On Kroger’s Visa ban and convenience
So The Kroger Co. is playing some serious hardball with Visa. Unless you’ve been buried under a pile of credit card debt, you probably heard this week that Cincinnati-based Kroger will stop accepting Visa at 21 of its Food Co stores in California because of the high costs associated with the rates and fees Kroger must pay every time John Doe swipes his Visa at the stores.
And Kroger, the nation’s second-largest grocery chain, says it might expand the Visa ban to other stores. Keep in mind that Kroger operates almost 3,000 stores under its banners.
“If we have to expand that beyond Foods Co, we’re prepared to take that step,” Kroger Chief Information Officer Chris Hjelm told Bloomberg in regard to the ban.
Retailers pay $90 billion in swipe fees annually, and Kroger is concerned that Visa's rates and fees are among the highest charged, according to Bloomberg.
What Kroger is paying now is "out of alignment," Hjelm said. "We don’t believe we have a choice but to use whatever mechanism possible to get it back in alignment.”
Kroger will still take Visa for debit transactions. It should also be noted that Kroger has a rewards card with Mastercard.
I guess you have to hand it to Kroger for taking a stand. We’ve all had our moments with the credit card companies.
But the $64,000 question is: Will others grocers follow Kroger’s lead?
Let’s not forget that the grocery industry continues to get more uber-competitive by the day, and there is tremendous pressure on margins. Grocers are looking to save money wherever they can.
But banning credit cards to save money on rates and fees could alienate customers. Many consumers don’t have a lot of disposable income and rely on credit cards to shop. There is also the consumer segment that prefers to use credit cards to shop because they don’t want to carry cash.
Every grocery retailer knows customer service is key to successful business and is perhaps its most vital “store brand.” And convenience is a hallmark of customer service.
Taking away credit cards equates to taking away convenience.
I understand where Kroger is coming from. The credit card companies try to gouge all of us.
My guess is that Kroger and Visa will get this figured out.
But if they don’t … you have to wonder when the next proverbial next shoe might drop.