Feeling the pinch
With the banking sector in crisis, ShelfLife decided to speak to retailers and find out how their relationships with their bank and service providers had been affected.
Print13 April 2010
Every business needs to survey its offering now and then to see which goods and services generates the least value. ShelfLife spoke to a number of retailers to hear how business was faring and reflect on their experiences with their banks and service providers. Most admitted that the relationship they once had with their banks has completely diminished due to personnel changes or just new procedures that have been put in place. This means that small business expansion is being stifled. Bank charges and constant margin reductions from the service providers are seriously affecting a retailer’s bottom line. Fionnuala Carolan reports.
Don McSweeney, J.P. Griffin
and Sons, Lower Main Street, Castleisland, Co Kerry
Has your business relationship with your bank soured over the past year or so?
Yes, very much so.
My business has been banking at the same branch since the 1980s. To be fair, we’ve always had a good, relationship up to now. Last month I arranged a meeting with the bank in an attempt to have my cash handling charges reduced; I’ve often read that people can get “fee deals” with a bit of negotiation. I emphasized my business’s loyalty to the bank (we’ve paid a lot of fees over that period), and our trouble-free 40 year relationship. In truth, I wasn’t hopeful before the meeting, but I was totally taken aback by the bank’s attitude: thanks for the loyalty, but no deal whatsoever on offer. Also, if you decide to go to another bank, well that’s ok with us.
It is my opinion that the representative was well-prepared and was almost reading from a script. Also, I think the bank knew exactly what the competitors are offering (so much for competition). I was really furious after the meeting. I suspect that fee increases are imminent across the board now that NAMA has saved their skins, and I am really concerned about how they may treat small businesses in the future. I suspect they are really going to get aggressive.
Are your bank charges becoming a problem or were they always a problem but due to higher profits, it didn’t matter as much?
They were always exorbitant, in my opinion. I suppose in the better times one just paid up, and put attempts to reduce the charges on the long finger.
What aspect of your business generates the least margin?
Top-Ups, local authority waste fee collection, 3V cards, M50 toll payments- all the Payzone stuff, really.
Have you considered putting a surcharge on to top-ups? If you have already, what sort of a reaction have you received from your customers?
I’ve considered it, but I think it would only generate customer ill will and would be self defeating. There are too many other avenues available for topping up now.
Have you ever considered getting rid of these services and do you think it would affect your bottom line if you did?
Yes, I’ve considered it. However, they do actually bring customers through the door that might not otherwise come in and some will buy a higher margin product. I hope to do an analysis of associated purchases for all these products at some stage i.e. what other items (if any) do customers buy with say, phone credit, but this will take me some time.
Gus O’ Hara, Spar, Vernon Avenue, Clontarf,
Dublin 3
Has your business relationship with your bank soured over the past year or so?
No, quite the opposite in my case. Realising that trade is down I approached my bank earlier this year (Ulster Bank) and renegotiated my position. This is not to suggest that there were not costs associated with this new agreement. However they were pragmatic and understanding of the situation.
Are your bank charges becoming a problem or were they always a problem but due to higher profits, it didn’t matter as much?
Bank charges are always a thorny issue for retailers. I am just coming out of an agreed fee period and expect that I will be paying higher chargers than before. My only course of action here is to reduce the amount of cash lodged through the bank. Using local building societies or credit unions is a helpful solution here.
What aspect of your business generates the least margin?
I often reflect on this. I suggest a better way of looking at your business is to consider the cash margin associated with products. In this respect the Lotto and cigarettes are excellent cash margin sources. Poor or in the case of e- services, desperately poor percentage margin lines include sales drivers such as €1 offers. However top-up and E-Flow contribute least of all. In fact when banking is included 3v produces a loss for every retailer selling the product. It’s that simple. The model in Europe from where the margin comparisons are drawn are different. A large percentage of e-sales are driven through kiosks etc when the cost base is much lower.
Have you considered putting a surcharge on to top-ups?
No.
Do you use Payzone or Postpoint? Have you encountered any problems with them? If you don’t use either what additional services do you provide for your customers and through which company?
