What’s Wrong With Retail (Part Three)

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What’s Wrong With Retail (Part Three)

There are very, very, very few retail­ers these days above the mom and pop level, be they brick and mor­tar or online (or com­bi­na­tion thereof) that do not fea­ture, be it via shiny brochures at the cash reg­is­ters or blaz­ing adver­tise­ments on their web­site, some form of branded credit card. Said credit cards invari­ably offer assorted entice­ments for shop­ping at said store: spe­cial pay­ment options that aren’t actual dis­counts but are shaded to appear as such, superdeeduper bonus points for the one point per dol­lar spent rewards pro­gram, secret sales, etc etc. They also invari­ably fea­ture inter­est rates that would stun a charg­ing rhi­noc­eros, but don’t let that stop you from buy­ing that what­ever it is you can’t afford right now. Say, remem­ber when the world econ­omy nearly tanked in the late 2000’s because of peo­ple buy­ing houses in this man­ner, pushed by lenders who believed if they could just keep shuf­fling cards it would all some­how work out? Good times, good times. But I digress.

In the­ory, credit cards exist so a con­sumer can pur­chase an item or items and pay for them over a period of time, the credit card provider charg­ing a fee (i.e. inter­est) to cover the cost of admin­is­ter­ing assorted aspects of the card plus make a profit. Which is fine; despite the firmly held opin­ions of assorted elected offi­cials that busi­ness’ sole pur­pose is pro­vid­ing tax rev­enue with which to fund their social engi­neer­ing exper­i­ments and, not coin­ci­den­tally, assure their con­tin­ued re-​election via grow­ing the num­bers of those beholden to them due to gov­ern­ment hand­outs being their means of exis­tence, any and every given busi­ness’ pur­pose is mak­ing money. This duly noted, when credit cards issued by dif­fer­ent stores all have one uni­fy­ing theme, that being either vari­able or fixed inter­est rates in the high twen­ties or low thir­ties, you have an oper­a­tion mak­ing the local strip mall check cash­ing joint seem pos­i­tively charitable.

It’s under­stand­able why stores push branded credit cards, threat­en­ing their employ­ees with every­thing short of may­hem if they don’t suc­ceed push­ing cards down everyone’s throat who makes a pur­chase be it great or small. It’s brand loy­alty enhance­ment. It’s a money saver for the store; stan­dard arrange­ment is that unlike the usual per­cent­age a retailer pays card issuers when­ever a pur­chase is made with a given card (usu­ally one or two per­cent), a branded card pro­vides no per­cent­age to the issuer, who instead looks to make its money on the afore­men­tioned stratos­pheric inter­est rates. And it makes it far more likely you’ll spend that $1500 or more on what­ever should there be some juicy enroll­ment entice­ment — an imme­di­ate rebate, things like that. Great deal for the store. Great deal for the card issu­ing bank when­ever some­one doesn’t take advan­tage of the vague “no inter­est if you pay off your bal­ance within X num­ber of months” offer said cards usu­ally trum­pet. The con­sumer? Unless you don’t need the card as any­thing other than a con­ve­nience, not so much.

There is, how­ever, a glo­ri­ous oppor­tu­nity for retail­ers will­ing to eschew the seven fatal words of enter­prise, namely “we never did it that way before.” Given that most busi­ness estab­lish­ments cur­rently have equip­ment capa­ble of sim­ple math plus com­mu­ni­cat­ing with other busi­nesses — like, say, finan­cial insti­tu­tions — it would require lim­ited effort and expen­di­ture to estab­lish not a tra­di­tion­ally struc­tured credit card sys­tem, but rather an inter­linked retailer-​specific debit card which upon approval of a pur­chase would, based on the consumer’s aver­age bank bal­ance plus sched­ule and amount of deposits, at an agreed upon day or date per month auto­mat­i­cally with­draw X per­cent­age of the pur­chase amount from the purchaser’s bank account. There would be a small trans­ac­tion fee added to each with­draw, with the bank and retailer split­ting it (there’s that pesky “a busi­ness needs to make money in order to stay in busi­ness” tru­ism again), but as an entice­ment to the con­sumer it would be dra­mat­i­cally lower than the afore­men­tioned credit card inter­est rates. Those con­sumers who attempt to cheat the sys­tem would be pur­sued by the usual col­lec­tion processes. Now, there are stores who to a lim­ited degree have such in place, but none of which I’m aware have taken it to the next level.

