By Dale S. Laszig
As the holiday season approaches, many merchants are shifting into high gear, hiring seasonal workers, increasing inventory, and launching promotions designed to get shoppers into stores, hotels and restaurants. Retailers typically stage promotional events throughout the year, but most view transactional data from November to January as a key performance indicator of their year-over-year business growth, customer acquisition and wallet share.
The holidays are also a mission-critical time for payment processors. Many hiring decisions and new product testing and certifications are put on hold as companies bolster customer support during this peak season, when merchants can double and triple electronic transaction volumes.
Payments analysts are predicting that the 2015 holiday season will be a challenging time for U.S. retailers and processors alike. They expect the following factors to impact payment processing throughout the holiday season:
Some merchants have claimed that the issues described above may be more relevant to payment professionals than to most retailers. They believe merchants generally focus more on core business than ancillary processing systems.
"You don't really think about credit card processing until something goes wrong," said Sean Payne, Lake Geneva Store Manager of Wisconsin-based Clear Water Outdoor, a sporting goods chain established in 2005. The company has three locations in Wisconsin and a growing e-commerce business that has helped expand its North American footprint. Payne stocks imprinters in all store lanes as an added precaution against equipment malfunctions and power failures.
"I care about my processing system when I can't take care of a customer at checkout," Payne said. He added that his customers increasingly use credit and debit cards online and in stores; few pay with cash or checks; and even during the holidays, cash accounts for $500 to $600 out of $15,000 in sales.
Payne and two other merchants participated in an interactive panel held July 2015 at the Midwest Acquirers Association's annual conference. Mary Winingham, payments industry consultant and MWAA President wanted to give merchants a chance to air their views. "Why don't we ask the merchants what they think?" she said. "We invited Main Street merchants to participate because they represent 99 percent of our industry's target market."
Winingham and other MWAA organizers selected three merchant level salespeople (MLSs) and three merchants from Lake Geneva, Wisc., for the panel. The MLSs pitched new business to each merchant and then went away, giving the merchants a chance to freely share their views on the highs and lows of each sales presentation. The merchants provided feedback on all three presenters, including how underwhelmed they all felt when they heard the familiar phrase, "I can save you money."
Merchant panelist Kathy Yih is owner of Chinawest Jewelers, a high-end jewelry store in Lake Geneva, established in 1977. Yih praised the panel's focus on small to midsize business owners, noting that they represent a majority of the nation's employers and are critically important to the U.S. economy.
"The sales agents need to think about who we are and what we need, and at times that may look like a blank slate on our side," she said. "It's up to the sales agent to guide us through the process and help us identify our key processing requirements."
"The panel event was fascinating," Winingham said. "I handpicked the salespeople, knowing that they would be compelling presenters."
The merchant panelists conceded that all three presentations were well-planned and executed, making it especially tough for them to decide on a winner. After considerable deliberation, the panel awarded first place prize to James Diel, President of St. Louis-based Gravity Payments Inc. "Diel got it," said Yih, complimenting his approach of asking a question, listening to the answer, then skillfully "rolling you in."
Diel said that it would have been a valuable experience even if he hadn't presented. "Being able to hear the panelists share what resonated was enlightening," he said. "You don't always get that kind of feedback." Consultative selling is a core value at Gravity. "Build rapport; learn about the business," he said. "If you gain an account on price, you'll lose on price."
Yih said, "If I could roll them all together into a ball, I'd have the perfect agent. You can't take a one-size-fits-all approach in this business." She urged MLSs to take the time to visit a company's website and do their homework before making a sales call. She said that it's better to be prepared than to walk in and say, "So, I see you have a jewelry store."
As he reflected on the MWAA sales presentations, Payne suggested that cold calling may not be an appropriate way to sell payment processing; it doesn't allow enough time to research a particular merchant's complexities and unique business requirements. "Someone would have to build a relationship and know what I do before showing me a new processing system," he said.
Payne was impressed by one of the agents who made data analytics the centerpiece of his presentation. The agent described how small to midsize merchants could use his company's enhanced reporting tools to learn more about their customers and staff. This service would be bundled in with credit card processing at no additional charge. "Instead of selling credit cards, he described how data analytics could provide insights into the frequency of customer visits and which clerks outperformed others by selling more merchandise," Payne said. "It was crazy interesting because it was free."
MasterCard Worldwide has been using data analytics to help Level One retailers develop a dimensional view of their customer base. Omnishopper 2016: Taking the Long-term View of Keeping the Customer by John Gaffney, Director of Editorial Services at MasterCard Advisors, combines insights derived from aggregated, anonymous transactional data with a survey of 10,000 consumers in 11 countries. The resulting portrait revealed that eight out of 10 global consumers use a computer, smartphone, tablet and in-store technology for shopping. MasterCard calls that "omnishopping" and expects the trend to continue.
The study's key findings show how smarter customers are "more likely to stay with current retail choices," making customer retention more important than ever to retailers. Consumers are reportedly satisfied with the omnishopping experience, which Gaffney described as largely dependent on connected, digital devices.
"Eighty percent say they're loyal to retailers they currently do business with and thirsty for more information about their purchases," he wrote. "And they are reducing (in developed markets) the number of retailers they are dealing with. For example, in the UK, 47 percent of consumers are visiting fewer stores on High Street in 2014 versus 2010."
