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American Express’s Small Business Saturday

This article was written by in Consumer. 31 comments.


I’ve avoided writing about Black Friday this year. In the community I follow, promoting the day after Thanksgiving for shopping has gotten completely out of hand. I wrote an article for PC World a few years ago, The Insider’s Guide to Black Friday Bargains, where the tips are still relevant for today’s shoppers. I’m not going to write a new article every year about how to find the best Black Friday deals.

As if Black Friday weren’t enough of a marketing scheme, a few years ago consumers were blessed to receive Cyber Monday, yet another day of hype encouraging people to buy more. I’m not always anti-consumerism, but I just find every year’s increased holiday sale hype, designed as a last-ditch, end-of-year effort to make up for poor sales since January 1, annoying. Doorbusters, bait-and-switch, and worst of all, and crazed Wal-Mart shoppers who are willing to kill others just to be first to grab some sale item that will be worth a tiny portion of its sale price in five months, make me embarrassed to be an American consumer.

American ExpressThe opposite approach is to put faith in Buy Nothing Day. The message of Buy Nothing Day is good, but like any temporary boycott, it just time-shifts spending; what you don’t spend on the day after Thanksgiving you’ll likely spend the next day. And if a sale expires, you’ll spend more.

The worst thing to come out of the holiday hype is “Small Business Saturday.” (Let’s just stop naming the days following Thanksgiving, also known as Turkey Thursday.) This is American Express’s effort to get consumers to patronize local stores in favor of national chains. On the surface, this isn’t a bad idea. Support business owners in the community by visiting smaller retail establishments who otherwise have a difficult time competing with large box stores like Best Buy, Wal-Mart, Target, and Home Depot. Your neighborhood appliance or hardware store generally charge more money for the same products offered by national chains because small stores have little leverage to negotiate with wholesalers. Working with a small business based in the community you live, having a friendly face who can help answer your questions, and building a relationship with a business owner might be strong enough reasons to settle for a higher priced item.

This is coming from American Express. Many small business owners simply can’t afford to accept payments using American Express cards. It costs more money for a retailer to accept most American Express cards than most Visa or MasterCard credit cards. When you do use your American Express cards at a small business, you are not helping the store as much as you would if you were to pay with cash. American Express interchange fees can take an unhealthy bite out of a small business’s profits. Also, unlike Visa and MasterCard, who generally split merchant fees with banks that issue their cards, American Express cards are generally not issued by third parties, and the company keeps the entire interchange fee.

The “Small Business Saturday” campaign was not created for the good of the overall economy. American Express offers this message, “The 2nd annual Small Business Saturday® is a day dedicated to supporting small businesses on one of the busiest shopping weekends of the year,” but the day supports American Express, which is not a small business. Through this campaign, American Express is offering small businesses that accept their cards to prominently display an advertisement that offers a $25 credit to any customer who uses an American Express card to purchase items totaling $25 or more at the location. There is little in this campaign other than self-interest and self-promotion on American Express’s part.

Is this bad? It’s hard to say. If you want to do your part to support local businesses that are in danger of closing partly due to the high prices credit card companies charge, shop there but pay cash. Forget about the 1% cash back or less you can earn, paid for by the small business owners. The $25 credit in the offer doesn’t support small businesses because this isn’t extra money that can be used to purchase more in a store. It’s a statement credit, designed to thank card holders for using American Express and requiring retailers that accept the cards to pay more to AmEx through fees.

American Express is, thanks to capitalism, allowed to promote almost anything it likes in order to increase profit. That’s how corporations compete, build value for shareholders, and help upper middle class households stay upper middle class and wealthy households increase their wealth. The company reports that small businesses saw an increase in sales due to last year’s Small Business Saturday campaign (but note that they didn’t see the same large increase in profits). Look past the marketing messages at who is most benefiting from this campaign.

When the sun goes supernova and engulfs the Earth, marketers will promote the event as the hottest party since the big bang.

Published or updated November 20, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 31 comments… read them below or add one }

avatar David

If I spend $25 at small business and get a $25 credit from American Express, how have I managed to hurt the small business? For example, I will probably buy wine for family get-togethers for the holiday season (don’t drink much the rest of the year). I would normally buy it at the big grocery store, but since I see this offer, I may buy it at the small liquor store on the corner. Haven’t I helped the store in the process?

