When starting a smoke shop business, there are many things you need to consider to ensure that your business runs smoothly. One important factor is the payment options you provide for your customers. These could include online payment, cash, credit card, and so forth.
Since credit card processing fees can add up quickly –especially if you don’t have the best merchant service provider, you need a payment option that ensures you make some profits and the customer is happy.
Discover in this article how the cash discount program can help your smoke shop save money and increase profits.
What Is the Cash Discount Program?
This is a program that helps business owners deal with the ever-increasing credit card processing fees. The cash discount program offers separate prices for credit card users and cash-paying customers.
To encourage the use of cash, the program passes the credit card processing fee to the customer, which makes them pay more than cash buyers. Likewise, cash-paying customers are given a discount.
This program helps the business owner grow their business without worrying about credit card processing fees for all card transactions.
Benefits of Cash Discounts
If you implement the cash discount program in your smoke shop, there are several benefits that you’ll start enjoying. Some of these benefits include:
1. Improved Cash Flow
The use of wireless payment has moved people away from using cash. Cash discount programs improve the cash flow as customers strive to get discounts. This also gives you better access to cash faster than during credit card purchases. Cash is instant, whereas credit card payments will take a few days before you can access the money.
The availability of cash in hand makes it easy to handle business as you can purchase equipment or even give your customers change for their payments.
However, a good merchant can also provide you with great services that allow you to access your funds quickly.
2. Lowering the Chargeback Ratio
By encouraging customers to pay with cash, a cash discount program can reduce your chargebacks ratio. This happens as the program reduces the frequency of chargebacks you’ll receive.
A chargeback is a reversal of a transaction and the return of the funds to the original payer, typically a credit card company.
3. Increases Profit Margins
Cash discount programs play a great role in increasing your profit margins. When a large number of your customers make cash payments, you don’t have to spend any service fee.
In a good program, a card-paying customer pays for his smoking products and also covers the payment processing fees.
You’ll be able to save money and boost your earnings because all of the increased fees will be passed along to the clients. Additionally, you will be able to work with the majority of credit card brands without incident if you have a reliable payment processing supplier for your company.
4. Attracts New Customers
Whether you run a smoke shop or some other type of business, using a cash discount program can also act as a marketing plan. As consumers are fond of looking for the ideal deals that will save them some money, you’ll probably gain a couple of customers.
Cash discounts are not just good for first-time customers, but they also encourage repeat customers. If your products are of great quality and fair prices, your business will attract new customers and retain your current loyal ones.
Challenges Facing Smoke Shops
When looking to venture into the smoke shops business, there are several challenges that you’re going to face. Though it might get a bit tough, the good news is that you can overcome these challenges and run a successful business. Some of the challenges you’re going to face in this industry include
1. Constantly Changing Regulation Laws
First, the law on vaping smoke shops is always changing, and you need to ensure that you’re always informed of any new developments in terms of regulations and laws set by the FDA. The FDA has some strict federal regulations on the smoke shops business.
However, you should ensure that you also check your state laws as they could differ from federal ones. Let these regulations guide how you select your business location and whether it’s a brick-and-mortar or online business.
You’re also likely to pay very high taxes for your vape smoke shops business, depending on the state you’re in.
2. High Competition
Second, you need to work on making your smoke shop stand out from the competition. As vaping products are available everywhere, you need to have a competitive edge for your business to remain relevant.
Implementing a cash discount program is one way of staying ahead of the competition. This program will improve the use of cash in your business while passing on the credit card processing fee to any customer who uses one.
Setting your smoke shop in a location with high traffic can also help improve your chances against competitors. But you must have quality products if you want to maintain most of the customers who walk in. great customer service will also go a long way when it comes to dealing with the competition.
3. Raising Capital
Though bank loans are always go-to providers of capital for businesses, smoke shops aren’t so lucky. Most American banks put them in the high-risk category, making getting a business loan a nightmare. On the off chance that you get a bank loan, the repayment fees and rates you end up paying will be excessive, making it hard to run a profitable business.
However, there are other options that you can use to help you get your business started. They include crowdfunding, online loan providers, investors, and peer-to-peer lending.
