In 2010, in the midst of the economic recession, American Express decided to declare the Saturday after Thanksgiving, Small Business Saturday. They did more than make a declaration and some advertisement, they put money behind the program. American Express offered a one-time $25 statement credit for anyone who registered their Amex card and made a $25+ purchase at a participating small business. The program was a huge success that American Express brought it back in 2011. Why would American Express give away free money? Well, its all for good publicity.
Typically, small business are not fans of American Express. Of all the credit card providers, American Express has been reported to the highest swipe fees. I say "reported," because American Express strongly pushes back from assertions that its swipe fees are higher than Visa and Mastercard. However, speaking with family members with small business, they confirm that American Express's fees are higher than other providers. I have seen this chart a few times:
Regardless of the what the fees actually are, American Express leaves a bad taste with small businesses owners. Small Business Saturday promotion has slowly started to make small business owners warm up to American Express.
2013 will be the third year of this Small Business Saturday promotion. This year, American Express is only offering a $10 statement credit compared to the $25 credit offered the past two years.
The decrease in the statement credit from $25 to $10 is major. When first announced, many people in the community were unhappy. Why? Its $15 less of merchandise that they get. You see people game the system by purchasing exactly $25 worth of merchandise, just enough for the credit. While not against the terms and conditions of the program, it is against the idea behind the program.
With the decrease to a $10 credit, I fear that small business owners might lose money on purchases. Say Joe Smith visits XYZ Small Business on Small Business Saturday. Joe Smith has his new Amex, that he got, because X blogger told him to apply, and heard that he can get $10 free merchandise by swiping his American Express card. The problem with the lower statement credit is a possible lower profit margin.
Assuming a $10 purchase, a 3% American Express swipe fee eats $0.30. Add in the processors swipe fee, which typically a quarter (.25) or two (.50). Take the higher end, the use of the credit card costs $.80 or 8% of the purchase price. Now lets look at a $25 purchase, 3% = $.75. Add in the $.50 processor fee and we are at $1.25 or 5% of the purchase price. If Joe Smith picks an item with a small profit margin, Mr. Small Business owner might be in trouble with the lower price point.
Yes, this is an extreme example. My analysis could be completely off. I don't have an MBA or even a BA in business. If my analysis is completely off, please let me know. No hard feelings. However, I have a feeling some small business owners might be doing the math like me. This may result in some small business owners might skip publicizing Small Business Saturday.
The reason why I wrote this article is to encourage people to think about spending a little more than $10 on Small Business Saturday. Spending an additional couple dollars on your purchase, maybe the difference of a profit, loss or break even for Mr. Small Business Owner.
Registration for Small Business Saturday opens on November 24. To register, bookmark this website.
Are you planning on participating in Small Business Saturday?
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