“So, what is cash discounting? Cash discounting helps businesses cover merchant service fees, which are the cost of processing credit card payments. The key is that you advertise a price that factors in the [processing fee percentage] and then you deduct that amount at the register for customers paying in cash,” the National Merchant Association explains.
Every small savings stacks up–for your business and for your customers–and cash discounting facilitates it.
To provide your business insight into this practice, we’ll unpack how cash discounting attracts and benefits customers, how it positively impacts your business, and why it’s so important during this inflationary period. Read on to learn more.
Why Convenience Stores Need Cash Discounting
“My research revealed that most convenience retailers were not keeping up with the rapid pace of inflation. I began to see [Consumer Packaged Goods] margin compression all over the place,” Taiga CEO Bill Ivers told the National Association of Convenience Stores (NACS).
Inflation, though cooling, is high in a number of consumer spending categories, including food. With inflation staying high, merchants have been getting hit hard for more than a year. In part, that’s because higher inflation translates to higher credit card processing fees.
“The impacts of [convenience retailers not keeping up with inflation] continued from early 2022 all the way through the first quarter of 2023,” he said. “In March of 2023, we began to see a crisis in consumer confidence, which led to a major change in purchasing behaviors. For example, consumers began to prioritize perceived value, buying on promotions and substituting private labels for name brands.”
Ivers’ research indicates that consumers are exceptionally budget-focused. How can cash discounting help? By offering customers the option to omit those fees, you’re providing savings, building trust, and incurring loyalty.
How Cash Discounting Benefits Your Business
Cash discounting increases cash flow. By avoiding credit card processing fees, you have more capital available that you can use.
An extra percentage represents a massive opportunity to invest more money into your business: new point-of-sale systems, new equipment, much-needed repairs, more staff, and more inventory.
Cash discounting programs aren’t exclusive to business-to-customer transactions. Business-to-business cash discounting provides a mutually beneficial financial arrangement between vendors. For example, if a convenience store, vape shop, automotive repair or any business invoices a client, cash discounting lets the business slash a small percentage of the money owed in exchange for paying the invoice sooner.
How Financial Fuel Services Can Get You Started
Where should your business get started with a cash discounting program? Financial Fuel Services with Clover and Valor Tech, both of which specialize in featuring cash discounting in their point-of-sale systems can facilitate this change. As part of our partnership, our team can help to set up a cash discounting program at your convenience store, automotive repair business, vape shop or any other business that accepts credit cards.
National Merchant’s Association recommends businesses post signage about cash discounting at all entrances and point-of-sale systems, overcommunicating the incentive to customers as they walk in and pay.
To learn more about starting a cash discounting program, schedule a consultation today.