As shoppers rush to big-box retailers in a frenzied pace, American Express is trying for the second consecutive year to lure them into mom-and-pop shops.
The credit-card giant is offering a one-time $25 allowance for spending at independent retailers in the second installment of “Small Business Saturday,” a marketing campaign that has garnered support from lawmakers and advocacy groups all over the country.
In the inaugural effort last year, participating stores reported a 28 percent jump in sales from the same Saturday in 2009, according to American Express. And the company expects even better results this year.
Some 2.6 million people had “liked” the initiative by late yesterday on Facebook, where an American Express page allows shoppers to search for participating small businesses by zip code. And tens of thousands of small shops downloaded free marketing materials from the credit card giant.
“Year one was about claiming the day; year two is about small businesses taking ownership of it; and next year is when we hope to see a halo effect,” said American Express spokesman Scott Krugman.
While the economy is buttressed by “doorbuster deals” at massive retail chains, those transactions bypass a huge swath of U.S. commerce. About 35 percent of employees work at firms with fewer than 100 workers, according to the U.S. Census.
Khoury’s Fine Wine, a Las Vegas shop, was getting the message out on Twitter and Facebook this week and planning a small fete with a food truck. Owner Issa Khoury wasn’t aware of the campaign last year, but heard a lot of buzz about it in recent weeks.
“It’s scary, but we are kind of one of the last independent wine shops standing in this town, so we are really hoping it boosts sales,” Khoury said.
Tim Calkins, a marketing professor at Northwestern University’s Kellogg School of Management, said the initiative has resonated because it was launched in the wake of the credit crisis, when many Americans were leery of big business.
“The magic of marketing is when you can align the way people are feeling with a brand and I think American Express has done that,” Calkins said. “I signed up for it; I’ll be out there.”
American Express will get a return on the ad dollars that it has spent on the promotion. The initiative is likely to sway more small businesses into accepting American Express cards, one of the biggest challenges the company faces.
When a customer swipes an American Express card, the firm charges about 2.5 percent per transaction, a higher fee than its competitors.
American Express argues that the higher charge is warranted because its customers spend more than those who use Visa or Mastercard. The average user of an American Express card is on pace to charge almost $15,000 this year.
In part because of higher fees, American Express controls only one-tenth of the U.S. credit card market, according to a recent report by the Government Accountability Office. And it constantly battles “card suppression,” when a store accepts American Express, but encourages shoppers to use a different card that charges them a lower percentage of the transaction.
Skintology Skin and Laser Center, a Manhattan spa that is offering half-off pricing on laser hair removal and Botox, usually doesn’t accept American Express, but it will this weekend.
“For something like this, we felt like it would be a prudent business move,” said marketing chief Alex Freylikhman. “I think it’s a great effort, particularly in this economy.”
Salida Mountain Sports, in Salida, Colo., accepts American Express, but it planned promotional sales for Friday this year, not Saturday.
“Honestly, they would have to drive a lot of business through our store to soften the blow from those higher fees,” said owner Nate Porter.
American Express would not say the extent to which the campaign boosts its own business, but maintains that the initiative is not about its bottom line.
“Whether you’re a merchant that accepts the card or not, you’re going to see better business on Saturday,” Krugman said. “And everybody agrees that for the economy to move forward, small businesses need to thrive.”