It sometimes seems like the state of our economy at any given time totally depends on who you talk to.
One source will cite slow upticks in consumer confidence, another will talk about the elusive coming recession, almost as if trying to will it into existence. Politically motivated speakers will boast about thriving markets when trying to get reelected…or spout dire warnings about the retail apocalypse if trying to unseat an incumbent.
The fact is that retail runs on an unpredictable cycle. For merchants, that means long-term strategy planning involves a bit of guesswork. Try to protect yourself too much, and you’ll stifle growth; expand like the good times will last forever, and you’re likely to overreach. Either scenario spells trouble.
That should just be common sense, but I still get merchants and others asking me to predict the future of retail. It’s like they think I have some sort of insider’s secret formula, simply because I work in fintech. Unfortunately, there IS no formula; merchants would be better served by spending less time trying to predict the future, and more time preparing for the future.
The Better Your Engine, the Further You’ll Go
Strategic expansion and risk mitigation are both crucial elements of a healthy, growing business. When it comes to balancing the two, however, I often find myself falling back on an old maxim: it’s easier to get a dollar out of an existing customer than a nickel out of a new one. In other words, taking care of your customers should always be priority number one.
When your company is growing—particularly when it’s growing rapidly—it’s easy to grow lax in areas like fine-tuning company policies or delivering “above and beyond” customer service. I’m not saying anyone would deliberately ignore those areas. I’m just implying that they may not get the full attention they need.
Think of it like a car engine. Sure, you’re not going to neglect adding gas or changing the oil. But then that darned “check engine” light comes on. What does that even mean, anyway? The car seems to run fine. You know you need to take it to a mechanic, but your schedule is packed today, so it gets put off until tomorrow. Or the day after. Or the day after that…but then one morning the car won’t start at all. Suddenly, that red light becomes a priority, only now the process involves a call to AAA, towing charges, major schedule reshuffling, and more.
Of course, you had no way of knowing when—or even if—your engine would conk out. But that’s exactly my point: the better you take care of your engine all along, the more likely it is going to be ready when you need it. And the same is true of your business.
There’s No “Check Chargebacks” Light
Again, there’s no certain way of predicting what the retail environment will look like in six months or a year. If the market is going gangbusters, you may need to ramp things up. If, however, consumer confidence takes a nosedive, you need to be strong enough to survive until things pick back up.
You can’t control the economy, but you can take care of your “engine.” That means keeping it running as efficiently as possible so you’re always ready to go, regardless of whether you need to take off or scale back.
To illustrate how this works, let’s look at chargebacks. We know from research and experience that we can directly trace as many as 20-40% of the chargebacks a business receives to seemingly minor missteps on the part of the merchant.
We can equate getting hit with chargebacks to a “check engine” light for your business. It signifies that there’s a problem, and it’s not something you should ignore. Identifying and resolving the issue needs to be high on your priority list…especially since the problem might be you!
Take billing descriptors, for example. The billing descriptor is that short line of text that explains each charge on your customers’ card statement. Ideally, that line should clearly identify your company:
- Frank s Tire & Auto
Some merchants, however, have descriptors that read like a secret code:
- FR ENT dba Frk T&A
Now, as a merchant, you may think that’s fine, so long as you know what it means. But what if the customer doesn’t recognize the descriptor, and doesn’t remember the charge?
To illustrate, here’s a little story about a guy named Edward. Now, say Edward purchases a $60 water pump from Frank. By the time he gets his Visa bill, however, that pump has been installed and all but forgotten. Edward—who does not normally shop with Frank—sees a $60 charge that he doesn’t remember, going to some FR ENT dba Frk T&A company that he’s never even heard of. His first reaction is going to be “Somebody hacked my card!”
With a mystery descriptor like that, there’s no way for him to contact Frank and ask what’s going on. So naturally, Edward calls his bank and files a chargeback.
That puts Frank in a bind; he either has to convince the bank that the charge was legit, or lose the part and the purchase price. Either way, he’ll also get stuck with administration costs.
Does Your Business Need a Tune-up?
That’s just one example of a small glitch that seems harmless, but can cause great damage. There are many more: in fact, my company has isolated over 100 different chargeback triggers that can be traced directly back to the merchant!
Many of these lie in customer service policies, such as return requirements or shipping and delivery methods. Taking the time to “tune up” in these areas can not only help protect you from chargebacks, it can make your entire operation run more smoothly, and keep your customers happier and more engaged over the long haul.
That’s what I mean by “preparing for the future.” Taking steps to streamline and solidify your policies and procedures today helps ensure that your business is ready for whatever tomorrow brings.
