Winning the high-stakes holiday shuffle
This story originally appeared in The Green Sheet Issue 121002 on October 22, 2012.
Early forecasts have projected holiday retail sales could top 2011 by as much as 3 to 4 percent. Deloitte LLP predicted U.S. retailers, excluding motor vehicles and gasoline, will ring up $920 to $925 billion from November through January 2012, an increase of 3.5 to 4 percent. And $36 billion of that total is expected to be mobile-influenced as more shoppers turn to smart devices to comparison shop and locate products.
A more conservative 3 percent upturn was projected in the Holiday Retail Sales Forecast: 2012 by Anthony Liuzzo, Business and Economics Professor at Wilkes University. His annual forecast has tracked shopping trends and buyer behavior for more than 20 years. His two-month, November and December sales forecast predicted economic uncertainty and an extended 32-day shopping season will be key factors influencing the coming holiday season.
General consensus within the payments industry about the upcoming holiday season appears to be optimistic, fueled by continual innovation in products and services aided by well-articulated marketing campaigns. Indeed, signs that the approaching season could see marked improvement began to surface in August.
In a September interview with The Green Sheet, Lazaros Kalemis, Chief Executive Officer at Alpha Card Services Inc., reported that payment processing within ACS' merchant portfolios was up 5 percent from the previous August. "And then we also noticed, through our payroll division, that some of our businesses that we do payroll for are hiring, so we have new employee hires going up as well, which is across the board," he said.
Steve Eazell, Director of National Sales and Marketing at Secure Payment Systems Inc. agreed, noting that business activity this year has been higher than normal, especially in equipment leasing. He added that during the first quarter, SPS introduced Payday Express Plus, which will enable merchants to offer customers extended payment plans on higher-ticket gift purchases over the holidays.
To entice merchant level salespeople (MLSs) to approach merchants well in advance of the holiday season, a number of payment service providers launched summertime and early fall promotions. They offered discounts on POS systems and unveiled programs that would improve operational efficiency in preparation for the year-end sales cycle.
POS Portal, for example, offered summer discounts on several popular POS systems equipped to handle the high-volume usage anticipated for the holidays. "Christmas in August was a way for us to highlight to agents, especially ISOs, that now is the time for them to engage with merchants and get them set up," said Kevin Kent, Senior Product Manager at POS Portal. He noted that unless something breaks, merchants prefer to be in execution mode once the holiday season begins.
"When you're in this high activity season, it's more about volume and getting as many merchants signed up as you can so you can close off the year," Kent said. "We built out a customer service organization to keep the burden of the day-to-day operations off of the sale reps, so they can sell." As a new incentive this year, POS Portal launched Portal Bucks, whereby ISOs and MLSs can earn rewards and apply them toward POS systems purchased through POS Portal.
"As we go into the holiday season, a lot of our agents that shop frequently on our e-com site have these Portal Bucks built up in their accounts," said Josh Johnstone, Marketing Manager for POS Portal. "It's essentially free money for them." He added that the program gives MLSs an advantage when attempting to close last-minute deals, because they're able to pass along the savings to potential merchants.
"We try to definitely motivate our sales partners during the tail end of the year," said Jason Chan, Director of Recruiting for Central Payment Co. LLC. "We're offering special bonuses." He noted that for merchants who may have recently installed new POS systems, CPAY provides 24/7 customer service and technical support, which means merchants can schedule training time when it's most convenient.
According to Jared Isaacman, CEO of Harbortouch, his company increased staff this year to accommodate growing acceptance of its free POS system program, an initiative that has driven record business for the company.
To support agents, Harbortouch hosts an annual sales conference to train and certify agents on its POS systems. During this year's fall conference, topics of discussion included current initiatives and a vision for the future, he said.
Another business primed for the holidays is USA ePay. "As a gateway, we're prepared for the traffic and have technicians on staff all the time," said Ben Goretsky, CEO at USA ePay.
"We have promotional packages on our wireless hardware products for mobile merchants or the startup retailer. A lot of people that have a gateway account with us right now can use their iPhones and Androids with their existing account."
Because fraud can be especially damaging during the holidays, Goretsky advises anyone reselling fraud modules to encourage merchants to take full advantage of any training that might be offered to limit fraudulent transactions, which can quickly escalate if not detected early.
Another reason to connect with merchants ahead of the holiday curve is the heightened risk of attrition directly before the holidays. "A lot of shuffling happens right before the holidays because merchants are looking for solutions," Goretsky said.
"They start calling people, and the person that they get on the phone not only will switch their current solution over, but will give them the new solutions that they need, too."
One way to prevent fourth quarter attrition is to re-examine merchants within existing portfolios to determine whether additional services or equipment upgrades might be in order. "They'd be surprised how much money they can make just by expanding their current portfolios with new solutions," Goretsky said.
ACS has a program for swapping out older equipment that may lack sufficient memory to support the Europay/MasterCard/Visa (EMV) standard and other emerging payment technologies. "If we ran a Hypercom 4200 or a VeriFone 5700, there is enough memory so we can put in a merchant's terminal a gift card, credit card, a time clock for our payroll division that sends their hours automatically to us, so there's nothing that they have to do," Kalemis said.
