Retailers lure customers with their own stimulus plans

Tired of waiting for spending to rebound on its own, retailers are taking matters into their own hands. Stores like Sam's Club, Target, Toys R Us, Staples and Office Depot are offering unconventional promotions meant not only to attract customers but also to get them feeling profligate.

Sam's Club is introducing a program in which it facilitates loans for shoppers of up to $25,000, backed by the Small Business Administration. Target will give its credit-card holders 5 percent discounts.

Toys "R" Us is instituting a holiday-fund program where it adds to shoppers' savings, and Staples and Office Depot are giving away office products for a penny or at no cost.

"A lot of the government programs have come to an end," said David Bassuk, a managing director in the global retail practice at AlixPartners, a New York-based financial consultancy. "So retailers are taking it upon themselves to do everything they can to get the consumer to spend, even opening up their own wallets to give money back to the consumer."

Of the over-the-counter stimulus plans, the one at Wal-Mart-owned Sam's Club is the most unusual.

Sam's Club began testing the program in May and will soon start marketing SBA loans of $5,000 to $25,000 for its members nationwide.

Superior Financial Group, which is managing the loans, gives Sam's Club members a $100 discount on the application fee and lower interest rates because of how much business it expects to get.

The company says it does not expect the program to be a big moneymaker, though it earns $50 for each financed loan. The point is to get customers spending more freely — and, it hopes, spending at Sam's Club.

Michael Golata was someone who had been watching his spending carefully. As a contractor in Louisville, Ky., for United Parcel Service, he drives emergency medical equipment to hospitals when MRI or CT scan machines break down.

When he asked UPS if more routes were available, the company told him there was so much work that he should bring on as many drivers as he could afford. There was just one problem: Golata owned one truck, and he was driving it all the time.

Online, he had found a used white Dodge Sprinter for $12,500. With just a few thousand dollars in cash, he tried to get a loan but was denied by two local banks because the truck was too old and had too much mileage.

He decided an SBA loan would be too much trouble, and he rejected as absurd a loan from a commercial-finance company with a 21 percent interest rate and payments of $450 a month.

About a month ago, Golata, a Sam's Club member, clicked through the retailer's website and found a page describing SBA loans offered by the retailer. He filled out an online application, and, by the next day, got a phone call from Superior Financial telling him he was approved for a $10,000 loan, with an interest rate of 7.25 percent over 10 years.

"It made the payment, like, $118 a month. I thought I was dreaming," Golata said. He immediately bought the Dodge, hired three drivers and went from billing UPS $3,000 a week to $8,000, he said.

A little under half of Sam's members are small-business customers, and they account for a little more than half of the revenue at the retailer.

As its net sales began to slip last fall, Sam's Club surveyed small-business customers and found that tight credit was partly to blame.

In the survey, said Catherine Corley, vice president for member services at Sam's Club, "fully one-third said 'I didn't buy what I needed to buy at Sam's Club because I didn't have the money.' It really motivated us to say, 'We've got to find some solutions.' "

Sam's Club has done only a small test of the SBA loans, and so far about 200 people have applied, with about 45 percent being approved, said Tim Jochner, chief executive and founder of Superior Financial.

The warehouse chain is considering offering other financial products through third parties to help ease customers' finances, like working-capital loans or peer-to-peer loans, said Hiren Patel, director for financial services at Sam's Club.

"We're not necessarily trying to be a bank; we're just trying to bring to them, much as we do with products, the things they need," Corley said.

Golata, the truck driver, said he was delighted with the loan program. But if the point of it was to free up his cash at Sam's Club, it didn't quite work.

Golata is now saving again — so he can get another Sam's Club loan in six months and buy another delivery vehicle. "It's not like it made me spend more than I normally would," he said.