Stroller and car seat brand Uppababy says it’s saving thousands of dollars each month after correcting the merchant fees it pays to credit card companies.
When Lauren and Bob Monahan founded the Uppababy brand in 2006, they set out to design a better baby stroller. Now, after rapid growth across some 12 countries and with products that include several types of strollers and car seats, their company has found a better way to do business with credit card companies.
Uppababy’s biggest market is still the United States, where it sells to such major retailers as Amazon.com Inc. and buybuy Baby, a subsidiary of Bed, Bath & Beyond Inc. But most of its sales are to legions of boutique retailers, many of which prefer to pay via personal or business credit cards after viewing products on Uppababy.com, Uppababy controller Brian Murray says. (The site also allows consumers to buy products by clicking to a retail dealer through the Shopatron e-commerce network.)
Those card transactions mostly fall into the card-not-present category, as the buyers are not face to face with the seller, Uppababy. Those transactions cost the seller more than card-present transactions. The card systems also charge more for certain kinds of credit cards, particularly those that offer cardholders generous rewards. Processing a high volume of payment card transactions, though convenient for its business customers, makes for a confusing set of merchant transaction rates that Uppababy must pay, Murray says. “There are variations based on the kind of card,” he says. “I was aware of that, but never much of an expert—it’s a field unto itself.”
Paying the wrong rates to credit card companies, he says, can run up unnecessary costs. But since Uppababy began working a few years ago with Independent Merchant Group Inc., a firm that audits the invoices merchants receive each month from credit card companies, the baby products company has been saving tens of thousands of dollars a year in fees, Murray says.
Uppababy’s wholesale customers generally place their orders through the company’s sales reps, including through live chat sessions, phone calls or faxes connecting them with the company’s contact center. They can also place orders in-person in visits from sales reps, who enter orders through a Handshake Corp. application on mobile devices.
Uppababy keeps on file its wholesale customers’ payment account data, including card account numbers. After customers place orders, it enters those account numbers into the company’s financial management software from NetSuite Inc. As card-not-present transactions, they’re subject to a range of fees imposed by credit card companies, but many of the fees may be out of date, Murray says. That’s where Independent Merchant Group comes in.
Vito Pagano, president, CEO and founder of Independent Merchant Group, says merchants typically pay additional fees for card-not-present transactions depending on the volume of transactions, the seller’s line of business, risk factors and other criteria. Those extra fees range from about 0.3% to about 0.65% of online sales transactions, according to figures from Visa Inc.
Oftentimes as a seller grows its business over several years it fails to renegotiate card transaction rates that may decline as things like transaction volume and risk factors change in the merchant’s favor, he adds.
In Uppababy’s case, Independent Merchant Group’s audits have resulted in an average monthly rate paid to credit card companies of 2.2%, down from a prior 3.6%, saving Uppababy up to about $30,000 a year, Murray says. “A lot of our rates were falling into the wrong buckets,” he adds.
Murray says Uppababy doesn’t pay any fees up front to IMG, which keeps about 20% to 30% of the amount it saves. He adds that he spends about 15 minutes per month scanning several pages of the invoices he receives from credit card companies and e-mailing them to IMG.
The lower rate paid to card companies will grow in importance as Uppababy grows, Murray adds. The privately held company doesn’t publicly state its revenue, but Murray notes that it’s in eight figures, that is, at least $10 million. “We’re still growing strong,” he says.For a free subscription to B2BecNews, click here.