Card payment fees, EFTPOS fees, capture too much attention from retailers, in my opinion. Too much time is spent chasing lower costs from banks or imposing a surcharge on transactions where a card is used for payment.
It fascinates me that retailers tend to spend less time on other options for managing the payment costs to businesses.
It’s an easy complaint for a retailer to make, my EFTPOS merchant fees are too high, it’s not fair, time for me to consider another supplier or to consider charging customers a surcharge.
Customers hate surcharges, especially if there is another retailer selling what you sell that doesn’t charge a surcharge.
Every method of payment has a cost, including cash. In my experience working with retailers, the cost of cash is higher because of theft. However, it’s not easily seen, especially in retail businesses that don’t research or teach about theft.
To address the cost of EFTPOS merchant fees for a retail business, you need to be an engaged retailer. Here are some ideas:
- Promote cash payment, if you want the costs associated with cash, of course.
- Be clear as to the cost of using a card. You could apply a surcharge, which I think is a ridiculous idea, though.
- Price, knowing that cards will be used by customers. Build the cost into your pricing model for products where you can do this. Keep the price bump under 1.5%, and it’s less likely to be noticed.
- Lower a cost elsewhere to cover the payment cost. Look at your labour costs, for example. Shaving an hour of employee rostered time can save you what’s equal to purchases of $3,750 on a card—depending on the type of card used.
- Increase sales. While you should be single-mindedly focused on this anyway, increasing sales helps you address the EFTPOS cost and more in the business.
It’s easy to complain over EFTPOS fees. Before you do that, look at your own behaviour. Here are some common points in retail businesses that retailers overlook when they complain about supplier- or service-related costs. These are things we regularly see ignored in favour of complaining about someone else:
- Dead stock. A problem not seen is not a problem to many. In the average indie retail business, dead stock is equal to around 3% of turnover.
- Bloated roster. Some prefer to spend money on people so they have time to themselves to relax, golf or sit in the back office where no customer purchases from. We often see a bloat cost equal to around 10% of the roster.
- Wrong trading hours. Some stay open too long, while others are not open long enough. Either way is at a cost to the business.
- Being blind to theft. Theft in local indie retail costs, on average, between 3% and 5% of turnover. Not watching for it, tracking it and mitigating it has a cost to the business.
- The wrong product mix. Gross profit’s a key measure of retail business performance. Increasing yours beyond what is traditional for your channel provides you with a buffer. For example, transaction count/sales can decline, and you can be okay. Measure gross profit. Set a goal. Chase it. The air is cleaner in the above-average zone.
- No, it’s not bliss. There are insights into your software that can guide better, faster and more financially rewarding decisions. Yet too many in retail don’t want to know. That failure costs them plenty.
- Stop running out of stock.Manual processes for stock reordering by retailers and suppliers regularly result in sell-outs, and therefore missed sales. Every time that happens, it’s a cost to the business. In a retail business we looked at, the cost of sell-outs was more than $3,000 in a year, or $1,500 in gross profit, all because of poor reordering management.
The items on the above list are all on the retailer to address. The benefit’s that addressing these results in a stronger, leaner and more valuable retail business.
Adding a surcharge is an easy step. It may be the wrong step as doing so could shield you from more important and valuable business moves you can make.
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newsXpress is a marketing group that supports small local independent retailers to thrive. Find out more at help@newsxpress.com.au.
