critically – they speak to the desires and wants of in-store customers.

The problem, Abramowitz noted, is that retail in the last decade has moved online and into multi-channel – and private-label cards have not really made the necessary transformation to keep pace. The big, private-label companies are offering good in-store solutions today, but the solutions aren’t built for the web or the typical eCommerce shopper.

This isn’t the case for retailers born in the online world, Abramowitz contends. Consumers in the digital era, he noted, are looking for something that many private card products aren’t known for offering, which is total transparency into the finance charges associated with those purchases. Delivering that isn’t a matter of building a better private-label card as much as it is rethinking retail credit from the ground up.

Building a More Relevant Product for Consumers and Merchants

The online world, Abramowitz noted, is different from its real-world counterpart – which, he believes, is part of why private-label cards have not transitioned so smoothly. “I think you really question every assumption about what customers are looking for – and I think that online, transparency and predictability are incredibly important.”

The credit offering makes it easier for customers to build bigger baskets, which is why areas like appliances, home furnishings and jewelry tend to be the popular categories for Bread.

The installment pay plans allow customers to know up-front exactly what they are paying each month over the duration of the loan – no math required. By contrast, in the private-label credit card world, a customer has a far less transparent view into their spending. Consumers, particularly millennials, tend to value transparency and the ability to plot their financial lives around predictable, easy to understand expenses, noted Abramowitz.

Moreover, he added, unlike other players in the installment lending for retail space, Bread isn’t consumer-facing: It’s a white-label product that is invisible behind its retailer partners’ branding. From the consumers’ point of view, they are financing with the merchant directly, while on the back end, the retailer hands off underwriting and loan servicing to Bread.

The retailer gets a powerful marketing channel that goes directly to the consumer throughout the retail journey – their branded, in-house financing offer – but doesn’t have to manage the complex and compliance-heavy world of consumer financing on the back-end.

What’s Next

In some sense, the growth of eCommerce is as close to a sure thing as there is in the world of retail, Abramowitz told Webster. But the real action, he noted, is probably going to be the “confluence of online and offline channels,” and the future will likely go to the services that move most smoothly and seamlessly between them.

And in that competition, Abramowitz believes digital-first firms have the advantage. “I think to do omnichannel correctly, you really need to have your core DNA online. I think you can take online offline, but it is much harder to take offline online.”

Digital players can’t ignore the offline world, added Abramowitz, because as much as is written about the explosive growth of eCommerce, the reality is that physical stores are still where the vast majority of sales take place.

And, he noted, this is even more true when it comes to the sorts of big-ticket sales that Bread and other installment players deal with directly.

“But the world is increasingly affected by what is happening online,” Abramowitz said.

And what is happening online, he noted, is a change in how customers want to relate to retailers when it comes to financing. They want transparency and predictability – and through Bread, retailers can offer that, without having to ask them to become experts at underwriting and collections themselves, and without the risk of losing relationships with their customers.

The goal now, Abramowitz said, is to continue building out the platform, and to apply it broadly.

“We have found there are a lot of areas where this service is applicable,” he said. “It has really been quite extraordinary.”