We had a story yesterday about how credit card companies are making a mint out of higher gas prices, because they get a percentage of transactions and the gas pump. And, at the same time, we ran a story about how four trade associations - the National Association of Convenience Stores (NACS), the National Association of Chain Drug Stores (NACDS), the National Community Pharmacists Association (NCPA), and the National Cooperative Grocers Association (NCGA) – have filed an antitrust and class action lawsuit against Visa USA, MasterCard and a number of their member banks, charging them will colluding to set artificially high fees.
MNB user David Livingston responded:
Thanks for pointing out how much profit the credit card companies are making off higher fuel sales. Now I know why many of them offer 3% to %5 rebates back on fuel purchases. Just about every other month BP Amoco is sending me a $20 gift card. Discover ran a 5% cash back program all summer on fuel purchases.
Trust us. There are no gifts from the credit card companies.
And MNB user Teri Richman, senior vice president for Research and Public Affairs at NACS, wrote:
You couldn’t be more correct in your view that the use of PIN numbers with debit cards is the least risky card transaction type and therefore should be the least costly. Indeed, we believe that PIN numbers are also appropriate for use with credit cards as security and ID theft concerns continue to rise. Clearly, we now see the opposite occurring in the marketplace and that is that use of signature-debit is on the rise largely because more and more rewards programs are tied to them by the card companies. When a merchant accepts one of these reward cards they pay more in fees which, of course, helps finance the reward. This is an example of retailer disintermediation, i.e. a consumer shift in usage to higher priced reward cards which delivers merchants no real benefits and at the same time promotes customer loyalty to a payment method rather than to their store.. The real rub is that merchants are paying for the privilege of rewarding customers no matter where they shop. In addition, the need to pass along these fees to all customers has the overall effect of taxing all on behalf of the very few who will garner enough reward points to really enjoy something meaningful. Most customers never get to the threshold of spending to redeem many of the rewards being offered. We’re eager to see reform of the interchange system here in the U.S. and it is our considered opinion that the litigation filed last week by us and the other associations will help achieve that goal. Many thanks for writing about it.
Our pleasure.
One other MNB user wrote:
I will never use cash or PIN debit to buy gas as long as my credit card gives me 5% cash back on all fuel purchases. The same goes for groceries. Since I make sure I never pay any fees or interest, I like to think I’m sticking it to the bank anyway.
MNB user and retailer Howard Seiden wrote:
It is amazing what is happening with my fees. Five years ago, credit cards accounted for 15% of my sales. Now it is closer to 70%. Then you read where credit card companies are starting to give 5% cash back for sales to supermarkets, gas stations and someone else, I forget. They are giving back 3% to other stores. Who is paying for this? We are and we aren't making 5%. How can this work in the long run?
Also, it is not just the fees but if you stay up with the technology at all, you have the terminals, maintenance and the cost of transmitting the data. This all adds up to huge numbers. You can't shop it because they are all the same. I hope that the brewing storm definitely shows results.
And MNB user Lucretia Nesbitt wrote:
You know, I've never responded about a particular story before but this one just gets me. It makes me very thankful that my husband and I rarely use our credit cards, firmly believing in keeping balances down.
On the flip side of this, for those consumers that find themselves struggling to make ends meet and need to use their credit cards more often just to get gas, the credit card companies are going to continue making money off the finance charges. It seems to me their getting rich off both ends of the deal ... the fees they charge the companies and the finance charges they're making off the consumers.
MNB user John Tatum had a thought:
I agree the fees are onerous, but why do the retailers / gas stations not offer a lower cash cost? Is the cost of handling cash still higher than the transactions fees? I will move to cash when the retailer provides me an incentive and probably not sooner.
Do what you want. But it seems to us that you’re paying for the transaction one way or the other.
MNB user Joanne Sturm agreed with the cash discount notion:
The gas stations should pass a savings on to the consumers for paying in cash or using a debit card. This would be the only way you could get lazy people off their butts to leave their car and pay at the counter. We need to start doing something instead of just rolling over, and letting them stick it to us. Haven't we all had just about enough?