I am currently with Payzone. My feelings on the continuously reducing margin on these products have been well publicised in the past. I will reiterate the feelings of many retailers by stating that we have been targeted once too often for margin reduction. We enjoyed at one time a 10% margin. Once the principals got their first reduction they have pressed through for further reductions in the past five years. This is price fixing by any standard and I understand that our trade body CSNA is seeking to legally challenge any further reductions.
Have you ever considered getting rid of these services and do you think it would affect your bottom line if you did?
I often wonder at what stage you stop being a “busy fool” in stocking some of these products. The return is now only measured in footfall by many retailers as there is no profit and in some instances a loss associated in stocking. Each retailer must carefully measure the benefit/cost analysis for themselves. I will say that the latest reduction in top-ups and the fixed fee for other services make for uncomfortable bottom line reading.
Damien Callinan, Day Today, Graigcullen, Carlow
Has your business relationship with your bank soured over the past year or so?
Yes the banks are giving me a hard time. They don’t seem to care what happens to us.
Are your bank charges becoming a problem or were they always a problem but due to higher profits, it didn’t matter as much?
They won’t negotiate with us regarding charges for lodging cash, especially coin.
What aspect of your business generates the least margin?
The Payzone terminal – bill pay is a joke. All we are doing is banking money for them and paying for the privilege in bank charges.
Have you considered putting a surcharge on to top-ups? If you have already, what sort of a reaction have you received from your customers?
We do have a charge on top up-30c on €5, 60c on €10 and €1 on €20 but I am very tempted to increase those charges as they are not worth the trouble especially if they get the wrong one (ie ask for 087 so you presume it is Vodafone but they are actually 02 customers)
Now I reckon we should keep our margins, and pass on those increases, as they happen, or we will end up paying to sell top-ups.
Do you use Payzone or Postpoint? Have you encountered any problems with them? If you don’t use either what additional services do you provide for your customers and through which company?
I use Payzone and I did have a lot of trouble with them in the beginning. The terminal was not working for a long time and I was using the tills but that has no reprint facility so now I use an old router and it works okay.
Have you ever considered getting rid of these services and do you think it would affect your bottom line if you did?
Yes I have thought of getting out of them. I just do Bord Gais, top-up and prepaid credit card and phone top-up. I won’t do bill pay. I bet the banks get more than we do for top-ups and they don’t have to put up with all the hassle we get. However, I do think our day will come and we won’t have to bother with those services.
Lil Courtney, Centra Fairview and East Wall, Dublin 3
Has your business relationship with your bank soured over the past year or so?
Our relationship with the banks has certainly changed. Like any relationship that breaks down due to perceived inappropriate behavior, there are now major trust issues and unfortunately the banks are not engaging in any positive customer service. If you look at our role as retailers in this very changed and competitive market environment we have had to adapt very quickly to our new customer and employ policies to reassure our customers that we can and will give them value for money and the services they require to adapt to this new market reality.
However the banks have not adapted to the changes in the new market they are not customer led which is a requirement in any and all service industry. They are still dictators from positions of power instead of looking at each business case and designing packages that will keep viable businesses operating in the short to medium term. They are more supportive of debt ridden and badly run businesses than of businesses that just need space and cash flow.
However it is the fundamental attitude of the banks that has to change if small to medium businesses are to survive. The most basic lesson in any strategy is know your customer, give them what they need as opposed to what they want but ignore them at your peril.
Are your bank charges becoming a problem or were they always a problem but due to higher profits, it didn’t matter as much?
They were always a problem but more so now and has to also be part of a tailored customer service package by the banks.
What aspect of your business generates the least margin?
Bin tags, bus tickets, Lotto, phone top-up and they are necessary to service our customers’ needs. They have seriously declined since 2008 due to accessability through other mediums.
Have you considered putting a surcharge on to top-ups? If you have already, what sort of a reaction have you received from your customers?
We do not apply a service charge and do not intend to in order to keep the customers coming in and competing.
