Clint Woodman is Vice President of Woodman’s Food Market. He operates 15 stores in Wisconsin and Northern Illinois, employs more than 3,400 people, and his family has been growing the company for more than 50 years.
The typical Woodman’s store is about 250,000 square feet – larger than a Super Walmart. Oh, and they are a debt-free, employee-owned company.
The key to their success? Woodman’s Food Market do two things to keep their operating expenses as low as possible so they can pass the savings on to their customers:
- They buy in bulk
- They accept cash, check, and debit cards
Notice something missing? They don’t accept credit cards.
How can they exist without accepting credit cards?
It comes down to overhead and keeping costs low:
- The average fee to accept a debit card is 25 cents per transaction (swipe).
- The average fee to accept a credit card is 2-3% of the total.
If the average customer spends $100-$200 on their weekly grocery shopping then accepting credit cards would cost Woodman’s $2-$6 in swipe fees. For every 100 customers that go through their checkout lines they could be inflating their overhead by $200 – $600.
Compare that to the cost to accept debit cards: 100 customers would cost them $25 – regardless of the size of their purchase. Debit is definitely better then credit for a large store like Woodman’s.
Passing the savings on to the customer
Mr. Woodman says they offer such great prices and save customers so much money that it overcomes a customer’s desire to pay with a credit card.
I asked Mr. Woodman what their customers think about the policy. He said the only pushback they get is when opening a store in a new area.
Once people see how much they can save on their grocery bill they typically forget all about it and take advantage of the low prices by paying with their debit card or cash.
Bottom line: Lower swipe fees translates to lower overhead and lower prices for us.
Web and mobile payment options
An explosion of web and mobile payment options have come onto the market in the past 24 months. Most notably are services like Square, PayPal, and Starbucks.
Gary Leland is owner of the largest wallpaper store in Texas, a sporting goods store, and Podertainment Magazine for IOS. He warns us about how some payment systems don’t give business owners a choice in saving on swipe fees because they run all cards through as credit cards.
Stipe is a payment processing company that offers an interface for businesses to process credit and debit cards via the web or a mobile device.
He says Stripe processes all transactions as “credit”, which also charges the business owner higher processing fees.
Considering 65-70 percent of his in-store business is done via debit card, the unnecessary fees would cost him thousands of dollars a year. That’s a trip to Europe for him and his wife.
Why we should pay with debit or cash
Vendors, businesses, and retail stores must be profitable to stay alive. They can not absorb the fees for payment processing so the cost gets passed on to us.
By the way: This is the same for labor, cost of materials, licenses, insurance, etc. Swipe fees are just another bullet in the cost-of-doing-business chamber.
We benefit by offering to pay with a debit card or cash. It lowers their overhead, allowing the company to obtain higher profits.
Higher profits allows businesses to offer us:
- Better service
- Better products
- Lower prices
A profitable company can pay their employees a better wage. This translates to better service for us.
A company with higher profits can provide us with a better selection of products.
Lower overhead for the business means lower prices for us. Isn’t that what we all want?
Pay attention to payment options
My decision to get rid of my credit cards was motivated by two things:
- I can’t trust myself with a credit card (too easy to get into trouble)
- I can’t take part in increasing prices for me or my neighbor
I urge you to consider the same. The only people who win when we pay via credit are the banks that fill our mailboxes with pre-approved offers and help Americans get into debt.
You already have a debit card. To avoid debt – and costly interest – you can adopt some of the practices I have followed for more than 7 years:
- Use cash for small purchases (avoids processing fees altogether)
- Use debit any place where I swipe the card myself
- Offer to pay with debit – even when they don’t ask “Will that be Debit or Credit”
Also on the show: