Why do businesses turn away custom?

baby_fuzz

Okies, so we are talking hypothetically about larger businesses.
soz, I kinda missed that point...:o

[from what I understand, for most retailers, credit cards charge a percentage (above a threshold per transaction), while debit cards charge a set amount.]

Re: VAT, I'd agree with you - that the seller has to pay the VAT charged to the tax man, but remember, that they have also claimed part of the VAT back from goods bought to sell - and only on VATable items.

I'd assume low margins of around 30% on food, and at least double on things such as white goods, and much more for things that date quickly, such as electronics and the latest DVDs.

Any MSE forum users out there who could give us any better idea?:)

I digress...

I'd not have a problem with a nominal charge for small transactions from an independent trader, but would be a little wary if buying from a 'big name'. Having said that though, I'd ultimately do my sums, and just go with the best value for money (not necessarily the cheapest!).

chattychappy

Norfolk_Jim wrote: »

What I think might be hard on the seller is that presumably the card takes a % of the whole sale, but the whole sale will be almost 20% VAT, so the shop ends up paying for collecting VAT for the Vat man. Is that correct.

Yes, exactly right. Eg

Ticket price: £99
For 20% VAT, this will actually be £82.50 + £16.50 VAT

If CC charge is 4%, then this will be 4% of the amount collected, ie 4% of £99 = £3.96.

Therefore the % lost to the shop is £3.96 / £82.50 = 4.8%.

(We weren't charged VAT on the merchant charges - it was exempt. Not sure if that is still the case, but if VAT is added, then for a VAT registered trader it would be reclaimed so wouldn't make any difference.)

EycplUK

platterfish wrote: »

I used to work in holiday and flight sales, people would often ask why the credit card fee was applied - the majority of the time, particularly on flight only sales the amount of margin being made is less than what the credit card company charge them for you using your card. Therefore if they did waive the fee, they would be selling at a loss - which makes no business sense - or if not a loss, very very little margin which isn't worth having the responsibility of looking after the booking.

So how come Emirates dont charge a CC booking fee on flights ?
Would you still charge the fee on booking someone onto a Emirates flight ?

chattychappy

EycplUK wrote: »

So how come Emirates dont charge a CC booking fee on flights ?
Would you still charge the fee on booking someone onto a Emirates flight ?

I can answer that. One airline I know gives it's agents 6% commission on economy fares, before taxes.

So let's say the flight is £900 + tax = £1000.

The agent's commission is therefore 6% x £900 = £54. So their profit on the flight is £54. Now with the merchant fee of (say) 3% on £1000, they pay £30, so their profit is reduced to £24 - less than half.

Now consider the airline. It makes it's own profit when selling to agents. So if it sells direct, it makes the profit it would make anyway, plus it saves the agent's commission. Therefore it can easily pay the merchant's fee - the profit will still be more than selling via an agent - ie paying 3% to the credit card company is less than 6% to the agent.

Also consider that many agents discount over the airline's quoted fare and smaller agents will be paying a higher merchant fee than an airline with greater bargaining power.

lisyloo

but why turn away 375 as too triffling a sum to be bothered with?

Because there are liabilities and work involved for that sum.
I would agree with you that some costs are fixed e.g. whether they sell a car or not they still have to pay the electricity bill.
But generally the sale comes with a large amount of work, liabilities, after-sales service attached.
For any piece of work it has to be worthwhile.

375 Vs Nothing, is it me being silly?

Not silly, but perhaps not undertsanding what is taken on in return for that money.
You talk about it as if they have to do nothing, whereas in some cases they take on a substantial amount of liability.

Lets take the case of an airline for example.
Let's suppose they are going to make £20 profit on a flight ticket sale.
But if that person gets stranded due to say volcanic ash, then they are liable for food and hotel costs WAY beyond that £20.
There has to be a certain profit in there to make it feasible to cover their liabilities. The patout only happens in a minority of cases but overall they need to cover it.
If all the £20s don't cover the costs then ultimately you need to make more profit else you'd go out of business.
Can you understand that?
Each sale has potential costs attached.

If I have one and the next one is a mouse click away, why nothing over something?

Becuase as I've tried to explain each one has liabilities and costs attached.
If you are shifting socks then the liabilities aren't huge.
But if you are selling airline tickets the liabilities can be WAY beyond the costs.
If you sell a car you have to build in a certain amount for any problems you're going to need to sort out of your own budget. Cars are an example of something that can go wrong.

