Why a better discount offered by a card company may not make your newsagency as much money compared to going to a company that does not offer as good a discount
Beware any card company trying to win your business by offering a better discount, especially if the discount is above what is common for your size card account.
The best card suppliers for your retail business are those producing cards that sell easily: cards that existing customers will buy, cards through which you can attract new shoppers and cards recipients love, and tell their friends about.
By trying to entice you with a big discount, the card company representative probably knows they don’t have the best cards and are pulling the only lever they can: the discount lever.
Discounting by suppliers in a competitive space is lazy and, in my experience, not financially good retailers.
Winning your business with a bigger discount and providing stock that does not perform as well as another company holds you back, it results in you making less money.
I bought a newsagency business three years ago that had a single national card company supplier. The shop was doing around $100,000 a year in card sales. We replaced the one card supplier with two different suppliers and sales jumped 45%. While the discount from the two new suppliers was less than the incumbent supplier, we easily made more money.
A newsagent I was helping had for years had one supplier. They were looking at changing. The incumbent supplier offered a bigger discount and sold them on increasing their card space. fast forward eighteen months and card revenue is the same it was before the move. The card company has more stock in the business and the newsagent is only banking more profit because of a couple of extra points in discount. Indeed, the newsagent is worse off in real terms because there is no growth in unit sales.
A newsagent who purchased their business two years pressured several card companies for their best price. The company that won the account is the company that offered the biggest discount. There was no consideration of product. Card sales in this shop have not kept up with average growth in our channel.
When considering the best card suppliers for your shop be sure about your goal. Hopefully, the goal is to achieve the best return on space and capital possible, to achieve the best gross profit contribution. The most important contributor to gross profit contribution from card sales is card sales volume, not the discount percentage.
Beware any card company trying to win your business by offering a better discount. This is a lazy sales tactic designed to take your attention away from what really matters to you” stocking your business with cards that actually sell.
Footnote: In the Tower Systems newsagency software we make it easy for retailers to compare suppliers in a common product segment. This empowers local small business retailers to advocate for their businesses based on evidence.