The increasing costs and complications of accepting electronic payments are among the supermarket industry's toughest problems, according to the participants in SN's Executive Roundtable.
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Participants note that industry associations are trying to take concerted action, and individual companies are attempting to steer customers to lower-cost payment methods, such as off-line debit and electronic checks.
SN: What are some of the steps retailers can take that will have an impact on transaction costs?
BOB SCHOENING: It's a very complex issue. To the consumer, a lot of the costs associated with electronic presentation are hidden. Those costs are borne by the supermarket and, inevitably, the supermarket will pass those costs on to the consumers, in the form of higher prices.
JACK SCOTT: Say a consumer has a single card that can be used either as a debit or a credit card. Supermarkets should be able to inform customers of their right to choose which transaction will be more expensive for them. There are limits, though. I sat on a plane next to a woman who had switched from IGA to Albertson's. The former wouldn't take the plastic on which she earned frequent-flier miles. For that individual that was the key, and the grocer probably had no clue.
MIKE HUBERT: We are also trying to encourage alternative payments. We would much rather see debit transactions and electronic checks, so we are directing shoppers to the most cost-efficient form of payment.
JOHN GRANGER: The main way to do this is to fight [rising transaction fees] through our industry organizations.
SN: Are co-branded credit cards a way to lower a supermarket's payment costs? Do they provide other benefits?
SCOTT: I don't think co-branding has made much difference. What would be a service to a customer is a single card that does a lot of things -- frequent-shopper, frequent-flier, nd provides a succinct monthly statement.
HUBERT: I think there is real money to be made [with co-branded cards]. We wanted to grow Felpausch's electronic checking, but one problem is that we can't combine credit and electronic checks on [a co-branded credit] card.
SCHOENING: Co-branded cards mostly provide marketing benefits. You have to examine what's happening across the industry, and in other industries, with affinity and co-branded cards.
SN: Do smart cards offer benefits that other types of plastic don't?
GRANGER: Yes, they do. At a conference several months ago, a vendor was showing a card being used by McDonald's outside the United States. This card kept [customers'] purchase data and helped the retailer offer rewards based on the purchases stored on the card. Loyalty programs are not the only application for smart cards. There is much more to them that needs to be explored.
HUBERT: I see smart cards being used in the area of gift certificates, but I'm not sure about them from a loyalty-program standpoint.