J.C. Penney extends credit card, financial deal with Synchrony

Dive Brief:

J.C. Penney and Synchrony have renewed their strategic partnership for multiple years, according to a press release. The number of years was not specified. The deal enables J.C. Penney to use Synchrony’s consumer services and data analytics expertise to continue offering financial options and personalized shopping experiences to customers.
The 20-year long partnership has allowed J.C. Penney to offer a private-label credit card and J.C. Penney Mastercard Dual Card. J.C. Penney will continue to use Synchrony to manage and service payment cards for its more than 860 stores and on JCPenney.com.
The arrangement has a mobile component: SyPi, a plug-in from Synchrony. On its website, Synchrony describes SyPi as "a native credit feature that plugs into a retailer’s mobile app and allows cardholders to easily shop, redeem rewards, and securely manage and make payments to their accounts with their smartphones."

Dive Insight:

As payments and financial services take a growing role in retail success stories in 2018, the extension of J.C. Penney and Synchrony’s strategic partnership is a win for both companies. J.C. Penney is in the midst of a long slog through a retail world where malls have fallen out of favor and apparel retailing has become increasingly competitive. It’s also a time when competitor Sears, often found on the other end of the same malls, is reportedly readying a bankruptcy plan.

Synchrony needs J.C. Penney to keep up its client portfolio after losing the Walmart credit card business to Capital One this summer. Walmart was reportedly displeased with Synchrony’s marketing efforts, its transaction fees and the approval rate of card applications. It was another partnership that had lasted nearly 20 years, and represented over 10% of Synchrony’s total interest and fees on loans last year, Forbes reported. The Walmart-Synchrony breakup echoed that of Costco and American Express in 2016 when the wholesale retailer switched to Citigroup. Synchrony has recently extended its partnerships with Lowe’s and Fred Meyer Jewelers.

With its SyPi mobile component, Synchrony may help J.C. Penney compete with Macy’s and Kohl’s, among others, as shopping apps secure their niche as the first place many consumers turn while at home or in the store. For example, the percentage of online consumers who will use their smartphones to shop will grow to 16% this year from 12% in 2017, according to a recent study from PwC. J.C. Penney began accepting Apple Pay in its stores last year, and integrated its store-branded credit card – a Synchrony product – with Apple Pay.

"In my two years as CEO, we've been committed to transforming J.C. Penney from a company focused primarily on the brick-and-mortar business to a true omnichannel retailer," former CEO Marvin Ellison said in March.

In another sign of uncertainty at the department store chain that relates to the Synchrony deal, CFO Jeffrey Davis stepped down as of Oct. 1. The retailer is conducting a formal search for a replacement while Jerry Murray, SVP of finance serves as interim CFO. J.C. Penney was downgraded by analysts in August following a weak second quarter and questions about its turnaround prospects. Net sales had fallen 7.5% year-over-year in Q2 while the company was challenged by surplus inventory and markdowns.