Or, keep annoy­ing all involved par­ties by push­ing unwanted credit cards. Your call.

Next week, we look at respect (or lack thereof) in per­son and in paycheck.

There are very, very, very few retailers these days above the mom and pop level, be they brick and mortar or online (or combination thereof) that do not feature, be it via shiny brochures at the cash registers or blazing advertisements on their website, some form of branded credit card. Said credit cards invariably offer assorted enticements for shopping at said store: special payment options that aren’t actual discounts but are shaded to appear as such, superdeeduper bonus points for the one point per dollar spent rewards program, secret sales, etc etc. They also invariably feature interest rates that would stun a charging rhinoceros, but don’t let that stop you from buying that whatever it is you can’t afford right now. Say, remember when the world economy nearly tanked in the late 2000’s because of people buying houses in this manner, pushed by lenders who believed if they could just keep shuffling cards it would all somehow work out? Good times, good times. But I digress.

In theory, credit cards exist so a consumer can purchase an item or items and pay for them over a period of time, the credit card provider charging a fee (i.e. interest) to cover the cost of administering assorted aspects of the card plus make a profit. Which is fine; despite the firmly held opinions of assorted elected officials that business’ sole purpose is providing tax revenue with which to fund their social engineering experiments and, not coincidentally, assure their continued re-election via growing the numbers of those beholden to them due to government handouts being their means of existence, any and every given business’ purpose is making money. This duly noted, when credit cards issued by different stores all have one unifying theme, that being either variable or fixed interest rates in the high twenties or low thirties, you have an operation making the local strip mall check cashing joint seem positively charitable.

It’s understandable why stores push branded credit cards, threatening their employees with everything short of mayhem if they don’t succeed pushing cards down everyone’s throat who makes a purchase be it great or small. It’s brand loyalty enhancement. It’s a money saver for the store; standard arrangement is that unlike the usual percentage a retailer pays card issuers whenever a purchase is made with a given card (usually one or two percent), a branded card provides no percentage to the issuer, who instead looks to make its money on the aforementioned stratospheric interest rates. And it makes it far more likely you’ll spend that $1500 or more on whatever should there be some juicy enrollment enticement – an immediate rebate, things like that. Great deal for the store. Great deal for the card issuing bank whenever someone doesn’t take advantage of the vague “no interest if you pay off your balance within X number of months” offer said cards usually trumpet. The consumer? Unless you don’t need the card as anything other than a convenience, not so much.

There is, however, a glorious opportunity for retailers willing to eschew the seven fatal words of enterprise, namely “we never did it that way before.” Given that most business establishments currently have equipment capable of simple math plus communicating with other businesses – like, say, financial institutions – it would require limited effort and expenditure to establish not a traditionally structured credit card system, but rather an interlinked retailer-specific debit card which upon approval of a purchase would, based on the consumer’s average bank balance plus schedule and amount of deposits, at an agreed upon day or date per month automatically withdraw X percentage of the purchase amount from the purchaser’s bank account. There would be a small transaction fee added to each withdraw, with the bank and retailer splitting it (there’s that pesky “a business needs to make money in order to stay in business” truism again), but as an enticement to the consumer it would be dramatically lower than the aforementioned credit card interest rates. Those consumers who attempt to cheat the system would be pursued by the usual collection processes. Now, there are stores who to a limited degree have such in place, but none of which I’m aware have taken it to the next level.

Or, keep annoying all involved parties by pushing unwanted credit cards. Your call.

Next week, we look at respect (or lack thereof) in person and in paycheck.