PALMERSTON NORTH CITY COUNCIL
Memorandum
TO: Council
MEETING DATE: 27
May 2020
TITLE: Voucher
- Process Options and Feasibility
Presented By: Sacha
Haskell, General Manager - Marketing and Communications
APPROVED BY: Sacha
Haskell, General Manager - Marketing and Communications
|
RECOMMENDATION(S)
TO Council
1. That Council receive the report
entitled “Voucher – Process Options and Feasibility dated 27 May
2020.
2. That the
Chief Executive be instructed to investigate further one of Options A-F and
report back to the Committee of Council on 10 June 2020.
OR
That Council decides not to
pursue a Voucher scheme at this time.
|
1. ISSUE
After launching ‘Choose Manawatu’ as part of the
recovery plan workshop discussions, Councillors expressed a desire to support
businesses further by creating a voucher to encourage spending in the
Palmerston North City business sector to assist the business in their economic
recovery.
Introducing a ‘Buy Local’ campaign is a Stage 1
outcome of our City Recovery plan to promote local businesses and encourage
consumer spending.
To manage a voucher programme
within a budget the end date of any programme will need to align with either
the end of a financial year e.g. 30 June 2020, or until the number of rebates
have been fulfilled to the assigned budget - whichever is earlier.
2. BACKGROUND
The retail and service sector in Palmerston North has been hit
hard due to the consumer purchasing restrictions under Covid 19 lockdown and
needs to recover with pace to save businesses within the city.
Recent indications from weekly
credit and EFTPOS transactions are that while the city is yet to meet the same
levels this time last year, city recovery is happening, and consumer Spending
is returning as shown below in the recent Marketview report received as at 17
May 2020).
Even though the community and shoppers are regaining
confidence to return to the city, many businesses are under immense financial
stress through continued business expenses and with many consumers having
reduced incomes, having less discretionary income to spend locally. In
addition, many small to medium businesses now struggle to resource marketing
campaigns in order to promote their businesses, and without promotion it is
difficult to attract custom and adds to the economic difficulties they face.
To assist the buy local campaign “Choose Manawatu”
was launched and now has over 200 businesses registered within the Manawatu
region. It provides a digital platform to promote their businesses online and
provides a toolkit of resources to help promote their business.
A voucher, discount or rebate offer can also be used to
encourage purchasing behaviour and many businesses already provide similar
offers directly to consumers. Implementation of a voucher requires a process
that can protect the merchant, and purchaser against fraud or misuse, as well
as requires administration. Any voucher redemption mechanic requires
administration and depending on the mechanic its responsibility lies between
the merchant receiving the voucher, the purchaser redeeming the voucher, and
the programme administrator – in this case suggested as the Council.
To ensure the scheme fits within an allocated budget, it will
require a finite quantity of vouchers, a set timeline and clear communication.
Council should anticipate 100% of redemption of the scheme and preferably aim
to have this completed within the financial year for ease of administration.
Council will have to decide whether the scheme applies to
residents or ratepayers or whether this differentiation is important at all, as
this impacts the mechanics for fulfilment and distribution costs. There is a
total of 30,693 rateable residential and rural properties within the PNCC
boundary, of which approximately 280 ratepayers reside overseas, with an additional
500 properties owned by council. Thus 29,913 rateable properties would be
suitable for a voucher programme.
Options to implement such a system have been explored and are
provided below.
3. OPTIONS
The options which Council can
encourage retail spending in the city are through one, or a combination of the
following structures. Any incentive however needs to act as part payment for a
larger total purchase amount.
Use an
existing available voucher or discount programme such as ‘prezzy
card’, or ‘local
card’
(Option A)
This is utilising an ‘off the
shelf’ product.
- Print and distribute a bespoke
council voucher or card that can be redeemed by the recipient.
- Offer a cash back rebate on a receipt
of purchase as a way of discounting.
An example explaining each option is provided based on the following:
- Voucher is valued at $10 incl.
GST. (GST excl. $8.70 as the cost to council per unit), and is redeemable
against a required minimum total purchase of $30 incl. GST or $26 excl. GST
revenue to the business. This $30 minimum purchase is recommended by the
Chamber of Commerce as an appropriate and reasonable amount.
- Printing, postage and
administration are additional costs
- Rateable properties are eligible
for the incentive with a maximum of one per household.
There are existing incentive programmes available to encourage
consumers to purchase at local businesses. Supporting these are websites
listing the local businesses they apply to, and how to purchase vouchers or
receive the discount either online or in person.
Example (a-1): SOS Business
This website established early on in New Zealand’s
lockdown aims to help small businesses mitigate the financial impact of
Covid-19 by setting up a way for their regular clients and supporters to buy
vouchers for future products from those businesses.
Originally for cafes, sosbusiness.nz now lists well over 2000
businesses across the country from a range of industries although is still
predominantly food and beverages businesses. It excludes large businesses and
franchises, and if a business has their own voucher system, they can link to
that directly rather than using the sosbusiness.nz platform.
While this process is now an established system that does not
require administration by council staff, there are disadvantages:
- for the merchant it takes over a
week for businesses to receive their refund from the vouchers
- there is a cost to the merchant
fees of 2% of the transaction cost plus 30c per transaction which goes to
Shopify - a third-party online purchase platform.
- retailers do not receive the
full purchase price and payment is not as immediate as other options outlined.
- There is no connection back to
the buy local campaign Choose Manawatū and would require businesses to
list on both websites.
To use this channel as a platform for Council to offer a
voucher, they could offer a $10 discount for any business listed in Palmerston
North on sosbusiness.nz which would be redeemable using a specific code e.g.
