Coffee and Credit Cards: Small Transactions for Big Success
Coffee shops and other small businesses are equipping their shops to take advantage of the trend of consumers to use plastic instead of paper to pay for their purchases. In doing so, they are capturing new customers who make their shopping decisions based off of what methods they can use to pay for their purchases.
Here are some of the economics behind coffee shops and credit cards, so you can see what other small business owners are doing to increase their market share.
|Infographics: Coffee and Credit Cards © CreditDonkey|
You may be used to being asked “paper or plastic?” at the grocery store but are you asking this question to your customers? The neighborhood coffee shop is, and they are doing it for good reason.
Technology is being developed to allow consumers to make credit payments utilizing their smartphones or tablets, and this technology is likely to make the use of plastic as payments for small purchases skyrocket. As it is, plastic is already becoming an increasingly popular payment method for all purchases, even those that are less than $20.
Popularity of Plastic
People are already using their credit and debit cards to make small purchases; in 2009, 58% of all debit transactions were less than $20. And the number of individuals who chose to pay with cash drops off considerably when the purchase total is above $25. In fact, 74% of all transactions between $200 to $100 are paid for with credit or debit.
The popularity of plastic is predicted to continue to grow, with projections estimating 10.7% growth for credit and 8.5% of signature debit from June 2011 to June 2012. The use of checks during the same time period is predicted to decrease by 12.6%.
Businesses who continue to limit their payment methods to just cash or check are likely to see a decrease in customers over time as consumers start to view these payment methods as inconvenient.
Popularity of Caffeine
Without a doubt, the U.S. is driven by caffeine. Coffee shops are the fastest growing segment of the restaurant industry and have a 7% annual growth rate. And, Americans alone consume 400 million cups of coffee per day, making the U.S. the leading coffee consumer of the world.
Even if your business is in a completely non-food or beverage related industry, it’s always good to follow which products and industries are growing. Virtually every company can incorporate coffee into their environment. A good cup of jo could be the difference between staying with your company and shopping around for another service provider with slightly lower prices.
Combining Plastic and Caffeine to make a Profit
Coffee shops may start seeing a slight jump in their revenue this fall, and other business owners whose customers have been paying with credit cards and debit cards will see the same. This is because the Durbin Amendment goes into effect October 1, which will decrease interchange charges from 44 cents per transaction to approximately 22 cents per transaction. This change alone will help increase the profits that coffee shops and other merchants will see from small credit transactions.
But there is other income potential to be made by encouraging your customers to pay with credit. This is because consumers who pay with credit or debit often spend more money than when they are paying with cash. One study that was conducted showed that people will purchase more junk food when they use plastic to pay for their food instead of cash. While the study was conducted at grocery stores, it can be assumed that the same will be true at coffee shops and other establishments, like yours.
(Additional Writing by Meghan)