I understand your attack on American Express marketing, but are you attacking Visa for the Superbowl promotions they are running on every media outlet (use your visa card and win a trip to the superbowl)?

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avatar lynn ♦155 (Cent)

Is the cost of wine higher at the small business on the corner?

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avatar David

Yes, it is more expensive there. That’s why I usually buy it at the large grocery store where the price is cheaper. That was just an example. My point is American Express appears to be giving you a free $25 to spend at a small business and the article treats them like they’re dirty for it. Maybe I’m misunderstanding the promotion.

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avatar Luke Landes ♦127,373 (Platinum)

Visa’s promotion is not pretending to be anything more than it is, a contest for sports fans. American Express’s promotion is counting on customers’ desire to help small businesses. Also, I haven’t seen any commercials for either Visa or American Express — I don’t watch much live television, and when I do, I haven’t seen these commercials.

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avatar Ceecee ♦796 (Dime)

I plan to shop small on Saturday for the local merchants—–and ignore AMEX. I have worked for a mini retail operation and know firsthand that they need all the help they can get to stay alive right now. So I will shop small with cash. That helps the small business even more—–no swipe charges for them to pay!

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avatar lynn ♦155 (Cent)

I’ve recently made a commitment to shop small owner shops whenever I can. Produce will not be purchased unless it’s grown in our country. I’ll continue to research items and move forward from here. I know the costs are a bit higher, but I’ll just do without what I don’t need. Our country needs our help. We are the foundation that keeps it going.

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avatar LaTisha

That’s pretty crazy that Amex is promoting a small business day when their cards are rarely accepted at small businesses. I personally don’t shop for Christmas on Black Friday, Saturday or Monday just to be rebellious :)

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avatar shellye ♦107 (Cent)

I’m a marketer and I would have a blast promoting a supernova…LOL. But, seriously, I do plan to shop small on Saturday – and pay cash as well. As a side note, I did register my Amex card at the Small Business website, but only because I want to see if I can get the $25 credit, because it was college tuition time again, and I put it on the Amex because I get 1% back. So I guess I’m trying to double dip and get as much back for that purchase as I can. :-)

Interestingly, my kid’s college accepts Amex as a form of payment for tuition, books, fees, etc. but not Visa. I wonder how much Amex is paying the school to be the ‘official tuition payment conduit’?

I know of very few small businesses that accept Amex for the very reasons you mention above.

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avatar Edwin

As a marketing professional, entrepreneur and American Express card holder, I find this event to be meaningless as a customer of American Express. American Express is doing a “service” to its merchants who are small by offering free promotion and publicity, but at what price to its and the small businesses’ brands?

When I heard about the registration for the credit, I tried to sign up. The original press release said that the $25 would be in the form of “cash.” In fact, all it was a credit to your American Express card. I recommended a couple of friends get in on it as a way to have a luch or dinner after eating all that turkey. Neither of them have AMEX and could not claim the deal.

What they could have done is offer an American Express gift card or ecertificate to anyone who was interested and made it good at oparticipating locations. However, I have yet to find any merchant who is participating on Saturday. I would love to help a merchant or restaurant with their business.

This program is on its way to become a failure becuase American Express does terrible PR to itself and these small businesses. It takes more time to find a merchant who will accept the promotional credit and try to claim it that than the $25 worth to me.

It ends up leaving me disgruntled as a paying AMEX card user (for the Costco card), makes Costco looks bad in my eyes and does nto help small businesses, becuase they appear stingy and not able to work this out with themselves and get AMEX’s support. If you are a merchant, why pay thse exorbitant fees to AMEX?

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avatar Luke Landes ♦127,373 (Platinum)

Great comment, Edwin. It’s misleading for American Express to call a $25 statement credit “cash,” but they do it all the time with their “cash back” programs on their credit cards. They’re not alone; other issuers use the same terminology, as well. It’s one of the traps of cash back programs, and I happen to be working on a new article that addresses this.

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avatar Edwin

Flexo,

I think the Costco True Earnings Cash Back Programs is the most transparent of them all, which is the card I used to claim this deal. I could be wrong, but I enjoy the card and the benefits it provides.

However, what bothers me is that American Express and FedEx (the other manin sponsor of this promotion) have not done anything to make it easier to claim or endear the customers (both cardholders and merchants) to make this program successful for all parties. It comes off as if there were lying to create buzz on Facebook to get more data from having to like FedEx and American Express. The worst part is that you can’t claim this without being a cardholder. The shareholders of American Express should be upset that they are not doing anything to get new customers, many who could become profitable at a later date.

