I am just curious how AMEX would benefit from their shop at small business program where they provide a rebate to customers for paying with AMEX.
Also with eBay providing those codes where you take 20% off the seller.
How do AMEX and eBay benefit from these ventures? Is it a loss leader kind of initiative?
They might lose money on the particular campaign, but it's part of their plan to provide value to their customers to retain them and grow new ones, so they can make money off (some of) them during the year with more than enough left over to cover the cost of these campaigns.
I would doubt they lose money when its advertised so heavily etc
companies arent in it to lose, they're in it to profit and I am pretty sure
its definately not a loss leader
why do they continue to offer these deals is because it turns a profit and brings in customers every time
I think you will find part of the business model is to earn money
http://www.smh.com.au/business/the-economy/american-express-…
don't feel too bad taking advantage of promotions offered by Amex, they can easily spare the cash.
Not sure about ebay, but Amex is trying to make merchants * an offer they can't refuse *. If a merchant that currently won't accept Amex finds that many customers come in just to use their Amex cards, they would start accepting it. In theory, they should lose track of the shop small deals and continue to accept Amex all year round.
Ebay: The consensus on OZB seems to be that most vendors 'jack up' their prices during a 20% promotion … so it's not really a discount. You might legitimately get a discount on clearance items, but I'm not sure how much the actual discounts on non-clearance items is. I'm also not entirely sure how the site wide promotions are funded on ebay.
Amex: Shop small is a global initiative to encourage small businesses to accept amex. It's been around in the US/UK for years. You can do basic arithmetic to see how it's funded, eg Nov 16 promotion - 150k cards * $100 per card = $15m. The actual cost of statement credits is probably closer to $4m-$6m, since not everyone uses up all their possible statement credits. Out of the $4m-$6m is statement credits, amex probably collected merchant fees on $40m-$60m (say $1m-2m), since people typically spent more than the minimum $20 requirement. This leaves a net cost of $3m-$5m for the statement credits, which is a lot of money, but not hugh for a company like amex … they probably spend a lot more money on advertising the shop small promotion.
The other statement credits probably work in a similar way, but much smaller scale and the vendor might chip in to the cost of it.
I think the other statement credits are actually a part of a bigger strategy to condition Australian consumers to using amex and increasing acceptance. There's a good article about it here
At the end of the day, I think the promotions are just another advertising/marketing cost for these companies.
https://www.americanexpress.com/au/content/shopsmall/index.h…
they list some of the data here.
$603 million spent
Ebay and Amex make money from one thing FEES
it costs them nothing to charge you a % for listings
thats their bread and butter
They run a company, advertise sales, more people use ebay
they can afford to offer 20% off as they certainly have plenty of money from the extra flood of people buying on ebay
its a you scratch my back if I scratch yours entity with Ebay and their deals with suppliers
As for Amex, money made in Interest from credit card owners not paying on time, debt is a lovely game for those guys
they run a company not a charity and they once again do deals with certain companies to promote their offers
All in a days advertising my friend, they don't make a Loss if thats what you think
Clicks earn money :)