The No-Nonsense Approach to Improving Profit Margin
“It’s a marginal world out there for us.”
This is what you might hear if you ask a retailer how they're keeping operational costs and erratic buyer behavior from eating away at the bottom line. The delicate retail balancing act of inventory vs. pricing vs. markup often results in a low net profit margin, but that doesn’t necessarily equal bad business practices. What it does mean, however, is that merchants must find other ways to make up that ground.
There are many strategies for improving margins over time, including adjustments to operational expenses, limiting inventory costs, increasing conversions with smart marketing, among others. These are proven out, but you aren’t likely to see the effect for months (and in some cases, years). Most merchants simply don’t have the luxury of time. They need to solve their margin problem … yesterday.
Net Margin’s Silent Killer
With an average 3 percent taken for every swipe, credit card fees can wreak havoc on the bottom line. Therefore, it’s no surprise that the use of — and fees associated with — credit card usage present significant challenges for merchants both small and large. Chief among them is the inability to control the cost and the associated increase in this cost over time.
Credit card processing fees have increased steadily over time. A recent study by SurchX found that 91 percent of merchants agree their credit card processing fees have gone up over the past five years, and 70 percent agreed they're now paying more than expected in fees. Compounding the issue is increased credit card use, averaging 10 percent per year, the rise in mobile wallet and contactless payments, and more swipes with high-end or rewards cards, which have higher associated processing fees.
As a result, merchants are paying more in credit card processing fees than ever before, and there’s no sign of a slowdown.
Wave Goodbye to Credit Card Processing Fees
Until now, there was no way for merchants to recoup losses from credit card transaction fees. Merchants considered this a cost of doing business. That no longer has to be the case. There are now ways to easily, quickly and effectively improve profit margins by avoiding pesky credit card processing fees. One strategy is to pass along credit card processing fees to customers as part of every credit card transaction by automating the process of instantly identifying the card being used, what the fee on that card is, and how much the business can legally charge back to recoup that fee loss. With no significant change in customer behavior, no out-of-pocket investment and no ongoing cost in most cases, credit card fees can vanish from expenses nearly overnight. The result is an increase in net profit margins by up to 30 percent in a matter of days.
Robert Maynard is the founder of SurchX, a software company that enables retailers to recover losses from merchant processing fees.