I just want to say that I do not own any shares of American Express or FedEx directly. I believe they are holdings in my Roth IRA.

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avatar DonnaFreedman ♦2,454 (Dollar)

I try to use cash at small businesses whenever I can. Right now I’m up in Anchorage, Alaska, and have eaten at a small (15-table) restaurant a couple of times. I know the owners and thus know that it’s hard for them to make a living these days. One of them is in his early 70s and can’t afford to retire; he’s still there cooking six days a week.
Here’s another suggestion: Buy gift cards (with cash) from local small businesses as presents for your friends. They get to shop/eat/drink locally and the businesses get a cash infusion.

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avatar tbork84 ♦1,867 (Half-Dollar)

That’s a great suggestion because the truth is showing up at a small business and paying with cash is much better for their bottom line. Even though I regularly use cash back credit cards for my normal day to day spending, I will use cash at a small local business.

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avatar qixx ♦1,817 (Half-Dollar)

Some of the small businesses around me have taken a stand and don’t accept any credit cards.

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avatar Aaron

Thanks for the thoughts Flexo. On the surface the AMEX deal sounds so altruistic and a great deal. Often we don’t see what’s behind all the marketing hype. Thanks for exposing some of that for us.

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avatar Kevin @ Thousandaire.com

I think it is a disservice to these small businesses to suggest people shouldn’t participate in this program and villify American Express for it. This is capitalism. If a small business doesn’t want to pay Amex fees, they won’t accept the card. If they are willing to accept the fees, then they are either willing to them or they pass the fees along to the consumer. Who are you to judge what kind of fees are appropriate for a small business to pay? Only the business owner should make that decision.

Now once a small business has decided to accept Amex cards, why wouldn’t an Amex card holder participate in this program. I’m going to take my girlfriend out to eat at a locally owned restaurant that accepts Amex on Saturday. We are going to spend probably between $25 and $30. It will cost me $0 to $5 and the business will make $25-30 (minus fees) they wouldn’t have made if not for the promotion.

The only reason I’m planning to spend $25-30 at a locally owned restaurant on Saturday is because of this promotion, which is obviously good for me, good for the restaurant owner, and will cost American Express over $20.

The idea that you are angry at all over a credit card issuer giving customers a $25 statement credit is honestly very difficult to understand.

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avatar Edwin

Kevin,

It would be nice if American Express would make it easier to find businesses that participate. I have no clue about businesses in my neighborhood or a database to check other businesses that will participate. Those are amongst my problems with this promotion. It is useless to offer a promotion that is made too difficult to claim.

When the promotion was offered on Facebook, the press releases did not explain how to properly claim and the links to the databased did not even work, forget not telling me that there was no way to claim in any area I would be the Saturday after Thanksgiving.

It is good as a cardholder to get the benefit. However, it does not make sense to make it too difficult to claim becuase it will not accomplish the goal of creating a loyal customer to a small business and more loyalty to American Express.

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avatar Kevin @ Thousandaire.com

You can find a business at their facebook page. http://www.facebook.com/shopsmall

Just put in your zip and it will give you a list of small businesses where you can earn the credit.

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avatar Luke Landes ♦127,373 (Platinum)

I thought I was pretty clear about it — the credit itself is fine, but the idea that AmEx is positioning this as a way to help small businesses is marketing fluff and little more. I have no problem with capitalism in this context. They’re free to offer whatever promotion they want and market it any way they want, I just hope that people are intelligent enough to see past the marketing. Go ahead and sign up, but don’t think AmEx has any real interest in keeping small businesses alive.

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avatar Kevin @ Thousandaire.com

But like I said, the only reason I’m planning to spend money at a local small business this Saturday is because of this promotion.

It might be worth doing a little survey here on Consumerism Commentary and see if there are other people out there like me where it is working (at least in my case) to help drive customers to small businesses who otherwise wouldn’t have spent money in those establishments.

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avatar Hunter

Flexo- I agree with most of your opinions, but I have to side with Kevin on this one.

I have had several conversations with consumers that do and do not carry Amex AND business owners that do and do not accept Amex. The awareness that Amex has raised through this campaign has greatly benefited most small business owners I speak with AND it hasn’t hurt any of them. So, regardless of where the message is coming from, I’m confused why you would be opposed to it?