In a presentation at America's Customer Festival on Sept. 23, 2015, Gary Kearns, Group Executive of Information Services at MasterCard Advisors suggested that it's smart data, not bigger data, that can help merchants transform their businesses. Kearns said he and his team helps leading companies "turn data into insights into ROI," and begins each project by asking retailers about their business objectives. These objectives will help the team identify the right data, supported by analytics that will drive customer acquisition and loyalty, Kearns said.
Kearns called the use of demographic profiles a static, old-school approach to retail marketing. Dynamic, real-time segmentation is replacing old-school segmentation, he said. Kearns further noted that real-time data analytics can help retailers identify spending trends by answering the following key questions:
MLSs may well consider these questions when working with existing and prospective merchant customers. Even the most long-term, established relationships offer opportunities for new lines of business. Understanding a customer's key objectives is an important first step toward helping him or her identify the right technology, value-added services and pricing models.
Many small business owners don't have time to research the expanding array of new payment services. Senior-level executives in enterprise-scale organizations often rely on in-house analysts to research available options. A majority of merchants, regardless of their size or business model, appreciate having a knowledgeable MLS who has taken the time to research and understand their business requirements.
Following are comments, observations and feedback from U.S. retailers on what they would most like to see from their processing partners, throughout and beyond the holiday season:
Real-time, live support
"I have a great rapport with my sales agent," Payne said. "He's a genuine guy who is sincerely interested in me and my business." He added that he knows he can call his MLS any time of the day or night, and he will be right there, no questions asked. Having that level of trust and quality of relationship is way more valuable than saving a few basis points, he said.
Support is critically important for Lars Åkerlund, Chief Executive Officer of FIKA, a chocolatier and coffee shop chain with 17 locations in New York City. The company is named after the Swedish practice, pronounced "fée-kah," which loosely translated means taking a coffee break and enjoying something sweet. In its frenzied, urban surroundings, the business has thrived since the first shop opened in 2006, and many more locations are planned.
"There are literally hundreds of credit card processors competing for business in New York City," Åkerlund said. "Many of them are competing on price, claiming that they can offer lower setup fees and lower monthly service fees, but when I ask them about support, most of them say that they have a toll free number." He added that most of these companies could not match the excellent service, phone support and on-site visits that his current processor provides.
Fast, integrated POS systems
Åkerlund would like to see simplified, faster transactions at the POS. "People are swiping cards in the same way that they did in 1980, making credit card transactions almost the same as paying cash," he said. "Touch-and-Pay [NFC] is extremely interesting to me, because it can sometimes take longer to accept a payment than to make a cup of coffee."
Working with LevelUp was a positive experience for customers and staff and a convenient mobile payment method, Åkerlund said. He hopes to see similar mobile payment schemes in the near future. "The mobile wallet will be so convenient for everyone, and the processing will be so much faster," he stated.
Åkerlund cited integration as an essential aspect of the POS system. "When we integrated our credit card processing with our back-office accounting, we saved time and money with the new system," he said, noting that his current POS outperforms the original system and costs considerably less.
Faster funds, improved cash flow
Several merchants, who preferred to remain anonymous, mentioned that it can take several days after settlement for their store locations to receive credit card funds. Cash flow is critically important to small retail businesses, they said.
Protect merchant, cardholder data
"Jewelry is considered a high-risk category in retail, but we have rarely had a problem," Yih said. "I think the reason is that we know our clients." While a majority of the store's customers are repeat buyers, Yih remains vigilant at the POS, stating, "I learned a long time ago that a simple electronic authorization for a credit card transaction doesn't always mean that you'll receive the funds the next day."
Yih was surprised to learn of the October EMV liability shift at the July event. "Apparently, there was a disclosure on my merchant statement, which is a perfect example of how small business owners can miss things," she said. "We're constantly multitasking and have so many buttons to push that we need things presented in a simple and direct way."
Payne has trained his staff to protect against fraudulent transactions in-store and online. "We do our due diligence when big ticket items are purchased online," he stated. "Our staff will confirm shipping addresses, and we have a strict policy against working with freight forwarders."
Months after the MWAA merchant panel, attendees and exhibitors are still discussing the event and insights it provided into Main Street merchants. Many would like to see similar presentations that foster understanding between merchants and payment processors.
While many merchants claim to think about their POS systems only when something breaks, merchants and processors appear to agree on some of the most compelling issues facing the retail payments space. Both groups cite security, customer support, emerging technologies, and relationships based on understanding, respect and trust as key drivers of customer longevity.
Throughout the holiday season, retailers and processors will see a range of emerging payment methods in play. As these new technologies gain mainstream adoption, more merchants will leverage cloud-based systems, data analytics, tablet computing and mobile wallet schemes.
As Kearns said, it's smarter data, not bigger data that has the power to transform a business. The same can be said for payment technology, which is just a resource and only as effective as the people who use it to achieve an objective, deliver a service or solve a problem. Perhaps MLSs seeking to sustain long-term business growth can follow Kearns' example and help merchants improve their payment processing experience by asking them first what they are trying to accomplish. 
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