The toilet cleaning example is a bit of a straw man isn't it?

Why?

If it was that or nothing, I might have to choose to do it as my alternative would be to get nothing while waiting for a better option to come along.

It's generally not the case that there is absolutely nothing as an alternative.
If you take it to the extreme then the alternative in terms of income is benefits.
If people are going to work they need travel costs and clothing etc. so they need to earn a certain amount ABOVE the alternative to cover those costs.

Surely better to do it and also look for a better return elsewhere at the same time.

I'm afraid that's too simplistic.
If the car dealers works on very low margin sales that takes their time and they don't have the time to do whatever it is that's needed to look elsewhere.
I've been made redundant twice before.
I have usually spend my ENTIRE day looking for work. Looking for jobs, talking to agents, writing cvs, writing letters, making phone calls, going to interviews.
If I had taken the toilet cleaning job, I would not have the time to go to interviews during the day and look for better work.
There simply is not a limitless supply of time/labour to do both.
If you concentrate on low margin sales it prevents you doing other things.
Even if you were selling socks, you'd still need to order, stock, fill shelves, price them up, take the money etc.
Cars are somewhat more complicated and take more time per sale e.g. test drives, talking to people, finance, hpi checks, cleaning etc. etc.

If you had an infinite supply of time/labour then I'd agree but life isn't like that. You have a finite amount of time and you have to focus on where you want to spend it.
Some business are focussing on the "sack em high, sell them cheap" appraoch like Poundland. Other business e.g. Rolex shop, will go for higher profit but lower volume.
But you cannot do everything, it's impossible.

safc118

businesses buy large quantities of products.

They expect products to sell at the price they advertise them for.

E.G if currys buys 1000 tv's and they cost £349 and they sell at £399

if a customer comes into one store and says i would like 10 tv's what deal can you do they will probably do the odd 3 or 4 percent but everyone expects at least 10% off when spending a lot and buying in bulk

in manufacturing this works as thats how the big retailers get there items so cheap however in retail (especially large retail businesses) this is bad as they see it as sell 1000 tv's at full price in 2 weeks or sell 10 tv's in 1 day for 10% off they dont do it becuase if you walk someone will come in and buy for full RRP

chattychappy

Another issue is simply staff training and authority.

It's all very well to talk about "surely it's worth a company to do X or do Y in circumstance Z" - but this corporate thought process has to be distilled and given to staff in a way that can be operated.

The more discretion and complexity afforded to staff, the more expensive it becomes to operate.

For big retailers, it just becomes more efficient to sacrifice the special cases to keep costs low when doing the standard deal.

ILW

baby_fuzz wrote: »

Okies, so we are talking hypothetically about larger businesses.
soz, I kinda missed that point...:o

[from what I understand, for most retailers, credit cards charge a percentage (above a threshold per transaction), while debit cards charge a set amount.]

Re: VAT, I'd agree with you - that the seller has to pay the VAT charged to the tax man, but remember, that they have also claimed part of the VAT back from goods bought to sell - and only on VATable items.

I'd assume low margins of around 30% on food, and at least double on things such as white goods, and much more for things that date quickly, such as electronics and the latest DVDs.

Any MSE forum users out there who could give us any better idea?:)

I digress...

I'd not have a problem with a nominal charge for small transactions from an independent trader, but would be a little wary if buying from a 'big name'. Having said that though, I'd ultimately do my sums, and just go with the best value for money (not necessarily the cheapest!).

Part of the issue is that with icreased competition from internet box shifters, many electronic items PCs, TVs ets are now making gross margins of less than 10%. Does not leave much room for negotiation.

safc118

ILW wrote: »

Part of the issue is that with icreased competition from internet box shifters, many electronic items PCs, TVs ets are now making gross margins of less than 10%. Does not leave much room for negotiation.

yep very very true e.g Ipads very expensive bits of kit all sining and dancing only make 9.7% (at store level) and still not allowed to do any discount on them according to head office (with such low margins no wonder why)

platterfish

EycplUK wrote: »

So how come Emirates dont charge a CC booking fee on flights ?
Would you still charge the fee on booking someone onto a Emirates flight ?

Yes, as they give agents a discount, ChattyChappy's answer here is exactly what happens. Agents are also sometimes cheaper than the Emirates website, and margins can be as low as £2/3! - as to maintain the discounts the agents receive they have to sell x amount of flights as part of their contract, to maintain their bargaining power.