Another MNB user wrote:
I work for a family-owned convenience store company in the Midwest. Our credit card cost was our fastest growing expense this past year and continues to grow. Their fees are based on transaction dollar amounts. So as the price of gasoline goes up, while the cost of their transaction doesn't increase, their profit does. For example, our gross profit cents per gallon profit on gasoline is around a dime. Out of that, besides paying our employees, health care costs, other overhead, etc., if our customers choose to pay with their credit card, it costs us over two cents a gallon. So, on $2 a gallon gas, it is four cents plus per gallon, on $3 a gallon gas, it is six cents plus per gallon.
MNB user Amy Haefele wrote:
The credit card industry might be the only one that defies basic economic principles - more and more people are going "cashless," especially since all the major fast food restaurants have started accepting credit cards over the past few years.... and yet, the transaction fees continue to rise. You bet I use my debit card PIN number whenever I can, because I feel for the companies who are forced to pay for the fact that consumers no longer carry cash.
But another MNB user wrote:
Your recommendation to "use cash or PIN-based debit cards and watch ‘em squirm" needs a modification. Just use cash.
In California, the price to process a debit transaction at Arco went up to 45 cents (from 35 cents). I was really mad, but since my tank was on "E" I filled anyway. But I won't go back.
We had an email yesterday from an MNB user complaining about a Safeway store in Indiana, which prompted another MNB user to respond:
It’s well worth noting that the Safeway stores that operate as such in Indiana are NOT owned or operated by Safeway, Inc. There's some kind of funky arrangement where they kept the name when Safeway exited Indiana a few years ago.
The person who wrote that letter, though, does describe a lot of Safeway, Inc's problems, though.
We continue to get email about Federated’s decision to change Marshall Field’s name to Macy’s…
MNB user Phil Blackburn wrote:
Reading yet again the responses to the name change of Marshall Field's. I was in the audience last week during your presentation here in Seattle (great job!), and was one of the folks in the audience who booed about the change from "The Bon Marche." For me, The Bon was a great place to buy mid-price clothing. Perhaps I am wrong, but my impression is that not only did the name change to Macy's, but much of the selection and quality o clothing declined. As one of your readers pointed out, commodity merchandise is available much cheaper at other locations, and at alternative formats. It's such a shame for them, since I now either upgrade to Nordstrom's, order from the internet, catalogues, etc. without ever having to burn $3 gas to visit a mall. They basically lost me as a customer.
It is interesting how some supermarket retailers have failed in similar ways after acquisitions. For the independent supermarket retailers I serve, this is a great opportunity, provided they have operational excellence. Local community involvement, unique selection, quality perishables, and fast, friendly service can still provide a competitive advantage as you point out.
Another MNB user wrote:
One more on the Marshall Field’s/Safeway/ Dominique’s, etc…
I only hope some of the suits from far away making these decisions read your newsletters!! It would save them thousands in market research – they are getting true feelings expressed right here, every single day!
Does it make a difference? Kroger, are you listening? Just because you are 108+ years old doesn’t mean you know everything….. shoppers do speak with their dollars…. While a “Kroger division” is very close to both work and home, I still drive several miles to get to Trader Joe’s, Whole Foods, Wild Oats, ….and a local health food chain that still retains its personality!!
Another member of the MNB community wrote:
Over the years I have given a lot of thought to this “local versus national” issue. Yes, the local attention and tailoring to meet the needs of the local customers is very important, But the “scale” efficiency of a national is also very valuable. The idea that you can just buy up locals and plug the national’s name in is just stupid and I have experienced it myself. But it indicates that the national thinks they know everything.
If the national is run like the Russian Army with all orders coming from above and lower level officers expected to follow those orders, it will fail just as the Russian Army did. What leaders of an organization like say Albertson’s and Ahold USA apparently fail to grasp is winning at the local level requires leader who has the capability to win and the motivation to win. You cannot control everything from headquarters and demand that the local management just execute. Food retailing will not work under that model today. Details of merchandising such as local products and pricing must be the responsibility of local management if a “national” is to win.
