Kroger blinked.

owl-2361801_1280Well, that didn’t take long. 

Your Visa credit card is once again welcome at Kroger-owned Food Co and Smith’s Food & Drug stores. Kroger, it seems, was the first to blink. 

It was only in March of this year that Kroger announced that its 142 food stores and 108 fuel centers operating in seven states under the Smith’s Food & Drug brand could do just fine without Visa credit cards, thank you very much. Perhaps Kroger was encouraged by the results of having already banned the cards in its 19, California-based Foods Co stores. At the time, I excerpted the following from a Kroger press release:

“Visa has been misusing its position and charging retailers excessive fees for a long time,” said Mike Schlotman, Kroger’s executive vice president and CFO. “They conceal from customers what Visa and its banks charge retailers to accept Visa credit cards. At Smith’s, Visa’s credit card fees are higher than any other credit card brand that we accept. Visa’s excessive fees and unfairness cannot continue to go unchecked. That’s why, starting April 3, Smith’s will accept all forms of payment except Visa credit cards.”

If the loss of Smith’s inflicted a flesh wound on Visa’s bottom line, a bigger wound could have resulted had the retailer extended the rest of its roughly 3,000 stores. Especially if in doing so it sent a message to other retailers to the effect of Fear not—there is life after Visa.

But on October 30, Kroger relented

If you’re curious to know what motivated the change of heart, you’re not alone. According to Business Insider and other media reporting the about-face, Kroger ain’t a-sayin.

With benefit of hindsight, it’s tempting to weave an eloquent “told you so.” But to do so would be to indulge in revisionist history. When Kroger first announced the ban, some experts were outright pessimistic in their predictions, but most were guarded. I admit I more than erred on the side of caution when I offered three possible outcomes:

(1) Kroger capitulates and mends ties with Visa; (2) Visa capitulates and gives Kroger a better rate; or (3) Kroger and the Visa credit card carry on without each other. I know better than to make an attempt at predicting which it will be.

Had other retailers jumped on the “we’re not going to take it anymore” bandwagon, Visa might have been forced to deal. As it was, Kroger found itself alone on the credit card battlefield. If this was a game of endurance, Kroger’s pockets, deep as they are, would have been no match for Visa’s much deeper ones. Moreover, the people at Visa surely knew that capitulating to Kroger would have obliged them to capitulate to everyone, and left them wide open to accusations of monopolistic malfeasance.

With the benefit of hindsight, there are some observations we can safely make. Whether or not the following played a part, they are instructive for any marketer:

  • It’s never a good idea to confuse a customer. Kroger expected Smith’s customers to remember not to pull out a particular card that all other stores accept. Meanwhile, they had to remember to pull out, as Mobile Payments Today listed at the time, “… debit cards from Visa and Mastercard, and credit cards from Mastercard, Discover American Express, as well as cash, checks, WIC and SNAP government benefit transfer cards and health savings account cards.” That’s asking customers to do a lot of remembering and a lot of thinking for what had always been to them payment by rote.
  • It’s never a good idea to take away a privilege or convenience. Pulling out a Visa credit card or using a Visa credit card account via mobile wallet is a convenience. Kroger took that away.
  • It’s never a good idea to befuddle or embarrass a customer. On the umpteenth occasion of having to say, “Oops, I forgot” because a Smith’s terminal rejected their payment, it’s difficult to imagine a customer cheerfully adding, “My bad!” What’s easier to imagine is a customer muttering unseemly words while digging for an acceptable card, or simply saying to the poor cashier, “You can put these groceries back” and walking out.
  • It’s never a good idea to make casualties of customers. Customers were more likely to be displeased with Kroger than with Visa over the inconvenience. “It’s Visa’s fault” is a tough argument to make when you’re the only major chain that’s not playing ball.

My guess, and that’s all it is, is that not accepting Visa credit cards threatened to cost Kroger more in lost sales and ill will than it was spending on interchange fees.

But all we really know is that Kroger blinked.

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