Consumers will be tolerant of merchant surcharging for COVID-19 related expenses as long as there is an element of trust, according to a leading Canadian behavioural economist.
A few Canadian merchants have begun adding separate surcharges on invoices and attributed the extra cost to COVID-19 expenses, either the additional costs of protective masks, gloves and cleaning products or the costs of being forced to operate at reduced capacity. Kyle Murray, a marketing professor and behavioural scientist at the University of Alberta said that consumers will likely accept these costs if they trust the merchant, if it involves non-essential spending, it is disclosed in advance and it is not indefinite in nature.
“Ultimately, it’s a test of trust and fairness. If consumers believe it is fair, not just an attempt to get more money, they are more willing to go along with it,” Murray said. “Consumers will be more sympathetic to the short-term costs that restaurants and local stores are facing, when they can only have two shoppers at a time, or the restaurant can only be half full.”
He said the strained capacity arguments are more likely to be accepted than the additional costs of masks and sanitizers, which are more likely to be seen as “a relatively small charge that the store should cover”. Consumers can easily see merchants that used to be busy now can only serve a few customers or a handful of tables.
Initial reports have indicated that surchargers are primarily local sole proprietorships such as restaurants and beauty salons. There are some exceptions such as courier companies facing fewer flight choices for parcel delivery.
Murray said consumers would be much less sympathetic to surcharges from retailers selling essentials, or if the costs were hidden. “Apart from groceries and pharmaceuticals, most shopping is not as essential. If consumers don’t want to pay the surcharge, they can stay at home.” He noted past examples such as airlines adding “fuel surcharges” and telecommunications companies tacking numerous additional charges to cell phone bills as sources of consumer mistrust that has hampered those industries for years.
And while consumers might rally against a larger retailer such as Wal-Mart imposing surcharges, they might still accept one from Starbucks, because of the capacity restrictions.
Underlying all of this is the assumption that the surcharges would not last forever. “If restaurants are full again, the charges for masks and sanitizers would not go over as well,” Murray said. “Consumers are ok with an unusual world as long as they think it has a finite horizon. If it drags on into the winter or spring, people’s attitudes are going to change.”