f you're a sales rep, it's important for you to keep up with what others are doing in their markets, to stay current with newcomers as well as the latest trends in products and services. As time-consuming as it might be, giving customers the best service – and competition for accounts – requires it.

Sometimes insights come in a flash when you're not even looking for them. Wandering around an office supply store, an end display grabs your attention. Standing in a membership renewal line, your eyes fall on a rack of brochures. Just like that, you get a fresh perspective on what your competition is all about.

But watch out – there's a competitor out there who doesn't seek to simply outsell you. This competitor's goal is to provide a payment-processing alternative for merchants, especially small businesses, and it could make landing new accounts even more difficult for the Merchant Level Salesperson. And you don't need to take a field trip to the nearest shopping center to get this information.

All it really takes is a visit to The Green Sheet's MLS Forum online, from the comfort of your office chair, to find out that one of the most participated-in discussion threads recently had to do with merchant processing services available through retail outlets such as Office Depot and Costco.

What? Merchants signing up for transaction processing without the aid of the Merchant Level Salesperson? Eliminating the Merchant Level Salesperson in the financial services industry is a very bad idea.

Merchants have options now that provide them with payment-processing alternatives that they didn't have before. In some cases they don't have to deal with MLS's to establish their merchant accounts. You need to explain to your prospects how your services exceed those offered by the discount chains.

Just a few years ago, there was a great hue and cry over merchants being able to buy POS equipment directly at retail outlets (GSQ, vol. 2, no. 2, May 1999). The actual processing services are available the same way. But can Costco and Office Depot REALLY give the merchant the service and expertise that you have available? We think not! In order for you to compete directly with these non-MLS competitors, our staff writers have researched the details of what Costco, et al. is offering.

Through several large office supply chains and discount/warehouse stores, business owners can sidestep the traditional MLS relationship and sign on with processors over the phone or online. Brand awareness is with the retailer, so the customer may not be fully aware that a separate entity is providing this service.

Just how important is it for the Merchant to understand who is processing their transactions? When it comes time to resolve a consumer dispute we know it's very important! Your service as a payment processing professional is integral to your merchant's ongoing profitability.

Here are some details on these programs to enable you to strengthen your response and competitive placement.

OfficeMax/Office Depot/Axeus
A Different Approach to Tapping an Underserved Market

Shoppers at OfficeMax and Office Depot can buy cartons of paper, pens by the box, computers, push pins and paper clips – and apply to accept credit and debit cards at their businesses.

The chain's partnership is with Axeus, Inc., a business solutions provider based in Carlsbad, Calif. Merchants can buy or lease POS terminals and process transactions for credit (Visa, MasterCard, American Express, Discover, Diners Club, JCB), debit and check guarantee through Axeus.

Rather than serving as competition for ISOs and Merchant Level Salespersons, Axeus sees its niche in the financial services industry as providing a way for smaller merchants to accept credit and debit cards. Andrew Newby, Vice President of Marketing for Axeus, says, "We're exploiting a different channel, not competing. We use a different model for this passive channel."

Axeus' program focuses on merchants that traditional processors might shy away from, Newby explained. Axeus solutions are available through over 2,000 retail locations across the country, he said. Merchants with lower sales volumes are typically the ones who use Office Depot or OfficeMax as their primary office goods supplier.

As Newby put it, "People buying cash registers want to take that next logical step and process credit cards. We don't go after high volume accounts. They may not have been established long enough, for example [to qualify for a merchant account]. Our customers run the gamut – small retail, mom-and-pop, Internet, mobile merchants and MOTO.

"Some businesses don't know where to turn. They're unsure of how to get going. We put forward the best possible customer service, and we honestly don't see ourselves as competing with ISOs."

Axeus offers complete turn-key solutions, including equipment or just the processing services, depending on what the merchant already has. Rates for transaction processing and equipment purchases or leases are published on the brochure and on the Web site. Newby said the program will work with any manufacturer's equipment, including wireless terminals; Axeus promotes Hypercom's ICE 5500 and T7P terminals on the Office Depot in-store brochure.

Merchants call a toll-free number or apply online. Axeus offers the "standard types of accounts based on consumer needs and the standard 24-hour approvals," he said. "All customer service is facilitated over the phone or electronically. It's been absolutely effective. All the customer service representatives at the help desk are well-versed to offer technical advice."

Merchant attrition has been low, too, according to Newby. "In four years, we've never had a merchant go back to a store with a formal complaint," he said.

While the Axeus logo is right there next to the Office Depot logo across the top of the brochure, under the fine print that says "Payment Processing Provided By," are merchants really aware that this is a service offered through the chain? The Web site, www.growyourbiz.com, makes it pretty clear that the program is a cooperative effort; when callers dial the toll-free number, it's plainly stated they've reached Axeus. But the real awareness is of the retail outlet, Newby acknowledged.

"The stores add validity – this is a very sensitive channel," he said. "The ultimate relationship is with the end user."

When you find yourself competing against this offering be sure to stress your direct relationship with the processor you represent. Here's where your handy copy of the latest Acquirers Report from GSQ will become an important part of your sales presentation.

Costco/NOVA
Five Pounds of Tortilla Chips, a Patio Set and a Merchant Credit Card Account

The excellent deals that Costco customers shop for are famous for their wide variety. It's impulse-buying heaven! Where else can you go in for a bag of dog food and come out with a kayak? The sheer volume of products available at the warehouse stores is what makes the membership chain unique; it also reflects the fact that the atmosphere and focus are different than at Office Depot.

Beyond once-in-a-lifetime purchases, Pat Callans, Costco's Vice President of Member Services, said that because membership is a requirement for shopping at the warehouse outlets, when Costco offers services to its members, it really is offering benefits.