Without ever having worked at either company, I can imagine the differences between Kroger and Albertson’s. The authority and responsibility of a Kroger Region Manager compared to an equal at Albertson’s. I’d bet big money Kroger’s managers have a totally set of different responsibilities than the Albertson’s or Giant managers with a comparable number of stores. I’m sure the same would be true for Publix. Define nationally, execute locally and you win. Demand nationally and follow locally and you lose.
Regarding our suggestion that maybe retailers could allow some employees to program the music selection in stores, MNB user Philip Herr wrote:
I believe that employees are responsible for the music in our local Super Stop & Shop. After all, whenever I am there I have to wonder who among the customers I see really appreciate the contemporary hip hop sound that I find so irritating and tuneless. As a male fifty something responsible for household shopping I realize I am an exception, but I really wonder who is being served by the choice of music. It certainly does nothing to enhance my shopping experience -- quite the contrary.
We wrote yesterday about a new retailing trend called de-malling, the “transforming the retail landscape by integrating shopping centers into neighborhoods rather than walling them off from nearby residents.”
One MNB user responded:
De-malling? Oh please. If the best they can do is re-create the shopping center, they missed the last 50 years.
The specific project referred to in the story was in Somerville, Massachusetts…which led one MNB user to observe:
Have you ever walked around in Somerville from November to March? Walking outside is not going to be fun a lot of days! Whose idea was this?
Responding to speculation that Tesco may be interested in merging or acquiring Safeway in the US, with which it owns a home shopping business, one MNB user wrote:
It’s also worth noting that Tesco has an arrangement with Kroger as well. Kroger might be a better fit for Tesco than Safeway for one VERY big reason: Fred Meyer and GM. Kroger has experience and infrastructure in General Merchandise that Safeway does not have.
Safeway might make sense, but Tesco seems to be heading in a supercenter direction in the UK as it is. I personally am wondering when Tesco will show up here because if they can give Wal-Mart fits over there, imagine what will happen in Wal-Mart's backyard.
Not to go into the whole story all over again, but we have been variously accused this week of being biased against old people, arrogant, and (worst of all in our view) not funny.
One MNB user wrote…
Since when have people lost their sense of humor and become so PC? I enjoy your daily banter and takes on the industry...and other not-so industry related things.
Do I always agree with you? No...I believe you tend to have a more liberal viewpoint than myself...but I respect your views and enjoy reading your reasoning. Do I always like your jokes? No...but then again not everyone can be as funny as I am. (By the way that was a joke…)
…Honestly if you lose your humor and your viewpoint your site would be just another boring industry website. Keep it up...there are lots of us tuning in daily to get some good insight, a little humor, and some good movie and wine reviews.
Thanks….to you and all the folks who were concerned that we take the criticism personally.
We don’t. It’s all part of the gig. And being married for 22 years and having three kids, we are used to being accused of being arrogant and not funny. (One of our kids thought it was funny that we were accused of being biased against old people. “But you are an old person,” she said. Funny kid. Takes after the old man.)
And finally, we got a number of emails yesterday about the death of Don Adams of ‘Get Smart” fame, with most people bemoaning the fact that someone who was so much part of their childhoods was gone…especially because it means we’re all getting old as well.
MNB user Rick Brindle wrote:
The heroes of my youth continue to pass on. I still remember where I was the day The Rifleman died. When Andy goes, I am taking a personal day.
What two cartoon characters did Don Adams lend his voice to?
The answer, of course, is Inspector Gadget and Tennessee Tuxedo.
And, don’t forget, Adams also played the house detective on the funny old Bill Dana Show...”My name Jose Jimenez...”
It’s funny how those old TV stars with whom we all spent so much time as kids continue to reverberate in the national consciousness, and resonate emotionally for many of us. And like Chuck Connors was the man for Rick Brindle, for us it was Mike Connors of “Mannix” fame.
