The news: Kohl’s and Capital One extended their private-label card partnership and plan to pilot a co-branded credit card in 2023, per a press release.

Here’s how it works: The Kohl’s Card has zero fees and will let Kohl’s Rewards customers earn an additional 2.5% on top of their 5% rewards. New cardholders also get 35% off their first Kohl’s purchase within 14 days of account opening.

Why it’s worth watching: As retail sales tick up, store cards are well-positioned to capture volume and build consumer loyalty.

• Retail sales have steadily increased each month—January sales jumped the most since March 2021. And total US retail sales are expected to climb up 3% year over year (YoY) and hit $6.796 trillion in 2022, per eMarketer forecasts from Insider Intelligence. As strong retail appetite and widespread inflation come to a head, consumers may be more inclined to spend with private-label cards to earn rewards on purchases at their favorite stores.
• Because private-label cards only let customers spend at one brand, they tend to offer attractive rewards and deals that encourage repeat purchases: Kohl’s holds cash promotional events throughout the year that let its cardholders earn an additional $10 for every $50 spent during a single transaction. These perks drive spend: Last year, Kohl’s rewards members spent twice as much as non-members, and Kohl’s cardholders spent six times more, per Kohl’s 2022 investor day.
• These perks also help bolster consumer loyalty. Improving customer relationships using loyalty programs is a top priority for brands: 52% of executive marketing and ecommerce respondents plan to launch or expand their brands’ loyalty programs, per a CommerceX and CommX survey.

What this means for Capital One: Extending its relationship with Kohl’s can help sustain Capital One’s volume growth.

• Capital One reported a 28% increase in credit card purchase volume in Q4 2021. And while the Kohl’s program made up a small portion of Capital One’s volume, the retailer’s rewards and card program demonstrably encourage spending.
• The Kohl’s co-brand can also bolster Capital One’s volume because it might appeal to a wider base of customers. The global value of consumer credit card rewards is expected to exceed $108 billion by 2026 (up from $92 billion in 2022), driven by an increase in co-brand credit card adoption by retailers, per Juniper Research.
• Capital One has inked several co-brand deals, including a program with BJ’s Wholesale Club—and the Kohl's extension might further its reach in the space.