"One way we're different from other retailers is that we are a membership club," he said. "We have great loyalty to our individual and business members. If we're offering a service through a third-party provider, we're duty-bound to give our members a better deal."

After all, Callans said, one of Costco's goals is to make things simpler and less expensive for small business. "We cut out as many of the costs and make it as easy as possible for them."

The services available for Costco's members make up a list of business solutions almost as diverse as the merchandise lining its stores' aisles. Payroll services, small business loans, prepaid overnight delivery, retirement plans, financial advice and insurance programs for health, home, life and auto are offered through partnerships Costco has with several third-party providers.

Merchant credit card processing is also one of those services. A partnership with NOVA Information Systems, Callans said, gives Costco's small-business customers access to the same discounted rates and options that larger merchants often have. While the terminals and other POS equipment are no longer sold at the warehouse locations, he said they are available at the "handful" of centers the chain has opened at separate sites on the West Coast that cater specifically to small business.

Callans said Costco is picky about its choices of partners: "Our business services are all offered through different providers. They're not integrated and there's not much overlap. But with all of the services, we survey our members to develop programs with interest and broad appeal to them. We determine whether they're the types of programs we can show true value through and analyze them at least annually."

Based on customer survey results, the potential program goes out for bidding with several providers. "The player selected will have a unique benefit or service to offer our customers. NOVA is a sizable player in the marketplace. We were able to negotiate some excellent rates with them," Callans explained.

Costco has been offering card-processing services since 1997; in fact, it was one of the first business solutions it made available as a membership benefit. Costco members pay less for the same transaction-processing services for credit and debit, as well as for fees and leased or purchased equipment, than other NOVA customers.

Costco's three-tiered membership system includes different benefits for each level. Executive members, for instance, pay a higher annual fee to belong but receive discounts on services; they pay no application or monthly statement fees for merchant accounts opened through NOVA. Costco's brochure for the merchant card processing service spells out fees and rates clearly, eliminating a lot of initial guesswork for its customers.

Despite the third-party relationships, the brand awareness is definitely focused on Costco. "The idea of membership as a component is very important," Callans said. When something isn't going well, "business members have the right to contact Costco."

That feeling has to be reflected in the customer service that members receive when they call NOVA about merchant accounts. "Part of the staff at NOVA is dedicated as the Costco team to handle sales and other issues," he said.

According to Callans, NOVA sees Costco as another, although unique, distributor of its product. "This is a partnership and we're a distribution arm for them and in a way, it does include some of the elements of the MLS-merchant relationship.

"I think these types of relationships will be healthy for the industry in general, stimulating competition and efficiency overall," he said. "We are an efficient distributor of merchandise and services, which I'd like to think lends good, healthy competition to the market."

Microsoft/Citibank

Even Microsoft is getting in on the action. At the National Retail Federation's 92nd annual Conference and Expo in early January 2003, the company announced an extension of its contract with Citibank Merchant Services.

A new payment-processing module will be added to the latest version of Microsoft's Retail Management System (RMS) that the two companies say will eliminate the need for card payment terminals and other stand-alone POS equipment.

RMS is a software application that operates in Windows 98, 2000 or XP environments. It interfaces with Citibank Merchant Services' system for payment processing and meets POS compliance standards for peripherals. It's a different sort of solution than those being offered by Axeus and NOVA, but it's one that could have a big impact on the way smaller businesses accept payments.

"The trend is toward totally integrated systems for small retailers," said Jim Greene, Senior Product Planner for Microsoft Business Solutions' RMS product line. "Think about it - we're bringing a level of empowerment to retailers that they might not even be aware is available. Integrated devices are definitely the next step."

The PC-based system allows simple integration of POS peripherals supplied by other manufacturers such as Cherry Electronics, Epson and ScanSource - for example, printers or specialty keyboards that include the card swipe - through USB connections. "It's just not as complicated as it used to be," Greene said.

The system can be easily modified to meet the varying needs of a wide range of specialty merchants and businesses. "The beauty of it is that a [Microsoft-certified] reseller can sell the same application to many types of businesses," he said.

The RMS application includes features for tracking inventory and sales volume and prepares data for reconciliation and reporting. The software makes it easier to follow the success of sales and promotions, to set profit margins and multiple tax tables and track commission schedules.

Greene said RMS version 1.1 includes card processing through Citibank. When installed, the program accesses Citibank's system; the account-application and credit-approval processes are handled separately by Citibank. Rates for processing swiped retail and Internet/MOTO transactions are higher than in the two programs mentioned above, but Greene said there is no monthly fee associated with the Citibank service.

The current version of RMS will run one to three lanes, and workstations are added at additional costs dependent on the number of units. Greene said Microsoft has put together a tool to calculate value, which shows big savings for merchants.

Because the system includes so many different aspects of conducting retail business, it will soon pay for itself. "The initial $3,200 investment, including the hardware, software and installation, will be paid for in two to three months," he said.

This "merchant solution" reminds us of a bumper sticker that was popular a few years back, "If you like Social Security, you're going to LOVE nationalized health care!" Certainly any MLS can make the argument that their personalized service can beat Mr. Gates' team, hands-down. Can you imagine having to "patch" your credit card processing software as often as you have to "upgrade" Windows?

The transaction-processing options from Axeus, NOVA and Microsoft/Citibank Merchant Services, as well as others available in the marketplace and in the works, are designed to provide smaller merchants options for accepting payments and running their retail businesses more efficiently and comprehensively. For the MLS, these programs constitute a new and different level of competition. Our goal is to empower you to create wealth for yourself, as well as the product and service providers you rep. We trust we've given you the information you need to win against these potential rivals.