How the Internet is Decreasing Retailers’ Profits
The internet is cutting into every retailers’ profits in a big way, but not in the way you’d expect. You probably assume I’m referring to the fierce competition ecommerce giants like Amazon have created, but you would be wrong.
The internet has changed the way in which retailers accept payment for goods by making credit card transactions a breeze. As a result, credit cards have become the preferred method of payment for many consumers. In recent years, the percentage of people who use their credit cards as their sole payment method has risen dramatically. More than half of all credit card holders use their cards for everyday spending.
The popularity of paying in this way has caused a drastic drop in the number of consumers who carry cash and checks. According to the 2016 Federal Reserve Payments Study, non-cash payments increased at an annual rate of 5.3% between 2012 and 2015. A 2016 Gallup poll also found that far fewer Americans are using cash than five years previously. Only 10% reported using cash for all their purchases, down from 19% in 2011.
What does the internet’s impact on payment methods have to do with a retailer’s profits? When an internet outage occurs, retailers are at a standstill. They’re unable to process any credit card payments unless customers happen to have the right amount of cash on-hand. While the occasional internet outage may not seem like a big deal, it actually has a significant negative impact on revenue.
The average business experiences 14 hours of internet downtime each year. Outages are typically caused by things that are out of a retailer’s control like power station issues, network failure, and human error. According to an IHS Study, a mid-sized business can lose $886,000 due to internet downtime. A large business can lose over $3,000,000 per year!
What can a retailer do to prevent internet downtime from negatively impacting revenue? There are inexpensive preventative steps that can be taken and safeguards put in place to protect your business from the negative impacts of an internet outage.
- Find a telecommunications provider who will act as a partner rather than a salesperson. While talking to different providers, focus on more than the price. A quality telecommunications provider will work to understand your business and create a solution designed for your needs.
- Have the right hardware and bandwidth in place. Insufficient bandwidth and sub-par hardware will slow your internet connection and possibly expose you to security threats. Work with a telecommunications professional to understand what you need to have in place.
- Install a wireless failover solution. This is a connection that relies on an LTE network to make sure your business is always connected to the internet during an internet outage. Having a wireless failover connection keeps your business running normally when unexpected disruptions impact your wired internet connection.
While the inability to process credit card transactions during an internet outage will be the most immediate revenue loss, there are less obvious revenue-killing impacts. There is usually a domino effect of failed online pickup orders, a lack inventory updates, and dead phone systems. Making up for the loss in productivity along with the inability to process credit cards will have a very large, very negative impact on revenue. Every retailer should take steps to minimize or eliminate the negative impacts of an internet outage.