We extend lots of credit. Most of our customers are businesses who make repeat purchases and they are very reliable when it comes to paying their bills. We make it easy to qualify for Net 30 terms and a high repeat rate for purchases of our products means that we can sell at very low margins.
Recently, we have noticed a trend towards those high volume repeat purchases being made by using credit cards. An occasional credit card payment was fine, but we are now seeing this move into institutional purchasing and it is becoming a real problem for us.
We have to pay between two and three percent in service charges to the credit card processors and when you start with a small gross margin, giving up that percentage of the total amount of the sale can really hurt.
The cost of credit card processing is built in for small volume customers who purchase from our web sites, but we don’t factor it in on case lot and larger purchases made by phone, using a purchase order. We even built an option of buying by purchase order into our web sites so that you could order online and then we would send you a bill.
If small businesses don’t resist this change in how new trends in payments are developing, everything will cost more. Wholesale level distributors can’t simply be expected to absorb this cost so that their customers get the benefits and incentives that come with buying with a credit card.
This is a process that works just fine without a middle man who adds no value to the transaction.
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