For us, there was no more important TV star in the sixties and seventies. None. And if you asked us what one actor we’d like to meet, it’d have to be Mike Connors, who luckily is still alive and kicking.
That probably won’t happen. But there it is.
MNB user David Livingston responded:
Thanks for pointing out how much profit the credit card companies are making off higher fuel sales. Now I know why many of them offer 3% to %5 rebates back on fuel purchases. Just about every other month BP Amoco is sending me a $20 gift card. Discover ran a 5% cash back program all summer on fuel purchases.
Trust us. There are no gifts from the credit card companies.
And MNB user Teri Richman, senior vice president for Research and Public Affairs at NACS, wrote:
You couldn’t be more correct in your view that the use of PIN numbers with debit cards is the least risky card transaction type and therefore should be the least costly. Indeed, we believe that PIN numbers are also appropriate for use with credit cards as security and ID theft concerns continue to rise. Clearly, we now see the opposite occurring in the marketplace and that is that use of signature-debit is on the rise largely because more and more rewards programs are tied to them by the card companies. When a merchant accepts one of these reward cards they pay more in fees which, of course, helps finance the reward. This is an example of retailer disintermediation, i.e. a consumer shift in usage to higher priced reward cards which delivers merchants no real benefits and at the same time promotes customer loyalty to a payment method rather than to their store.. The real rub is that merchants are paying for the privilege of rewarding customers no matter where they shop. In addition, the need to pass along these fees to all customers has the overall effect of taxing all on behalf of the very few who will garner enough reward points to really enjoy something meaningful. Most customers never get to the threshold of spending to redeem many of the rewards being offered. We’re eager to see reform of the interchange system here in the U.S. and it is our considered opinion that the litigation filed last week by us and the other associations will help achieve that goal. Many thanks for writing about it.
Our pleasure.
One other MNB user wrote:
I will never use cash or PIN debit to buy gas as long as my credit card gives me 5% cash back on all fuel purchases. The same goes for groceries. Since I make sure I never pay any fees or interest, I like to think I’m sticking it to the bank anyway.
MNB user and retailer Howard Seiden wrote:
It is amazing what is happening with my fees. Five years ago, credit cards accounted for 15% of my sales. Now it is closer to 70%. Then you read where credit card companies are starting to give 5% cash back for sales to supermarkets, gas stations and someone else, I forget. They are giving back 3% to other stores. Who is paying for this? We are and we aren't making 5%. How can this work in the long run?
Also, it is not just the fees but if you stay up with the technology at all, you have the terminals, maintenance and the cost of transmitting the data. This all adds up to huge numbers. You can't shop it because they are all the same. I hope that the brewing storm definitely shows results.
And MNB user Lucretia Nesbitt wrote:
You know, I've never responded about a particular story before but this one just gets me. It makes me very thankful that my husband and I rarely use our credit cards, firmly believing in keeping balances down.
On the flip side of this, for those consumers that find themselves struggling to make ends meet and need to use their credit cards more often just to get gas, the credit card companies are going to continue making money off the finance charges. It seems to me their getting rich off both ends of the deal ... the fees they charge the companies and the finance charges they're making off the consumers.
MNB user John Tatum had a thought:
I agree the fees are onerous, but why do the retailers / gas stations not offer a lower cash cost? Is the cost of handling cash still higher than the transactions fees? I will move to cash when the retailer provides me an incentive and probably not sooner.
Do what you want. But it seems to us that you’re paying for the transaction one way or the other.
MNB user Joanne Sturm agreed with the cash discount notion:
The gas stations should pass a savings on to the consumers for paying in cash or using a debit card. This would be the only way you could get lazy people off their butts to leave their car and pay at the counter. We need to start doing something instead of just rolling over, and letting them stick it to us. Haven't we all had just about enough?