4. Quality of Products
Finally, you need to ensure that you always provide your customers with high-quality vaping products. When starting your business, you should steer clear of any unknown manufacturers offering you great products at throw-away prices.
You need to ensure that you build a brand of trust and quality for your customers. Therefore, ensure to do diligent research before getting in bed with a new manufacturer. Selling counterfeit products will mess up your reputation even before you get established in the business.
Does Your Business Need a Cash Discount Program?
Before you implement the cash discount program in your smoke shop, you should ensure that it will be an asset and not another expense. The truth is, not all businesses are compatible with this program; therefore, it’s better to conduct some research on the subject before reaching out to a bank for their merchant services.
You need to check out several cash discount program providers before you settle on one. Though accepting credit card payments is going to increase sales in your smoke shop, it also comes with an expense that eats into your profits.
How to Get Started
Once you decide that your business is ideal for a cash discount program, it’s time to implement one. To do this effectively, there are several steps that you should take.
1. Finding a Merchant Service Provider
First, you need to find the right merchant service provider for your smoke shop. If your current bank provides cash discount programs, check them out first. There are many merchant service providers and it’s wise to avoid going with the first merchant service provider you come across.
To find the right one for your business, you need to ensure to do your due diligence. For added advantage, you should look for merchants (MSPs) who charge you a fair price and offer great services.
2. Cash Discount Signage
When implementing a cash discount program in your smoke shop, you need to ensure that you inform customers properly. You need to install proper signage on your business premises and on your website -if you have one, to attract many customers.
With this part of the process, you can get started on signage a bit early even before you reach out to any merchant service provider. The signage acts as an ad and attracts your customer’s attention letting them know there are discounts available.
4. Transactional Hardware
These include the point of sale (POS) system, credit card terminal, and mobile card readers. The good news is, if you already have this equipment already, all you have to do is have the cash discount program installed. Though the process
Though calculating cash discounts manually can be tricky, these programs do it effortlessly. All the calculations are preprogrammed, therefore, all your salesperson has to do is swipe the credit card.
5. Customer Services
Finally, you need to ensure that your customers get the best experience at your smoke shop. Therefore, you need to ensure that your employees know how to use the program. Though your POS does most of the heavy lifting, the cashier will still need to be on their A game.
To ensure the success of your business, you should ensure to always address the issues raised by customers as soon as possible. Putting your customers first will have some great results for your business, and is likely to attract new business.
Alternatives to Cash Discount Programs
On the other hand, if you’re not in any rush to implement a cash discount program, there are several options that you can try first. Though cash discount programs are efficient and cut down costs, it can be problematic if most of your customers use credit or debit cards only.
If you don’t address this problem early, it could end up costing you customers in the long run. The following are some alternative ideas to the cash discount program. They include:
Raising Your Prices: You could start by raising your prices just enough to cover the transactional cost. Increasing the cost of your products is a bit of a risk, but it can work great.
Setting a Minimum Purchase Amount: If you want to increase the cash flow in your business, you need to give your credit or debit card-using customers a nudge. You do this by coming up with a limit that a customer should reach before they’re allowed to purchase using a credit card.
Feedback is very important for any business, as it goes a long way in improving how you do business and increasing profits. What your customer chooses can make or break your business, as they influence the decisions of most potential customers.
Cash discount programs have great customer reviews as they offer benefits to both you and the customers. To create a great bond with your customers, you need to be transparent with your business practices. There are many merchants who offer great and safe payment processing.
Conclusion: Guide to the Cash Discount Program for Smoke Shops
Implementing a cash discount program with the right merchant service provider is a great option for your business. To grow your smoke shop, you need to face any challenges you come across by producing quality products and great services.
Due to the ever-increasing credit card transaction fees, most businesses are implementing cash discount programs to try and ensure that they get to pocket most of their business money. However, don’t make any haste decisions, especially when looking for a merchant account service provider.
There are several things that can make your smoke shop business grow. They include the right amount of funds, a great cash discount program, and effective employees. If, for some reason, you don’t like your cash discount program, try out the alternatives and see how they work.
For further information, check out our other credit card processing articles here.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.