Do you use Payzone or Postpoint? Have you encountered any problems with them? If you don’t use either what additional services do you provide for your customers and through which company?
We have Postpoint to pay bills and have never have any issues there and it is a necessary service to our customers.
Joe Stafford, Stafford’s
Fine Foods, Drogheda,
Co Louth
Has your business relationship with your bank soured over the past year or so?
Things have certainly changed in the banks. They have changed personnel so this has severed the relationship which is very obviously a strategy. The person you now deal with always blames the ‘phantom boss’, the person in head office who you never see. The people in the banks are just like puppets on strings. You just can’t get a straight answer.
Are your bank charges becoming a problem or were they always a problem but due to higher profits, it didn’t matter as much?
It is a necessary evil and has always been an issue but one that you just have to accept.
What aspect of your business generates the least margin?
The margin on phone credit means it is prohibitive to sell it. It has fallen from 25% to 3% in twenty years. They are huge footfall drivers but it costs 20c to lodge €100 so you are making a loss even before you take labour and other costs into consideration.
You can’t consider dropping top-up because you will be the only retailer without it. It would take one of the big players to do it before others could follow suit. I made a conscious decision not to offer any of the other services from Postpoint as I don’t want the hassle and it’s not worth it financially.
Vincent Jennings of CSNA
Have you considered putting a surcharge on to top-ups? If you have already, what sort of a reaction have you received from your customers?
You can’t put a surcharge on. Your customers would complain immediately. It’s easy to add on surcharges in big companies like Ryanair where you don’t ever come face to face with the boss but I have to face my customers every day.
CSNA speaks
Vincent Jennings, of the CSNA believes that low margin services like those offered by Paypoint and Payzone simply encroach on the time of the retailer for little to no reward. “There is no possibility of these services being profitable but retailers are afraid to drop them because someone down the road will have the service if they don’t. I don’t believe it increases footfall. Tesco and Dunnes don’t provide it and it doesn’t negatively affect them. Payzone bill pay service generates 19c per transaction regardless of the cost of the bill. The bank can charge you up to 48c for every €100 you lodge. M50 toll offers 1% margin and Dublin Bus Agents get just 4% margin. You are being charged 48c to bank the money but that is before you pay for labour, lighting, admin etc.
“The service providers and the public utilities need to engage in some corporate social responsibility. Retailers need to be paid a fair price for doing the service providers’ work for them. The utility companies don’t view it as their problem as they do not deal directly with the retailer so they are not considered customers.”
RGDATA has its say
Tara Buckley, director general of RGDATA said that independent retailers are looking at every aspect of their business to ensure that it adds value and the findings are similar across the board. “There is a lot of anger at mobile phone companies and other service providers that keep cutting the rather miniscule margins that they are paying the retailer for providing the service. Retailers have a number of options to deal with this, take it on the chin, add a surcharge or de-list the service provider. From our contacts with RGDATA members more and more are considering de-listing unless they get proper payments for providing the service. Retailers are sick and tired of providers unilaterally cutting the small margins paid to them and are not prepared to put up with things as they stand.”
Payzone defends its practices
We approached Payzone to explain that the retailers seemed disgruntled with the low margin on its products. Barry Keegan, sales manager at Payzone defended the business and said that these services are beneficial to retailers as they are a huge footfall driver and in his experience most retailers appreciate this. He said that certain symbol groups have agreements in place and get special rates if all their members have the services. To combat bank charges he suggested that retailers could encourage bill paying customers to pay in installments so the retailer will not have to lodge too much money at once.
“Around 3,500 retailers use Payzone services but there are only 1,500 Payzone agents. We try to insure that there is only one Payzone agent per town so that this retailer will have a full range of services that other shops in the town can’t provide. Taking services out of Post Offices and into shops means that the retailer is more involved with the community.”
Related Articles
Seanad to consider ban on bookmakers accepting bets on National Lottery →
Lidl sets net zero commitment by 2050 with new climate targets →
Hidden Hearth – Ireland’s alcohol-free festival returns this October →
Fans 0
Followers