American Express hasn’t even lost Costco charges yet, and it’s reeling. Here’s the inside story on how Amex lost the Costco deal. Delta is their second largest co-brand, but with Marriott buying Starwood they presumably lose the ability to issue Starwood co-brands at some point when the programs are expected to merge. Although American Express wants to find a way to keep the Starwood card post-merger.
Starwood’s Al Maha Desert Resort
American Express lost the JetBlue co-brand to Barclays though it’s small. Their network is no longer used for Fidelity card transactions.
Prepaid products aren’t driving the hoped-for growth. And American Express Plenti, a coalition rewards program that lets you earn points for doing business with a variety of merchants, hasn’t picked up many new participants since it launched.
American Express Centurion Lounge Dallas
Long term credit card interchange fees will be competed down by new technologies. Businesses which make their money on high margins processing credit transactions need to innovate, because those income streams will come under pressure.
American Express revenue is down and earnings are down. Their problem is lack of growth and paradoxically their strategy is cutting costs. They may have unnecessary expenses, and if they’re going to be a slow growth company for the foreseeable future they need a sustainable cost base. But the cuts won’t return them to growth. So the cuts aren’t a winning strategy unless the idea is to sell the company.
And it seems the layoffs have begun.
“There were some announcements this week that advised which roles were being eliminated as part of the larger restructuring plan.”
[American Express spokesperson Marina] Norville did not elaborate on the number of employees that would be impacted. She added, “There will be restructuring changes throughout the year, reflecting our previously announced actions to take $1 billion out of our cost base by 2017.”
It had been previously reported that American Express would shed 6% of the company’s workforce or about 4000 jobs.
American Express needs a strategy to grow, not to conserve as much cash as it can in a static revenue environment. They made need to make cuts, although major cost-cutting rarely cuts fat and not bone (see: United’s ironically-named “Project Quality”). My thoughts in the meantime are with the many sharp employees of American Express who may be learning their positions are no longer available.
I actually called them recently regarding the fact that they restrict bonus points on their Gold Rewards card to US purchases only. Two competing products offer better rewards with lower annual fees. For example, Discover has zero foreign transaction fees and their bonus point structure is good world wide. Chase Sapphire Preferred also zero foreign transaction fees and also awards bonus points world wide. What exactly are they thinking with a premium priced product that offers lower rewards? Doesn’t make a whole lot of sense to me.
As an aside, the new Citi Costco card also offers world wide bonus points, but I just read where they charge a 3% transaction fee. Seriously? What’s the point of that? These companies need to get a clue.
Speaking from an Australian perspective at least, it is no surprise Amex growth has stalled! Practically all small businesses here will not accept Amex due to the high merchant fees on the card. Those that do, will commonly demand up to 3% surcharge on the cardholder’s proposed purchase. If you have a Visa or MasterCard in your wallet (no surcharge payable) it’s a no-brainer as to which card you will use!
Amex is no longer a ‘premium’ card, as the service they provide in many areas has long since gone.
Further, from my own experience, Amex could cut costs by disbanding their Indian Fraud unit, which you might imagine would be right up to speed on worldwide scams and fraudulent activities, but are totally clueless and a waste of the company’s money! I had my grievance sorted out in no time by a super-efficient agent in Phoenix I happened to be diverted to at the time of day I phoned. The local staff in Australia were also very helpful.
Maybe AMEX should stop blacklisting all of their previous, non-paying, written-off customers. LOL. Let’s face it, they can forgive all of their “loans”, send those 1099 forms as if it were “income”, everyone will be happy and then AMEX can restart the debt-engine again, create credit default swaps, and finally pray the Fed will bail them out again (pretending to be a bank, rather that a credit-card company). Too funny.
Should we that are in it purely for our greed feel bad that people are losing their jobs because we are causing losses to the company. OK fine not all of it, or most of it, but at least enough of it to cause them to take notice and restrict sign on bonuses.
I am glad Amex is cutting cost. Ask any accountant, they will tell you controlling cost is extremely important. I am sure Amex is also thinking about growth and not just simply cutting cost. No company is that dumb.
I am glad they come up with new cards, the everyday card, and the everyday preferred are both good. Their recent addition of co-branding with Schwab is also commendable. Amex should be on the right path, once the US dollars weakens a bit. For your info, S&P has a buy rating on them.
