The most popular meal passes have started to fail. From the last week of December — at the peak of the shopping season — food retail chains stopped accepting Sodexo passes for the items bought by shoppers.
The reason: Retailers think they cannot pay 2.9-3.4 per cent of the total bill that Sodexo charges as commission. Besides, handling of passes and a waiting period of almost a month to get their money are also a deterrent at a time when consumer spending is on a decline.
“From December 28, we have decided to accept only cash, credit cards, gift cards, electronic credit, pre-paid credits and our own coupons. The cost of physically handling Sodexo passes is too high. If they have an e-credit or pre-paid card facility, we don’t have a problem,” said a spokesperson of Pantaloon Retail, which runs over 150 Big Bazaar and Food Bazaars stores in the country.
Around two per cent of Big Bazaar’s sale is through Sodexo passes. Pantaloon has already informed its customers it will not accept Sodexo passes.
“Besides the 3.5 per cent loss, it is becoming difficult to handle the passes, take them to collection centres and manage the security issues,” he added.
Vineet Kapila, CEO of Spencer’s, which discontinued accepting Sodexo this week, asks: “Since retail is a low-margin business, why give such commissions?” He added that a “sizeable” portion of Spencer’s sales were though Sodexo.
Food and grocery retail has a net margin of 2-3 per cent, while products like apparel and accessories carry higher margins. Kapila says such passes should be applicable only to non-food retail.
When contacted, a Sodexo spokesperson said a reply would be possible only on Sunday. However, a leading news website quoted Sodexo as saying that it was entirely the decision of retailers and the company would not like to comment on the decision.
Some retailers say handling credit and pre-paid cards is more viable, given the slowdown in consumer spending and lower revenues.
“Banks charge 1.5-2 per cent and you get money within a couple of days. In the case of pre-paid cards, you get funds the same day. So, we prefer those,” said a senior executive of a Mumbai-based retail chain.
Raheja-owned Hypercity is said to be talking to Sodexo on the issue and may take a call on its tie-up in a few months.
Many companies give Sodexo passes to their employees as part of their compensation package. These passes became popular as these carried tax exemption of Rs 1,300 per month or Rs 50 per working day. Though retailers earlier redeemed these against all purchases, when income-tax authorities objected to it, they now accept the passes only for food and grocery items.