Editor’s note: This commentary is by David Cadran, who is an assistant manager at the Brattleboro Food Co-op. He lives in Brattleboro.
Every workday for the past two years I would cross the street from my apartment and pass by Mocha Joe’s Coffee Shop on my way to work. I would not buy my coffee at Mocha Joe’s, instead I would get the slightly more expensive cup of coffee at my work.
So what made me forgo that daily purchase at Mocha Joe’s? What made Mocha Joe’s lose out on roughly $800 from me over those two years? They required a $10 minimum on credit cards and I am afraid to play into the “laziness” stereotypes of my generation but I, like many other people my age, are not going to go out of our way to get cash just for your business.
Welcome to the new paradigm of retailing for Vermont’s small businesses. The 2013 Federal Reserve Payments Study found that 67 percent of all consumer and business transactions were conducted by plastic and that number is only increasing. So why have Vermont’s small businesses failed to adapt? The problem is twofold: Fear of the unknown and money.
A number of business owners that I have spoken with have been reluctant to get credit processing systems because they’ve “never needed it.” They have their customers that pay with cash or by check and it works just fine. While this is true, business owners must also think of the potential sales that they are missing out on. Are new customers not coming because they can’t “charge it”? Are your current customers not spending as much as they would if you did take cards? Business owners also bristle at the idea of having to learn new systems particularly around how the machines work and what to do if one fails. These are easily surmountable obstacles but the psychology of having to deal with them can be off-putting for retail owners.
There are cutting edge companies out there that are shaking up the rather stodgy arena of credit card processing.
The other consideration is money. The upfront costs of purchasing equipment can be frightening to some owners but what keeps others up at night is that four-letter word called “processing fees.” That 1 percent cash back and airline miles you enjoy have to come from somewhere and those come in the form of processing fees. A processing fee is a small fee that banks charge business owners every time they swipe a card and this can add up very quickly. Some merchants get around this by charging minimums for transactions but you still run into the problem of potentially losing customers both new and current.
Through perseverance and a willingness to engage with new technology, Vermont’s small businesses can be prepared not only for today’s plastic consumers but for tomorrow’s mobile phone-enabled consumers and there are cutting edge companies out there that are shaking up the rather stodgy arena of credit card processing.
This past fall Mocha Joe’s invested in the Square Stand system. They chose to pay either a flat 2.75 percent per transaction or a flat fee of $275 per month with free processing. By utilizing this platform Mocha Joe’s was able to bring in new customers (including yours truly) and they were able to do it while giving up a small percentage of their revenue.
What Mocha Joe’s did was to innovate their business through research and other small businesses in Vermont can do it to. Already there is a plethora of alternative credit card processing companies including PayPal and Intuit. It may take time for change, but the sooner Vermont’s businesses adapt, the sooner they will be prepared to meet tomorrow’s challenges.