Another MNB user wrote:
I work for a family-owned convenience store company in the Midwest. Our credit card cost was our fastest growing expense this past year and continues to grow. Their fees are based on transaction dollar amounts. So as the price of gasoline goes up, while the cost of their transaction doesn't increase, their profit does. For example, our gross profit cents per gallon profit on gasoline is around a dime. Out of that, besides paying our employees, health care costs, other overhead, etc., if our customers choose to pay with their credit card, it costs us over two cents a gallon. So, on $2 a gallon gas, it is four cents plus per gallon, on $3 a gallon gas, it is six cents plus per gallon.
MNB user Amy Haefele wrote:
The credit card industry might be the only one that defies basic economic principles - more and more people are going "cashless," especially since all the major fast food restaurants have started accepting credit cards over the past few years.... and yet, the transaction fees continue to rise. You bet I use my debit card PIN number whenever I can, because I feel for the companies who are forced to pay for the fact that consumers no longer carry cash.
But another MNB user wrote:
Your recommendation to "use cash or PIN-based debit cards and watch ‘em squirm" needs a modification. Just use cash.
In California, the price to process a debit transaction at Arco went up to 45 cents (from 35 cents). I was really mad, but since my tank was on "E" I filled anyway. But I won't go back.
We had an email yesterday from an MNB user complaining about a Safeway store in Indiana, which prompted another MNB user to respond:
It’s well worth noting that the Safeway stores that operate as such in Indiana are NOT owned or operated by Safeway, Inc. There's some kind of funky arrangement where they kept the name when Safeway exited Indiana a few years ago.
The person who wrote that letter, though, does describe a lot of Safeway, Inc's problems, though.
We continue to get email about Federated’s decision to change Marshall Field’s name to Macy’s…
MNB user Phil Blackburn wrote:
Reading yet again the responses to the name change of Marshall Field's. I was in the audience last week during your presentation here in Seattle (great job!), and was one of the folks in the audience who booed about the change from "The Bon Marche." For me, The Bon was a great place to buy mid-price clothing. Perhaps I am wrong, but my impression is that not only did the name change to Macy's, but much of the selection and quality o clothing declined. As one of your readers pointed out, commodity merchandise is available much cheaper at other locations, and at alternative formats. It's such a shame for them, since I now either upgrade to Nordstrom's, order from the internet, catalogues, etc. without ever having to burn $3 gas to visit a mall. They basically lost me as a customer.
It is interesting how some supermarket retailers have failed in similar ways after acquisitions. For the independent supermarket retailers I serve, this is a great opportunity, provided they have operational excellence. Local community involvement, unique selection, quality perishables, and fast, friendly service can still provide a competitive advantage as you point out.
Another MNB user wrote:
One more on the Marshall Field’s/Safeway/ Dominique’s, etc…
I only hope some of the suits from far away making these decisions read your newsletters!! It would save them thousands in market research – they are getting true feelings expressed right here, every single day!
Does it make a difference? Kroger, are you listening? Just because you are 108+ years old doesn’t mean you know everything….. shoppers do speak with their dollars…. While a “Kroger division” is very close to both work and home, I still drive several miles to get to Trader Joe’s, Whole Foods, Wild Oats, ….and a local health food chain that still retains its personality!!
Another member of the MNB community wrote:
Over the years I have given a lot of thought to this “local versus national” issue. Yes, the local attention and tailoring to meet the needs of the local customers is very important, But the “scale” efficiency of a national is also very valuable. The idea that you can just buy up locals and plug the national’s name in is just stupid and I have experienced it myself. But it indicates that the national thinks they know everything.
If the national is run like the Russian Army with all orders coming from above and lower level officers expected to follow those orders, it will fail just as the Russian Army did. What leaders of an organization like say Albertson’s and Ahold USA apparently fail to grasp is winning at the local level requires leader who has the capability to win and the motivation to win. You cannot control everything from headquarters and demand that the local management just execute. Food retailing will not work under that model today. Details of merchandising such as local products and pricing must be the responsibility of local management if a “national” is to win.