99% of those being laid off have no direct responsibility for the strategic direction the executive directors of AMEX have decided to go at.
They are causalities just as the shareholders are, if not more so.
To say things like “I’m glad American Express is cutting costs” , “They made need to make cuts” are completely heartless things to say.
Unfortunately for AMEX, they’re now in a hole they dug for themselves during the last 20-30 years. As Visa and MC were expanding, AMEX tried to be the CC for elite, charging high merchant fees. For a while they got away with it by having a good travel rewards program, but now Chase/Citi/etc can do the same or better and with more mass appeal.
Outside of a frequent Delta traveler, someone needing their lounges, or business needing massive credit limits, why bother with any AMEX cards? Most general consumers don’t even know much about rewards. Many of the cards I see people whip out are from their bank or local credit union, and none of those are AMEX of course.
They simply can’t grow in the format they are right now. They’ll just remain a niche CC company.
The Amex offers on my accounts have been really poor of late as well.
Amex still thinks of itself as something special in your wallet. Like Mae West, their appeal has become much more selective over the decades.
A factor might be that Delta Skymiles are worth less and less thus a Delta signup bonus from American Express is less appealing .
Hmmm , could Amex possibly pressure Delta to improve Skymiles , or at least not keep making it worse ?
Amex is going to need to do something dramatic or they will ultimately suffer the same fate that Diners Club did. There’s no compelling reason to have an Amex anymore, I am a 25 year customer and while it used to be the only card I used, the customer service gap has been closed by several banks and the benefits of having the card keep getting reduced. The most reductions or downgrades that I’ve noticed:
– The big transfer bonuses (BA primarily) rarely happen anymore
– Member deals are rarely less useful
– Loss of Costco
– Lounge access gets less valuable every year (sorry but having a handful of overcrowded Centurion lounges simply does not cut it for the vast majority of frequent travelers)
– Feels like retailer acceptance is dropping, leading to the more frequent rebuff or “Oh…I’m sorry sir but we do not accept…” which some cashiers/waiters say bluntly and loudly enough to make it seem like I just tried to pass a counterfeit $100 bill as they pull their hand away to avoid physical contact.
To me the Centurion Lounge strategy seems the least well thought out. For a company that is losing customers and retail acceptance, it seems odd to invest in expensive physical construction that is inflexible, provides limited utility to members, and requires a long term commitment. It’s going to cost a lot of money and take quite a few years to build the lounge network out to the point that it is a viable replacement to Admirals Clubs for example…except for passengers who primarily do the same route with high frequency (i.e. DFW-LGA, or SEA-MIA). By the time the lounge rollout is done it may be too late.
Amex can blame delta for my cutting up both my reserve and platinum co-branded Amex card when my anniversary date rolls around. The fees are too high for the lack of return I am getting by having them all because of delta. Thus, my $90000 worth of charges will cost Amex $2700 in lost merchant fees (figuring a 2.5% fee) and almost $700 in fees for the privilege of using their cards. Not much for one person but multiply that by thousands of others doing the same and it might hurt Amex just a bit. If Amex wants to win me back, they had better tell delta to quit nickeling and dimeing me to death. A cash back card will be my go to because I can then use that cash anyway I want, especially for tickets on carriers other than delta.
Couldn’t disagree with Steve and most of you dissenters more. If Amex disappears, I’ll mourn for a lifetime.
Plus, Centurion Lounge is the best thing that ever happened. They should be leveraging that more than they do.
I’m dreaming, but I love the idea of Amex rebranding/chartering existing airlines on the most exclusive worldwide routes to fly “Amex Centurion” flights. If done right, the premium configuration would carry weight and be an honor for selected airlines.
I’m not writing Amex off. It takes time for a turnaround. I’m glad they got Schwab, at least Schwab didnt sign with Citi nor Chase. There will always be some partnership “loss” due to merger or whatever. But as long as the positives outnumber the negatives, it s/b ok. We’ll see how this unfold.
In 2009 AMEX without warning and with no outstanding balance took my platinum card away. The first I knew was when my transaction was delined . To add insult to injury they told me that my reward points 220 000 were cancelled too. The lack of respect for clients is historic. I did get my points back after many wasted hours and a letter to the CEO. I made a commitment then to never use an AMEX card again. Unfortunately they are the providers of my corporate card, but I will never again sign up for one in my personal capacity.