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Merchant Warehouse Inc. has bought gift and loyalty provider Opticard and has plans to offer its services as part of bundled transaction services to merchants.
Scottsdale, Ariz.-based Opticard, which will continue to operate independently, sells gift and loyalty card services to small businesses. Merchants can use Opticard programs to create customized gift and loyalty programs. Boston-based Merchant Warehouse, an independent sales organization and merchant processor, says the addition of Opticard provides a valuable service that more small and mid-size merchants continue to ask for.
“This is trying to fill a void that a lot of our small-merchant and strategic partners had come to us and said there’s a strong need for this type of service,” Chris Wuhrer, Merchant Warehouse senior vice president for strategic initiatives and product marketing, tells Digital Transactions News.
There were several reasons for the acquisition, financial terms of which were not disclosed, but a big one is the additional ability to differentiate Merchant Warehouse products, Wuhrer says. “It fills a strategic gap for us,” he says. “Merchants are getting more and more intelligent about growing their businesses.”
Merchants also view gift and loyalty services as ways to attract and retain consumers. “We are seeing an evolution in terms of how small businesses attack the market,” Wuhrer says, adding that many merchants look at the success of Dunkin Donuts’ and Starbucks Corp.’s gift and loyalty programs. While the scale of the business may differ, such programs are just as important to smaller businesses, Wuhrer says.
Merchant Warehouse will make Opticard’s services available through all of its sales channels, starting with its indirect sales channel, which includes ISOs, and its direct sales effort. Eventually, the products will be extended to other Merchant Warehouse partners, such as integrated software vendors, Wuhrer says.
Sales partners receive a wholesale rate that they can mark up for resale to merchants. “Our pricing is about getting penetration and engaging merchants we probably haven’t engaged in the past,” Wuhrer says. Merchants pay no set-up fee. A basic version includes 100 transactions for $10 per month, with transactions above 100 costing 10 cents each. An enhanced version included unlimited transactions and add-ons like digital card issuance. That monthly rate ranges from approximately $15 to $29, depending on which services a merchant chooses, Wuhrer says. “Final pricing is up the sales agent.” There is no termination fee, and Merchant Warehouse will convert an existing gift or loyalty program at no cost.
That pricing flexibility is important because pricing for credit and debit card payment processing continues to be commoditized, Wuhrer says. As profit margins decline on core processing services, ISOs and sales agents are prompted to look for services, such as gift and loyalty programs, that typically have better profitability, he says. The Opticard purchase “brings another suite of services that really brings value,” Wuhrer says.
There could be many advantages for small businesses that use gift and loyalty programs, says Ben Jackson, senior analyst of Mercator Advisory Group Inc.’s prepaid consulting services, Maynard, Mass.
“Gift cards can encourage shoppers to try a place for the first time and repeat customers to spend more,” Jackson says. “Loyalty programs encourage customers to return, and help merchants collect data on their customers and shopping behavior. Reloadable cards that combine the two can also help lower payments costs by converting what might have been an open-loop payment into a closed-loop payment.”
That may provide Merchant Warehouse with services that can give its merchants new competitive tools, he says.
