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Retailers, represented by the National Retail Foundation, promised that consumers would benefit when retailers, particularly small businesses, were to benefit from regulated interchange (swipe) fees charged by Visa and MasterCard. The regulation, commonly called the “Durbin Amendment to the Dodd-Frank Act,” would lower the cost for businesses who were subject to an effective duopoly between Visa and MasterCard, paying a percentage of every debit card transaction to the processor.

These fees are higher for transactions with any card that is more than just vanilla, and retailers have dealt with this high cost of doing business in an age where an increasing number of transactions are handled electronically mainly by increasing the costs of products overall.

Cashier checkout at WalmartThe National Retail Federation claimed last year that consumers would see the benefit of reduced interchange fees. Regulated cards — and not every issuer is subject to this regulation — carry interchange fees with a maximum of 0.05% of the transaction plus $0.21. The standard fee for a non-regulated card (reviewing Visa’s schedule of interchange reimbursement fees as of October 2011 [pdf]) is 1.90% of the transaction plus $0.25 for every swipe of the card.

If retailers intended for the consumer to benefit, the only way for that to happen would be in the form of lower prices. Here are a few comments from representatives of the retail industry, as compiled by the Electronic Payments Coalition:

  • “The reform will save each franchisee in the country almost 50% of the cost of a debit transaction, which ultimately will be passed on to the customer… It is simply a fact that lower merchant costs will lead to lower consumer prices.” (Bruce Maples, Chairman, National Coalition of Associations of 7-Eleven Franchisees)
  • “Merchants are ready to pass lower swipe fees along to consumers in the form of discounts and other benefits as soon as reform goes into effect…” (Mallory Duncan of the National Retail Federation)
  • “Merchants are making a wide variety of plans to pass the savings along to customers who use debit cards, ranging from discounted prices to benefits and increased services such as free delivery at an appliance store…” (National Retail Federation press release)
  • “Secondly, to the extent that a merchant receives a benefit, I do believe that from a competitive standpoint, they will bring that through to the consumer.” (Robert Donovan, Corporate VP & U.S. Assistant Treasurer, McDonald’s

If you’ve been shopping throughout the past year, particularly since October 1, 2011 when the regulation went into effect, you probably haven’t noticed prices decreasing. In fact, I would say prices overall, from my anecdotal experience, have continued to rise. Recent research confirms this suspicion, to the tune of a 1.7% increase across a list of common items.

According to a consumer survey conducted by Ipsos Research, only 7% of consumers believe that retailers are passing these savings onto customers. 76% of retailers have increased their prices or kept them constant since October 1, 2011.

At the same time of these increases for customers, retailers have saved $2.28 billion as a result of the regulation. When we discussed this on Consumerism Commentary, most readers didn’t expect retailers to lower prices. Why should they? Small retailers have the opportunity to reduce their costs while not affecting revenue by keeping prices steady. That’s how businesses can survive in difficult times. Large retailers may have healthier profits due to volume, but the ability for large retailers to offer low prices is their strength, and don’t have the margins to reduce prices much.

Could it be possible that these promises of savings for the consumer were promoted by the industry to garner more public support for regulations?

Photo: Walmart Stores
Electronic Payments Coalition

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I was torn when Amazon.com, the online-only retailer for books, music, and movies, became popular. I liked the convenience, but it was clear that local brick-and-mortar bookstores would have difficulty competing with Amazon’s prices in the long term. I was swayed enough to the side against Amazon when I participated in a boycott of the company when they filed for a patent for the 1-Click ordering system.

Over the years, though, I’ve come to accept Amazon.com as a part of my life as a consumer, and I shop using Amazon.com for more than just books, music, and movies. I gave into my desire for speedy delivery and joined Amazon.com Prime, as well.

BooksAmazon.com’s aggressively competitive tactics has extended recently to book publishing. With a book publishing arm, Amazon.com has the right to sell its own published books exclusively. With the new tools Amazon.com is offering authors, traditional publishers are having a hard time competing.

This week, I saw that Amazon.com is planning to open a physical, brick-and-mortar store in Seattle. It could be the first step to bring storefronts to more locations throughout the country, but that depends on the results of this one Seattle location. The purpose doesn’t seem to be to keep an inventory of books, movies, and other media on hand to sell, but to focus on Amazon.com’s own electronics, like the Kindle.

I was recently reminded of why I was wary about Amazon.com in the first place. I’ve seen what has happened to local book stores, some of which have gone out of business, and what has happened to Borders, with large, empty stores left in the wake. There are several local book stores that remain, but I can’t say whether the stores are thriving and predict how long they’ll last. I spoke with a book-lover who was mortified that I rarely shop in independent book stores and that Amazon.com is changing the landscape for consumers and hurting small business owners.