Example: I spoke with a lady that is not an AMEX cardholder that spent her entire Saturday visiting small businesses in her area (because of this campaign).

Example 2: I spoke with the owner of a consignment store/boutique that does not accept Amex that had to hire extra employees to help on small business Saturday because she sees an increase in activity.

Lastly, you said that I am not helping a small business as much if I pay with a credit card versus if I pay with cash. You are obviously correct, but you are ignoring an important fact regarding the benefits to accepting all forms of payments. When shopping with cash, my spending limit is set to however much cash I have on hand. Consumers that use debit and credit cards spend more than consumers that pay with cash, which leads to greater profits for the business owner.

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avatar csdx

I don’t understand why you’d be more upset about this than say Coke and polar bears, or just about any manufacturer and the whole breast cancer pink ribbon month. Aren’t they all basically doing things similar to what AMEX is doing here? Trying to say that they’re “supporting a good cause” when in reality its all “just marketing fluff”. Do they really care about it more than as a marketing event? Is it just PR? Companies do it all the time to get you to feel better about them, and sometimes they even manage to help.

As for me, I admit, that it did get me to stop and think just how much Black Friday is more about big box stores than anything else. I’ll take a free $25 and probably go out and try somewhere new to me. Also probably good for the business as it’s essentially a free Groupon style discount on AMEX’s tab.

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avatar Luke Landes ♦127,373 (Platinum)

I do have some comments about the Coca-Cola / Santa connection, but that’s for another time.

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avatar wylerassociate ♦906 (Dime)

thanks for the post flexo. Good information regarding american express.

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avatar Dan

What in the world am I reading here? You are being offered 25 bucks for free , and complaining about it? Gimmee a break . As for the businesses , if they offer Amex already , they are not losing money on these transactions , they are making money . And Amex of course is acting in their interest as well , what’s the surprise – or bad thing – about that? It’s called capitalism and it benefits all . Now stop pontificating like a bunch of ridiculous libs and go get your free 25bucks , for God’s sake .

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avatar Greg

I think you got this one wrong.

You might not like AMEX, and many small business may not accept AMEX cards because of the higher fees. If you want to do more to support local business, its a great idea to buy local, and pay with cash.

However, over 2.5 million cards were registered yesterday, meaning AMEX reimbursed over $60M for cards holders purchases at small businesses. My guess is the number is much higher than that.

We went to a local toystore where they told us it was their best day of the year! Same thing at a local clothing store!

Facts seem to be that yesterday was a good day for small businesses, and AMEX’s promotion had something to do with it.

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avatar Saavy shopper

I take issue with the fact that the commercial didn’t mention that a pre-registration was necessary. I saw the commercial, and made the required purchase at a local small business thinking all sorts of nice things about Am Ex. Now, after the fact, I learn that a pre-registration was required. I called Am Ex customer service and learned that accounts wouldn’t be credited that weren’t pre-registered. Not such happy thoughts anymore. I’m always supporting the small business, but only made this purchase due to Am Ex’s commercial. It’s really bugging me and I’m even considering cancelling my card because of it.

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avatar Csch

I don’t see this as a bad thing. I shopped small with 3 of my Amex cards this Saturday at a local store and I will receive $75 in credit. I spent a total of $265 at the business. In this economy, I would have had to shop at a big box store if not for the credit. It’s the business that chooses to accept Amex, they are not forced. Sure, I could have paid cash, but I certainly wouldn’t have spent $265.

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avatar Emily Guy Birken

Flexo, do you know about the 3/50 Shop Local project? http://www.the350project.net/home.html This is what we really need to do in order to help out our small businesses, instead of just designating a day during the holiday season.

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avatar Luke Landes ♦127,373 (Platinum)

Emily,

Thanks for letting me know about the 3/50 Project. I hadn’t heard of it before, and I think it’s a better approach than AmEx’s.

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avatar Sarek

Well, the whole Small Business Saturday promotion might be a scam because neither AmEx nor Bank of America (which issues my AmEx) has issued me a credit – it’s now 13 Feb., 2012. AmEx did send me an email saying that I have completed the qualifying transactions. AmEx says the credit has to come from BoA. BoA denies all knowledge of the promotion and credit.

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