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Differentiation in the Age of a Commodity Market

by George E. Devitt

It’s a situation every merchant sales rep has faced. You walk into a merchant. You’ve got the same equipment to offer as the person who just walked out.  So what compels the merchant to select your services over those of your competitor? Most often, it’s the discount rate. And in an industry that has become increasingly competitive, discount rates are being cut to the bone, making it difficult to generate a sustainable base of residual income of any significance. When price is the primary element of differentiation, marketers will tell you that you are in a commodity business. This is a tough game to play, and it’s difficult to compete with those who have greater scale than you do and can offer better pricing.

But is there a way to “break out” of this commodity orientation and move to one in which you’re adding value to the retailer? Can you increase his revenues? Can you decrease her costs? Can you improve the in-store staff’s efficiency? Can you move the discussion away from “discount rate” to improved profitability for the retailer?

One ISO thinks so. CardSwipe.net-an Altamonte Springs, Florida - based ISO is doing just that. And the firm is building its merchant base using the relatively new ePOS-infocommerce (tm), or epic, technology from Hypercom. You’ve read about epic in The Green Sheet  before, but CardSwipe.net is an “early adopter” of the technology and has met with some success.

According to Tish Moore Whiting, CardSwipe’s VP of Sales and Marketing, prospecting in this environment is a lot easier than doing it ‘the old way.’

“Before, when we would prospect with merchants to do their credit card processing, we got a lot of ‘not interested!’ and then ‘click!’ Now, when we call merchants we don’t even mention credit card processing. We ask the manager or owner if he or she would be interested in increasing revenues, decreasing costs, and improving staff efficiency. Occasionally, we still get a hang-up, but not nearly as often! I mean, what store manager or owner wouldn’t want to do these things?”

CardSwipe’s agents begin by asking the prospect if they have a PC in the store, and if they do, is it connected to the Internet? In over 50% of the cases, they don’t even have a PC in the store, much less connectivity to the Internet. The agent then asks if the retailer has a Web-presence. Surprisingly, many do-but their Web sites are static in nature (this should not surprise our readers as you have been selling these sites) and are “brochureware sites,” meaning that the consumer can’t purchase products over the Internet. When the agent asks if they’d like to be able to expand the boundaries of their store beyond their four walls (essentially to anyone who has access to the Internet around the world) “their eyes light up,” according to Whiting. “Invariably, the next question relates to the fact that they don’t have a PC in their store. When we say, ‘suppose you could use your credit card terminal to check orders received on your virtual storefront,’ then they’re hooked - although still a little incredulous. But because the ICE terminal has a browser embedded in it, they can actually check orders, pull them from stock and fulfill them-all using their existing staff, their existing inventory, and without the need for a personal computer. When they find out they can also send and receive e-mail from the terminal-to employees, customers and suppliers-they’re usually ready to sign. And the discussion of discount rate hasn’t even come up!”

CardSwipe.net also offers an “electronic receipt” service in which the customer signs on the screen of the ICE terminal and the receipt is stored electronically on one of their servers. In the event of a chargeback or a retrieval request, the merchant no longer has to dig through boxes of receipts to satisfy the request. The receipt can be retrieved electronically by CardSwipe’s staff and faxed or e-mailed to the requestor. “Merchants love this capability.” says Whiting.  No longer having to store boxes and boxes of paper receipts for years alleviates merchants of a major headache. And it also saves them staff time - time spent both storing and retrieving the receipts.”

CardSwipe.net works with the merchant in building their initial e-commerce site, and provides them with a “Wizard” which allows the merchant to make changes easily-adding items, adding categories or changing prices. Or, CardSwipe will make the changes for the merchant for a nominal fee.

Whiting says that the days of competing on price are numbered. “It’s a downward spiral, and the industry is getting closer and closer to true interchange pricing. This doesn’t leave anything for the ISO to build a base of residuals. So we decided that we couldn’t play by those rules. Now we’ve changed the whole ballgame-and the rules are much more to our liking!”