If Amazon.com extends its new store front model beyond one location in Seattle, the primary competitive target seems to be Apple, not local book stores. Yet, if the e-book, and particularly Amazon.com’s proprietary version of the e-book, becomes the preferred method of reading for more consumers, and these e-books could be purchased only from Amazon.com, local bookstores will be in danger.

What will a book store look like in the future? Will locally-owned book stores continue to exist as viable businesses?

Photo: shutterhacks
O’Reilly, The Globe and Mail, New York Times

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Free Shipping Day

This article was written by in Consumer. 4 comments.

Today is Free Shipping Day, and thousands of online merchants are participating in this movement, offering free or reduced price shipping so customers have an opportunity to receive last-minute orders in time for the holidays. Free Shipping Day was founded by an entrepreneur-couple in December 2007 as a location for finding shipping discounts offered by major brands. Since its launch, the service expanded to Canada and the United Kingdom.

While shopping online is convenient, consumers often pay for that convenience through shipping costs and the delay between ordering an item and receiving the delivery. A benefit of ordering online is that you never need to leave your house, unless you prefer to see an item in person before making your purchasing decision.

Package DeliveryLast night, I ventured outside with the goal of upgrading my cell phone. Verizon Wireless released the new Samsung Galaxy Nexus, and I figured this would be a good opportunity to replace my current, sluggish phone. Due to a car accident, traveling to the store took three times longer than it should have, and the store had no phones in stock by the time I arrived. I did have a chance to try the phone in the store, though. The sales representative offered me an opportunity to order the phone from the store, with no guarantee of when the order would arrive, but the price in the store was higher than the price on the Verizon Wireless website.

I realize that the price of this device would likely go down in just a few weeks, but I’ve been looking to get rid of my current phone for about a year. At least I didn’t need to pay a delivery fee. Verizon Wireless is not a merchant on the list of those participating in Free Shipping Day; this retailer offers free shipping in its normal course of business.

Here are the retailers participating in free shipping day.

Photo: kalleboo

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UPS Premium Service

This article was written by in Consumer. 17 comments.

Delivery company — or logistics company, depending on how you look at it — UPS is taking a page from Amazon.com’s Prime service and offering better delivery options for customers willing to pay a fee.

When I didn’t work out of my home, I’d often come back after work to be greeted by the familiar yellow slip sticking to my front door. While occasionally, my package would be waiting with a neighbor, occasionally my signature was required. And less frequently, for particularly valuable deliveries, my signature was needed in person. I’ve made many trips to the UPS delivery warehouse 45 minutes from my house in order to pick up a delivery I couldn’t be home to receive during delivery hours. I had always had the option to redirect delivery to another location, however, after paying a fee. At one point this fee was $4, but I believe it has increased over the past few years.

UPS TruckOn October 3, UPS is launching the “My Choice” service. The basic service is free, and this provides a notification a day in advance of a scheduled delivery. The notification will include a four hour window during which the package will be delivered. The company is offering a convenient feature to pre-authorize a delivery needing a signature. This is an excellent feature for someone who receives UPS deliveries regularly.

If you want more than the basic service, pay a $40 annual fee to receive access to a delivery tracker. UPS does a good job of telling you when your delivery is on the truck on the way to the point of delivery, but this new service is like GPS for your package. Another service available narrows the window during which your package will be delivered. For another $5, you’ll receive a two-hour window rather than a four-hour window.

Are these features worth a $40 annual fee? If I weren’t working from home, I might take advantage of pre-authorization to ensure my packages are delivered without me needing to be present, but I’m not sure I’d pay a $40 annual fee for a tighter guaranteed delivery time.

zyphbear

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Department of Justice Blocks AT&T Acquisition of T-Mobile

by Flexo
Cell Phone

Earlier this year, AT&T announced its plans to acquire T-Mobile, a plan that would change the landscape of wireless service in the United States and pave the way for an industry dominated by two large players: the new AT&T and Verizon Wireless. Today, the U.S. Justice Department stepped in, issuing a complaint to block the ... Continue reading this article…

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Life After Salary: 401(k) Rollover Complete

by Flexo

In late April, I described the process for rolling over a 401(k), and last week, I finally got around to doing it myself. I quit my day job nearly six months ago, and I’m slowly unwinding all of my employer-related investments. My 401(k) was worth about $106,000 and was my largest investment account, so I ... Continue reading this article…

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Government Blocks Merger of H&R Block and TaxACT

by Flexo

The Department of Justice filed an anti-trust lawsuit against H&R Block. This second-largest income tax preparation service intended to acquire the company that owns third-largest income tax preparation service, TaxACT. Based on the number of customers who used these companies’ services to self-file 2010 tax returns, the combined company would still be a distant second ... Continue reading this article…

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How to Buy Precious Metals Including Gold and Silver

by Flexo
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There are two main reasons to head towards precious metals as a major investment. One reason one might significantly invest in metals is the belief that the value of gold and silver will increase more than other types of investments like stocks and bonds, or that the investment in metals will provide a certain type ... Continue reading this article…

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