Customers can seem unreasonable in any business, and independent retail customers of cash & carry are no exception. Over the years I have had some really frustrating discussions about price-marked packs - “I won’t stock them irrespective of the margin” - and presentation and marketing of businesses - “why would I want to provide special offers?” - to name but two examples. Customers are not always right and may, like all of us, be set in their ways.
However, try as I might, I cannot convince myself of any argument to justify the outrageous provocation by PayPoint of independent retailers by its recent changes to terms.
This is frustrating as I am a great believer in the addition of added-value services in convenience retailing and have frequently talked of the benefits of ATMs, lottery, parcel collection and indeed bill payment services. None of these provide large margins for retailers but the sum of the parts should add up to a compelling proposition.
This is no longer the case for PayPoint. The company has always offered an extremely low margin, nominally on a percentage basis but with a cap at a level that makes any concept of a margin rather than a service charge a nonsense.
This cap was already at the very low level of 13p per transaction, less if the customer spent under £2.60 but no more, however much the payment they make. From 18 May the rate was reduced to 10p per transaction on general bills and, scandalously, 7p on utility bills and TV licence payments.
This means that under any measure of profitability and once the costs of cash handling are taken into account, the retailer provides the service at a loss - before taking into account any of his or her other overheads such as staffing and electricity.
Independent retailers have been the backbone of development of the PayPoint system and supported it as it has grown - without them it could not be successful.
The pathetic justification for the cap reduction from the company is about the generation of footfall. This might justify low margins, but it can never justify negative margins.
Footfall is generated by the package that the retailer offers his customers, and he is entitled to make a return on everything that he sells - who else would work for a negative wage in real terms?
In my view, the Competition & Markets Authority should urgently intervene in this gross abuse of power - though this may well be a ‘Ratner moment’ for PayPoint and perhaps even it will realise just how badly wrong it has got this decision.
Steve Parfett is chairman of AG Parfett & Sons
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