And the company has a unique approach for merchants who may have already left its fold. "We send out to every customer that's ever been boarded on Alpha Card's services but has left us - for example, has closed their account - a win-back campaign," Kalemis said.
The company recently sent letters and postcards to past merchant customers inviting them to rejoin ACS. He said that as a sign-on bonus, merchants received 2 percent off processing for the first month and a free terminal placement. Merchants who signed on during the win-back campaign were also rejoined with the ISO or MLS who initially signed them, Kalemis added.
The same policy applies to merchants who choose to add new services. "We're hitting our base constantly," Kalemis said. "And if one of our merchants does a cash advance, the original rep, even though they had nothing to do with it, they'll make some bonus on it. We're doing everything to make that portfolio more sticky and profitable for the rep and for us."
Dustin Wilkins, Partner with MLS Direct Network of Eastern Alabama, noted that with the increasing popularity of interchange pass-through as a pricing model, being willing to adjust rates accordingly can still go a long way in sustaining relationships at a time when attrition is rampant.
It also works well when approaching new accounts. "There are businesses popping up here that I'm able to take advantage of, new ones that are looking to save money," he said.
Entering the final countdown leading into Thanksgiving, peripheral sales channels such as gift cards, equipment rentals or leases, and merchant cash advances all represent viable last-minute revenue opportunities for ISOs and MLSs.
"A lot of people setup kiosks for markets, and they're there for a couple of months during the holidays," Goretsky said. "We start cutting deals early in October just for those guys because they're seasonal. The guy who usually does the pumpkin patch in October is the same guy who does the Christmas tree lot in November.
"And then, of course, there are the mobile merchants who are setting up for the holidays. ... We provide those merchants with special deals on equipment and setup, so they can get processing for the holidays." Holiday craft fairs, fundraisers and tradeshows that target holiday shoppers are primary sources for seasonal merchant accounts.
Similarly, POS Portal makes short-term seasonal programs available to its ISO and MLS clientele. "We'll plan a whole program, probably in the last part of October, where we'll push short-term rental options and opportunities for these guys so that they have something to sell and add some business going into January and February," Kent said.
Another popular last-minute holiday standby is the merchant gift card. Harbortouch and ACS both print custom gift cards in-house. Kalemis said his company can generally turn them around within 72 hours. Merchants can then use a software component of ACS' integrated POS solution to drive customers into their store locations via short message service and email marketing.
Supporting charity and offering rewards to employees and contractors are other important aspects of preparing for the holiday season. From bonuses and incentives to holiday parties and philanthropic efforts, teamwork and personal performance are recognized and celebrated by payment companies in a variety of ways.
"We have an annual holiday party that all of our corporate staff and employees look forward to," said CPAY's Chan. "We're big in philanthropy. We just recently donated to the Lucile Packard Children's Hospital." He added that employees volunteer each month in San Francisco's Glide program, which last year served close to 1 million meals locally to those in need.
POS Portal frequently rewards employees by mirroring its outside programs. For example, employees can earn rewards dollars in much the same way ISOs and MLSs earn Portal Bucks. Other employee incentives include rewards tied to a certain number of sales over a given time frame on specific types of equipment, which is usually done in conjunction with the manufacturer, Kent said.
Because ACS operates at full capacity during the holiday season, the company waits until January to host corporate parties at its two office locations. To uphold its zero-hold time customer service promise, staffing during the holiday sales cycle is critical, but employees do have a mandatory "mental health" day off every six months to look forward to, Kalemis said.
SPS hosts a holiday party each December for its employees. "We fly in all the people that work outside, and we have a big gathering just to say thank you," Eazell said. "And then there are bonuses for the people that have performed. This year we're expecting to give out a number of bonuses."
In the waning weeks of 2012, the "always be selling" approach is perhaps the best assurance revenue streams will continue long after the holidays have concluded.
"It's a great time of year to plant seeds and get ready for January," Kalemis said. For example, agents who sign up merchants for ACS' automated payroll services at the end of the year can initiate the switch starting in January when less reporting is required, he noted.
POS Portal stated that most MLSs begin looking for new POS solutions to bring to their merchants starting in mid-November. Part of the process of migrating to new POS systems involves the education of all parties that will be involved, which requires time not readily available to most merchants until after the holiday rush.
"If you think about an agent's time, the first two or three times you deploy a new terminal or maybe a mobile solution, there is more work involved on your side," Kent said. "And it might have different options that you're not familiar with, so there is a little bit more overhead involved." That said, he believes a large volume of merchants will transition to newer POS solutions in the coming year.
Joe Villamil, Vice President of Business Development at POS Portal, stated, "What we're hearing from our clients, and even filtering through from the merchants, is an increased awareness of EMV and a real desire to make a move on it. I think mobile solutions are certainly where it's at and then EMV. I think that 2013 is the year when that really starts to become a reality. It's certainly going to start with new merchant deployments."
According to Isaacman, there are "too many irons in the fire right now that are all game changers, potentially. Some of them aren't going to pan out. This is a big time to adapt or die in the marketplace."