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 who does not 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 is not easily seen, especially in retail businesses that do not research or teach theft.
To address the cost of EFTPOS merchant fees on 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. Keep the bump under 1.5% and it is less likely to be noticed.
- Lower a cost elsewhere to cover the cost. Look at your labour cost, for example. Shaving a hour of employee rostered time can save you around $30.00, that’s equal to purchases of $3750.00 on a card – depending on the type of card used.
- Increase sales. While you should be single-mindedly focussed on this anyway, increasing sales helps you address the EFTPOS cost and more in the business.
It’s easy to complain over EFTPOS fees. But … before you do that, look at your own behaviour. Here are common points in retail businesses that retailers overlook when they complain about a supplier or service related cost. These are things I regularly see ignored in favour of complaining about someone else:
- Dead stock. A problem not seen is not a problem to too 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 for relaxing, golf or to sit in the back office, where no customer purchases from. I 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 has a cost to the business.
- Being blind to theft. Theft in local indie retail retail costs on average between 3% and 5% of turnover. Not watching for it, tracking it and mitigating against it has a cost to the business.
- The wrong product mix. GP% is 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 GP%. Set a goal. Chase it. The air is cleaner in above average.
- Ignorance. No, it’s not bliss. There are insights in your software that can guide better decisions, faster decisions, 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 process for stock reordering, by retailers and suppliers, regularly result in sell-outs, and, therefore, missed sales. Every time that happens it is a cost to the business. In a retail business I looked at recently, the cost of sell-outs was more than $3,000 in a year, or $1,500 in gross profit, all because of poor re-ordering management.
The items on the above list are all on the retailer to address. The benefit is that addressing these results ins a stronger, leaver and more valuable retail business.
Adding a surcharge is an easy step, but the wrong step in my view as doing that could shield you from more important and valuable business moves you can make.