Re:Can the Visa-Mastercard duopoly be broken?
by philip1209 on Wednesday August 17, 2022 @07:20PM
(#32503083)
Would you mind sharing your approximate gross profit margin? And, can you share info about your marketing spend as a percent of gross sales?
I ask because most lower-margin businesses tend to be brick-and-mortar and service-based, like a restaurant. If a typical restaurant's profit margin is ~3-5%, then going from 3% credit card fees to 0.1% fees could conceivably increase their profits by 60-100%. So, if your margins are <10%, then I understand how transformative lower network fees could be hugely impactful.
For ads: Many ecommerce businesses spend far more than 3% of their gross revenue on acquisition/marketing costs. So, in some ways the 3% credit card fee is closer to a marketing expense that increases conversion rates - and payment network fees are often less than overall facebook/google ad spend. So, if you're spending >3% of your gross revenue on ads, then the high conversion rates of credit cards factor into your advertising acquisition costs.
I ask because most lower-margin businesses tend to be brick-and-mortar and service-based, like a restaurant. If a typical restaurant's profit margin is ~3-5%, then going from 3% credit card fees to 0.1% fees could conceivably increase their profits by 60-100%. So, if your margins are <10%, then I understand how transformative lower network fees could be hugely impactful.
For ads: Many ecommerce businesses spend far more than 3% of their gross revenue on acquisition/marketing costs. So, in some ways the 3% credit card fee is closer to a marketing expense that increases conversion rates - and payment network fees are often less than overall facebook/google ad spend. So, if you're spending >3% of your gross revenue on ads, then the high conversion rates of credit cards factor into your advertising acquisition costs.