More retailers go cashless to cut costs, theft during holiday shopping
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This holiday season, you might want to leave home without it.
No, not American Express travelers checks, as the twist on the company’s old tagline suggests – but cold, hard cash. In an effort to cut costs and hassles, a small but growing crop of retailers have stopped accepting the tried-and-true paper currency.
Some restaurants in large cities began shunning the greenback a couple of years ago, but an increasing number of nonfood chains are going cashless at some or all of their locations or never took bills at the brick-and-mortar stores they’ve opened in recent years.
They include clothing retailers such as Bonobos, Indochino, Everlane and Reformation; Amazon bookstores; Casper Mattress; Drybar hair styling; The Bar Method fitness studios; and United and Delta airlines (both at ticket counters and for in-flight food and drinks).
“The momentum started in the restaurant space, but we’re certainly seeing spillover,” says Jack Forestell, chief product officer for Visa.
Visa last year awarded $10,000 to each of 50 businesses that produced videos explaining how going cashless would benefit them.
The trend is partly rooted in the growth of credit- and debit-card transactions and the spread of digital wallets such as Apple Pay and Google Pay. Cash isn’t dead, but it’s no longer king. Jerry Sheldon, vice president of IHL, a retail and hospitality consulting firm, foresees cashless restaurants and stores comprising 40 to 50 percent of all retailers within 10 to 15 years as greenback use continues to dwindle.
“They’re making a business decision that they would rather make their investments in alternative forms of payment” than in cash-handling, he says.
Bonobos, the men’s clothing chain, launched in 2007 as an online-only retailer, opening its first brick-and-mortar stores in 2011. The company now has 59 showrooms that largely extend its website, allowing customers to try on suits, jackets and shirts before buying them and having them shipped to their homes.
“It feels more organic to continue the online experience” by accepting cards and other digital payment forms, but not cash, in stores, says Emily Lewis, Bonobos’ director of guideshop operations.
And instead of having to make change and count bills, “We can … be hyperfocused on the customer,” she says. “Finding you the right fit, getting your clothes, helping your experience.”
On rare occasions, she says, customers try to pay in cash, but “It’s not an issue.”
Indochino, a custom men’s clothing chain that similarly began online, says, “As a company that was formed in the digital age, we’re prioritizing other payment methods.”
Customers in its chief demographic, age 25 to 44, are the least likely to pay with cash. And average orders are hundreds of dollars, making cash payments even less likely, the company says.
Cash is losing favor
The retailers are largely following shoppers’ habits. Thirty percent of all retail transactions are in cash, down from 40 percent in 2012, according to IHL and the Federal Reserve.
Only about a quarter of Americans made all or most of their retail purchases with cash in 2016, down from 36 percent five years earlier, a Gallup poll shows. Millennials are especially cash averse. Twenty-one percent of those age 23 to 34 said they make most or all of their purchases with cash, down from 39 percent five years earlier.
“Their lives are wrapped around their little phones,” Sheldon says.
Lucas Broadway, 32, of Murfreesboro, Tennessee, says he uses his debit card “as much as possible” – once charging 27 cents for a book of matches – allowing him not to “worry about going to an ATM.”
Broadway “has no issue” with a cashless store and is instead irked by the inconvenience posed by shops that take cash only to avoid paying credit-card processing fees.
It’s no surprise that restaurants led the cashless movement, including salad chains such as Sweetgreen and Tender Greens, Epic Burger in the Chicago area and Petit Trois in Los Angeles. Starbucks turned one of its hometown Seattle shops cashless.
Why? Think about holding up a line of New Yorkers with cash exchanges during the lunch hour rush. Tender Greens says ditching bills shaves in-store orders by about 10 seconds. The cost of cash is also steep. Bills are constantly ferried from tables to the register and many hands touch them, making accountability a challenge if some go missing, according to an IHL report.
Yet nonfood retailers also contend with expenses. Besides the time spent counting bills and making change, they include ensuring registers have enough change, running cash to the bank, bank fees, armored cars, employee theft and robberies, the report says.
All told, such hassles cost retailers an average 9.1 percent of sales, ranging from 4.7 percent at grocery stores to 15.5 percent at restaurants and bars, IHL says. That compares to the 2 to 3 percent transaction fees credit-card companies charge merchants.
Lauren Helm, owner of a Bar Method fitness studio franchise in Huntington, New York, decided not to accept cash when she opened seven months ago to prevent theft and better document clothing purchases. Members simply charge items to a credit card already in the system for monthly dues.
“For some criminals, if they know we have cash, we could get robbed,” she says, noting classes begin as early as 6 a.m. and end as late as 8 p.m. Plus, she says, “It makes it kind of easier to spend money,” if members simply charge a purchase, boosting sales.
Low-income shoppers could be left out
Critics say cashless businesses hurt many lower-income Americans who don’t have bank accounts or credit cards because they can’t maintain a minimum balance, don’t have photo IDs or other reasons. Last year, 6.5 percent of U.S. households were unbanked, with no members having a checking or savings account. Twenty percent had not used mainstream credit such as a credit card or mortgage during the prior 12 months.
“It excludes people who only have access to cash,” says Christopher Peterson, director of financial services for the Consumer Federation of America.
A minibacklash is building. Bills outlawing cashless merchants have been introduced in Philadelphia and Washington, D.C. this year. Massachusetts has had such a law since 1978.
“I can’t understand why (the cashless trend) is happening at all,” says Craig Shearman, spokesman for the National Retail Federation. He says the card processing fees merchants pay are passed to consumers, costing the average household several hundred dollars a year.
Despite the pushback, IDC analyst Rivka Gewirtz Little predicts “significant and continued year-over-year growth (in cashless retailers) over the next 10 years.”
Many, she says, could follow Walmart, which offers prepaid cards that don’t require customers to have a bank account.
United, which doesn’t take cash for ticket purchases at airports or for food and drinks in flight, supplies kiosks near ticket counters that let travelers put cash on stored value cards.
The decision to go cashless is “part of our efforts toward creating a faster more efficient airport experience for our customers,” United says on its website.
Paul Davidson, USA Today
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