SAN ANTONIO -- Although the 16.6 cents per gallon (CPG) retailers earned in motor-fuel gross profit in 2005 sounds healthy at first blush, it quickly heads into penny-profit territory as business costs come out, such as 4 CPG for credit-card fees, 6 CPG for general operating costs, 2 CPG for equipment amortization and 1 CPG for inventory shrink.
The resulting net profit: 3.6 CPG. It is an effort to control that top-line itemcredit-card feesthat has brought diverse retailers together, from convenience store operators to supermarket andbowling-alley managers. [image-nocss] It was also the main talking point for Hank Armour, president and CEO of NACS, speaking at the Legislative Committee meeting at the 2006 Spring Convention for the Society of Independent Gasoline Marketers of America (SIGMA), held April 27-30.
The committee recently placed a priority on credit-card interchange fees as part of its legislative efforts in 2006.
The problem in monopolistic pricing, said Armour, noting that VISA and MasterCard enjoy 60% market share. Despite the facts that the United States has the largest volume of credit-card transactions in the world and one of the lowest fraud rates, retailers in this country pay among the highest interchange fees, Armour noted. Meanwhile, the card associations' complete operating rules governing credit-card fees remain unavailable for scrutiny.
Why is there this lack of transparency and why are U.S. retailers paying among the highest interchange rates when they should be paying the lowest? Armour asked the crowd of marketers and suppliers. To get these answers, NACS co-founded the Merchants Payments Coalition (MPC), whose 22 association membersincluding SIGMArepresent around 70% of transactions. This share increased just last week with the joining of the Online Travel Agent Association (OTA), which represents businesses such as Travelocity and Expedia.
As the anti-interchange effort grows, Armour said the industry has been winning the ears of more and more legislators. A class-action lawsuit, for which NACS' counsel is leading the offense, is scheduled to go to trial in 2008 (see related story in this issue of CSP Daily News).
In the meantime, the coalition is focusing on educating Congress and the public about the nature of the fight. It is vital that this effort not be perceived as an oil-industry initiative, or supermarket initiative, or c-store initiative, said Armour, emphasizing it must be seen as a consumer issue.
The coalition will spend 2006 delivering this message, with a focus on pushing for greater transparency of credit-card operating rules as well as investigating why U.S. rates are among the highest in the world. To power this effort, it has launched the Interchange Action Funding Initiative, which with a $7 million, five-year budget, will finance public relations, lobbying, research and grassroots efforts. NACS and the Food Marketing Institute (FMI) have so far generated most of the funds, and the effort is 78% of the way toward meeting the 2006 goal.
Armour noted that although more than 300 companies have contributed to the initiative, including some of the largest retailers in the business, he takes greatest pride in the contributions of the single-store operators. This is the most important issue our industry has faced in decades, he said.
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