Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban • Hacker News Board

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#111

Post by nickpsecurity » Wed, Aug 01, 2018, 4:15 AM UTC

sokoloff wrote: post #97

jlarocco wrote: post #13

I'm not sure I understand why this is a big deal all of the sudden. Don't retailers already account for these costs when they're choosing prices?

The average profit margin for a mainstream grocer (like Kroger) is 1-2 percent. It's a low-margin, high-volume business. Said differently, it's exactly the type of business that I'd expect to care deeply about transaction fees.

Don't fall for that crap. That's the profit after their much-higher, per-item profit came in, they spent it on all kinds of stuff, and then reported the lower numbers publicly. The actual markup on non-sales items at these big retailers can easily be double or more of the cost. It varies product by product. The corporate offices of each waste tons of money on all kinds of non-production people and fancy projects. They might also do payouts like dividends. The resulting pennies on a dollar of profit in final report echo'd endlessly is basically a PR ploy to benefit them in various ways.

They do want to decrease any costs they have, though. The credit cards charging a percentage of revenue instead of retailers' profits or card companies' transaction costs + reasonable profit is ridiculous. Companies like Walmart and Kroger would love to cut that difference out. Given Kroger's growth and low-profit strategy, my initial guess is that blocking Visa would probably be a dumb move on their part. We'll see.

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#112

Post by sokoloff » Wed, Aug 01, 2018, 4:18 AM UTC

rileymat2 wrote: post #105

sokoloff wrote: post #97

Earlier quoted context omitted.

The average profit margin for a mainstream grocer (like Kroger) is 1-2 percent. It's a low-margin, high-volume business. Said differently, it's exactly the type of business that I'd expect to care deeply about transaction fees.

Is this the overall profit margin, or is it what it is once it accounts for spoilage and other losses (theft ect.)? I ask, because 3% cc fee from a 2 percent margin is huge, but a 3% fee from a 80% margin that averages out to 2% because of spoilage is much smaller.

Gross margins are around 20%. Net margins are 1-2%.

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#113

Post by finaliteration » Wed, Aug 01, 2018, 4:20 AM UTC

amf12 wrote: post #106

At this point they should consider investing in their own debit-like card issued by themselves. You prepay it with $100, you get extra 5% loaded on the card, and additional discounts for using it. The retailer saves on per transaction fees since they will have to only pay it once for $100.

This is basically the approach Amazon and Starbucks have taken. Every $25 card reload via the Starbucks app probably adds up to a lot of money in saved transaction fees.

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#114

Post by sokoloff » Wed, Aug 01, 2018, 4:20 AM UTC

nickpsecurity wrote: post #111

sokoloff wrote: post #97

Earlier quoted context omitted.

The average profit margin for a mainstream grocer (like Kroger) is 1-2 percent. It's a low-margin, high-volume business. Said differently, it's exactly the type of business that I'd expect to care deeply about transaction fees.

Don't fall for that crap. That's the profit after their much-higher, per-item profit came in, they spent it on all kinds of stuff, and then reported the lower numbers publicly. The actual markup on non-sales items at these big retailers can easily be double or more of the cost. It varies product by product. The corporate offices of each waste tons of money on all kinds of non-production people and fancy projects. The…

Common stock dividends are not deducted from profit/profit margin in corporate accounting.

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#115

Post by megy » Wed, Aug 01, 2018, 4:23 AM UTC

viraptor wrote: post #95

cycrutchfield wrote: post #85

Earlier quoted context omitted.

Most people that care get a substantial portion of those fees back (either as cash or rewards). So in reality, those fees are a tax on the poor, the un-creditworthy, and the financially illiterate.

Do you really? Maybe it's country-specific, but in Australia there are no programs which give you that many benefits. Likely the best are the airline points, and even then they don't cover close to the payment processing fee total.

ING in Australia used to give you 5% back on their credit card, they stopped it earlier this year.

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#116

Post by nandemo » Wed, Aug 01, 2018, 4:25 AM UTC

finaliteration wrote: post #113

amf12 wrote: post #106

At this point they should consider investing in their own debit-like card issued by themselves. You prepay it with $100, you get extra 5% loaded on the card, and additional discounts for using it. The retailer saves on per transaction fees since they will have to only pay it once for $100.

This is basically the approach Amazon and Starbucks have taken. Every $25 card reload via the Starbucks app probably adds up to a lot of money in saved transaction fees.

AFAIK such cards make money primarily on breakage, i.e., points that people buy but do not use.

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#117

Post by jimmy1 » Wed, Aug 01, 2018, 4:26 AM UTC

cycrutchfield wrote: post #85

bostonvaulter2 wrote: post #81

Earlier quoted context omitted.

I wish credit card fees would come down, they're ridiculously high and increase the price of doing business, which increases the prices you pay for items.

Most people that care get a substantial portion of those fees back (either as cash or rewards). So in reality, those fees are a tax on the poor, the un-creditworthy, and the financially illiterate.

Most places that the poor (at least in rural areas) shop at offer substantial discounts for paying with cash. There is typically the "cash" price and the "card" price. At a liquor store, a 44 dollar bottle paid with card is 39 dollars cash. A haircut at the local barber is 13 dollars cash or 15 dollars card.

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#118

Post by incidentnumber » Wed, Aug 01, 2018, 4:27 AM UTC

finaliteration wrote: post #113

amf12 wrote: post #106

At this point they should consider investing in their own debit-like card issued by themselves. You prepay it with $100, you get extra 5% loaded on the card, and additional discounts for using it. The retailer saves on per transaction fees since they will have to only pay it once for $100.

This is basically the approach Amazon and Starbucks have taken. Every $25 card reload via the Starbucks app probably adds up to a lot of money in saved transaction fees.

Aren't these typically reloaded via a credit card?

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#119

Post by finaliteration » Wed, Aug 01, 2018, 4:29 AM UTC

incidentnumber wrote: post #118

finaliteration wrote: post #113

Earlier quoted context omitted.

This is basically the approach Amazon and Starbucks have taken. Every $25 card reload via the Starbucks app probably adds up to a lot of money in saved transaction fees.

Aren't these typically reloaded via a credit card?

Yes. But compare one $25 transaction to six $4 ones over a large population, and even the per-transaction fees alone seem like a pretty decent savings.

Re: Credit-Card Backlash Mounts as Kroger Weighs Expanding Visa Ban

#120

Post by nickpsecurity » Wed, Aug 01, 2018, 4:30 AM UTC

sokoloff wrote: post #114

nickpsecurity wrote: post #111

Earlier quoted context omitted.

Don't fall for that crap. That's the profit after their much-higher, per-item profit came in, they spent it on all kinds of stuff, and then reported the lower numbers publicly. The actual markup on non-sales items at these big retailers can easily be double or more of the cost. It varies product by product. The corporate offices of each waste tons of money on all kinds of non-production people and fancy projects. The…

Common stock dividends are not deducted from profit/profit margin in corporate accounting.

Thanks! Then I take that part back. I do know they, Walmart, and Target spend piles of money on bullshit, though. Kroger was doing the worst by far last survey since they were severely cutting stockers beyond what every company in this area was.