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Some retailers aren't happy to see cash
Paying with cash
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Kai Ryssdal: A couple of big retailers reported pleasantly surprising third-quarter profits today. It is, however, the fourth quarter where a lot of stores make or break their yearly profits. And there is some unpleasantly surprising news on that front for you. More Americans say they'll be paying cash, not credit, for their gifts this year. Marketplace's Stacey Vanek-Smith has more.
STACEY VANEK-SMITH: It's an American tradition, like Thanksgiving turkey, eggnog, and the Macy's Day Parade.
The January credit-card bill. When you come face to face with the tab for all that holiday cheer. Fewer Americans will be having that moment this year. The National Retail Federation reports more than two-thirds of shoppers plan to pay for their holiday purchases with cash or debit cards. That's up about 10 percent from last year.
CONNI GAUSE: You're keeping a closer track of what you're spending.
That's Conni Gause from Grinnel, Iowa. She'll be buying gifts for her sister, mother and teenage daughter. She's on a tight budget, and she says credit cards make it too easy to spend too much.
GAUSE: I don't want to go into debt any farther than I already am because I don't know what the future's going to bring.
Lynn Kahle is a consumer psychology expert at the University of Oregon.
LYNN KAHLE: When you use a credit card, you're saying you're pretty optimistic about the future. I may not have the money right now, but better to enjoy the pleasures of life now and worry about paying for them later.
That caution is bad news for retailers. Shoppers with plastic tend to spend beyond their budgets.
Kathy Grannis is with the National Retail Federation.
KATHY GRANNIS: We may not see as many impulsive buys. There will not be that extra sweater purchase that they don't throw that $20 on their credit card.
It's not just impulse buys that will be off the shopping list. About 80 percent of consumers say they'll buy fewer gifts this holiday season.
I'm Stacey Vanek-Smith for Marketplace.
It should be obvious why the merchant wants to contribute money to the credit card companies, in order for you the consumer to pay more money than you need to pay:
It allows the shop owner to pay bills (past and present) and payroll. If you the consumer do not pay more money than you need to pay, the shop owner needs to lay people off.
If the shop owner doesn't order more product than the community needs, then the factory making that product with robots, needs to lay off excess workers.
Laid off workers don't pay local taxes, so you the consumer either pay more for taxes, or get fewer services.
Money doesn't just appear and disappear.
This is another example of how short sighted our market really is. The most a business can afford to think into the future is the next quarter. It's true that spending cash instead of buying on credit has real long-term benefits but that doesn't matter if a store doesn't see those benefits until this time next year. Remember, our markets punish companies that make a profit but not enough of one to meet analyst's expectations. If you don't do something to increase EPS this quarter, right now, today you're going to suffer the wrath of the market and could be out of business before any future benefit can be realized. Retailers are aware of this fact and that's why they're worried about this "alarming" trend.
Shops may be unhappy about lower seasonal sales, but should be happy in the long term about cash. Stores pay several percent on each credit card purchase, and consumers paying 10% annual interest to credit card companies have 10% less to spend at their local store. In the long term, cash sales means the consumer has more to spend, and the store pays less overhead. Far from being "bad news" for retailers, that could be the next sales boom.
I don't see why vendors would be too upset about cash. After all, when a consumer uses credit, the vendor pays a transaction fee of anywhere from 1 to 3 percent of their profit to the credit card companies. By using cash (aka the "public option" of the financial world) vendors and buyers are in a win-win scenario. The only loser are the credit card companies.