Without ever having worked at either company, I can imagine the differences between Kroger and Albertson’s. The authority and responsibility of a Kroger Region Manager compared to an equal at Albertson’s. I’d bet big money Kroger’s managers have a totally set of different responsibilities than the Albertson’s or Giant managers with a comparable number of stores. I’m sure the same would be true for Publix. Define nationally, execute locally and you win. Demand nationally and follow locally and you lose.
Regarding our suggestion that maybe retailers could allow some employees to program the music selection in stores, MNB user Philip Herr wrote:
I believe that employees are responsible for the music in our local Super Stop & Shop. After all, whenever I am there I have to wonder who among the customers I see really appreciate the contemporary hip hop sound that I find so irritating and tuneless. As a male fifty something responsible for household shopping I realize I am an exception, but I really wonder who is being served by the choice of music. It certainly does nothing to enhance my shopping experience -- quite the contrary.
We wrote yesterday about a new retailing trend called de-malling, the “transforming the retail landscape by integrating shopping centers into neighborhoods rather than walling them off from nearby residents.”
One MNB user responded:
De-malling? Oh please. If the best they can do is re-create the shopping center, they missed the last 50 years.
The specific project referred to in the story was in Somerville, Massachusetts…which led one MNB user to observe:
Have you ever walked around in Somerville from November to March? Walking outside is not going to be fun a lot of days! Whose idea was this?
Responding to speculation that Tesco may be interested in merging or acquiring Safeway in the US, with which it owns a home shopping business, one MNB user wrote:
It’s also worth noting that Tesco has an arrangement with Kroger as well. Kroger might be a better fit for Tesco than Safeway for one VERY big reason: Fred Meyer and GM. Kroger has experience and infrastructure in General Merchandise that Safeway does not have.
Safeway might make sense, but Tesco seems to be heading in a supercenter direction in the UK as it is. I personally am wondering when Tesco will show up here because if they can give Wal-Mart fits over there, imagine what will happen in Wal-Mart's backyard.
Not to go into the whole story all over again, but we have been variously accused this week of being biased against old people, arrogant, and (worst of all in our view) not funny.
One MNB user wrote…
Since when have people lost their sense of humor and become so PC? I enjoy your daily banter and takes on the industry...and other not-so industry related things.
Do I always agree with you? No...I believe you tend to have a more liberal viewpoint than myself...but I respect your views and enjoy reading your reasoning. Do I always like your jokes? No...but then again not everyone can be as funny as I am. (By the way that was a joke…)
…Honestly if you lose your humor and your viewpoint your site would be just another boring industry website. Keep it up...there are lots of us tuning in daily to get some good insight, a little humor, and some good movie and wine reviews.
Thanks….to you and all the folks who were concerned that we take the criticism personally.
We don’t. It’s all part of the gig. And being married for 22 years and having three kids, we are used to being accused of being arrogant and not funny. (One of our kids thought it was funny that we were accused of being biased against old people. “But you are an old person,” she said. Funny kid. Takes after the old man.)
And finally, we got a number of emails yesterday about the death of Don Adams of ‘Get Smart” fame, with most people bemoaning the fact that someone who was so much part of their childhoods was gone…especially because it means we’re all getting old as well.
MNB user Rick Brindle wrote:
The heroes of my youth continue to pass on. I still remember where I was the day The Rifleman died. When Andy goes, I am taking a personal day.
What two cartoon characters did Don Adams lend his voice to?
The answer, of course, is Inspector Gadget and Tennessee Tuxedo.
And, don’t forget, Adams also played the house detective on the funny old Bill Dana Show...”My name Jose Jimenez...”
It’s funny how those old TV stars with whom we all spent so much time as kids continue to reverberate in the national consciousness, and resonate emotionally for many of us. And like Chuck Connors was the man for Rick Brindle, for us it was Mike Connors of “Mannix” fame.
For us, there was no more important TV star in the sixties and seventies. None. And if you asked us what one actor we’d like to meet, it’d have to be Mike Connors, who luckily is still alive and kicking.
That probably won’t happen. But there it is.
- KC's View:
