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Target puts a bullseye on Walmart's phone-card business

Shoppers pay for their merchandise at a Target store in Chicago, Ill.

You could call Target is the ultimate team player. It has paired up with big names in fashion like Phillip Lim and Jason Wu. It has struck deals with interior designers and celebrity chefs.

Now it’s entering in a new partnership -- and it’s a lot more about finance than fashion.

The retailer said today it’s getting into the pre-paid phone card business, with a new service called Brightspot. And Target’s partner this time is T-Mobile.

The wireless carrier has been making its name as a company that requires no commitment. If you don’t want be tied down with a two-year contract, and last year’s phone? No problem. T-Mobile won’t hold you to one.

And that’s what the Target deal is all about. With Brightspot, consumers can get a pre-paid plan for $35 a month to talk or text, or $50 a month if there’s a data plan in the mix.

Analysts say the partnership with T-Mobile will let Target cash in on the movement among consumers to cut the phone-contract cord. The deal will also help the giant retailer bring in new users, who’d rather pay as they go.

“Customers, can buy these pre-paid phone cards at a variety of locations,” said analyst Jeff Kagan, adding that Target competitor Walmart has built up a big pre-paid card business.

“The question is, ‘Why hasn’t Target gotten into this space?’” said Kagan.

The pre-paid phone card business is worth several billion dollars a year in the U.S., says Burt Flickinger, managing director of Strategic Resource group. He says it’s also a way for Target to expand its market, and “keep its guests or shoppers away from competitors.”

Flickinger says Target gets most of its revenue from apparel and accessories -- and those customers only shop so much. By selling pre-paid phone cards, Target can “get more and more consumers who are cash and credit constrained to come in their stores on a monthly basis instead of a quarterly basis,” he said.

Although the cards carry fees, consumers like their flexibility and the ability to pay for them month by month. Not to mention that Target is offering a $25 gift card to customers who stay with the plan six months in a row.

About the author

Sally Herships is a regular contributor to Marketplace.

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