Choose Manawatu or PalmyProud.
Example (a-2): Local Card
In Queenstown residents can purchase a ‘Local
Card’ for $49 per annum, which gives them access to 100+ businesses
across the Queenstown Lakes District offering incentives, bonuses and local
discounts ranging from 10-60%. This scheme was established in 2018 by a couple
of locals who were frustrated by the high tourist rates that locals were forced
to pay.
While this is only available to residents of Queenstown,
Council could look to implement a similar system and produce and cover the cost
of the card to residents, however the cost of the discount from the stores
would either be borne by registered businesses, or be covered by Council. The
latter would be not be practicable as the amount of discount and frequency of
purchases could not be managed within any predetermined budget.
There are several advantages of an off the shelf product like Local Card:
- Local Card is administered
independently and requires low involvement from Council, businesses and
consumers to use.
- The consumer may want to use it
more often to get the $49 cost of the card back - and this could be considered
an incentive to purchase more locally more frequently
However, countering this is the environment - where the future is not
entirely certain. Consumers are generally being more conservative and cautious
and, on this basis, the $49 price tag per card would be considered too high,
even if council subsidised Local Card $10 incl GST per card and the $39 to
purchase a Local Card might not be of value to ratepayers.
This system is also reliant on businesses joining local card
to provide the value.
Example (a-2): Prezzy Card
This is a well-known voucher system where the person you give
it to can choose from tens of millions of Visa outlets around the world,
including selected online merchants.
While it is easy to administer once purchased and distributed
(there is no administration) Prezzy cards cannot be ‘ring fenced’
for use within Palmerston North City businesses only and has a minimum per card
purchase of $25 incl. GST (21.74 excl.GST). At $21.74 per card to cover the
cost to 29,913 rateable properties would be a cost to council of $$650,308
excluding any postage required if it is to be sent to ratepayers.
Develop own card or voucher (Option B)
Council could provide its own card or voucher to residents or
ratepayers. The difference between a card and a voucher system is the card
holder can access multiple discounted transactions rather than a voucher which
is usually a ‘one use’ system at the point of sale.
Example (b-1) Council Card system
Palmerston North City Council could print and produce their
own card that is redeemable for a certain percentage discount on minimum
purchases, or to a dollar value. Council can print cards in house, and these
could be collected at council venues or distributed to ratepayers through
either Council rates correspondence, or if the distribution was to be residents
as opposed to ratepayers, this could be achieved through Palmy Proud magazine
distribution. The cost to print the cards in-house for 29,913 cards will be
$89,739. External printing sourced would reduce the printing cost to
approximately $77,774.
The next Palmy Proud magazine distribution is June 2020, and
the next rates notice is 1 August 2020.
Locals would present the card or voucher at the time of
purchase to a Choose Manawatu registered business registered within Palmerston
North. To be part of the scheme the business agrees to offer a minimum
discount to card holders on a minimum purchase e.g. 10% on a minimum purchase
of $30 or more.
Currently when businesses sign up for Choose Manawatu, they are not asked to
offer a discount.
Advantages of a card are:
- Low administration required by the
merchant, Council and purchaser on the basis that it is the card holders
responsibility if the card is lost or stolen.
- It is easy to distribute the
card through using existing council distribution channels to ratepayers or
residents
- A card is more tangible to
handle, as vouchers can get ripped and lost more easily.
- It enables multiple discounted
transactions so the user can receive multiple discounts.
Disadvantages of a card:
- Many stores already have a
discount system or in the hospitality sector (buy 10 get one free) and might
see this as conflicting with their own program.
- The merchant carries the cost of
the discount and would have to carry the risk and revenue loss of the cost of
the discounts processed this the point of sale.
Example (b-2): Council voucher system
Using a voucher system multiple vouchers are printed and
either sent to rateable properties or are available at a Council venue or site
to pick up.
Vouchers are redeemable at Choose Manawatu registered
businesses who display the Choose Manawatu member window sticker and that
business must be located within the Palmerston North City boundary.
The voucher acts as a cash equivalent of $10 incl. GST, for
any purchase $30 incl .GST or more effectively providing a discount to the
purchaser at time of purchase in store - much like the card.
The merchant collects any vouchers redeemed within the period, providing the
discount to the purchaser at point of sale and produces an invoice to the
Council with the vouchers attached at the end of the period to then be paid to
the merchant.
This would mean every business that receives a voucher would
have to be set up as a supplier to Council by finance in order to pay on
invoice. This is a normal part of the payments process set up by finance.
Advantages of a Voucher:
- there is no Council financial
administration required until the end of the eligible timeframe.
- the offer can be enacted quickly
and without delay and completed before the end of the current Financial year.
- To mitigate risk of fraud, the
voucher numbers can be recorded against the supplier invoice and cross matched
with the business receipts.
- It can be executed within a set
budget.
- Provides incentive for
ratepayers to spend locally, or encourage those that may have hesitated to
spend due to their financial situation. Therefore, assist in recovering revenue.
- Provides incentive for
ratepayers that have not purchased from these qualifying local businesses
before to try them. Therefore businesses would gain additional revenue and new
customers.
Disadvantages of Voucher:
- All businesses would have to be
set up as a supplier to Council in order to be to be paid on invoice and be
processed accordingly. However, this is already completed for any new supplier
invoices.
- The merchant does not receive
the full payment at point of purchase and there is a time delay to receiving
the money from Council. The merchant would effectively have to take the
‘risk’ initially of accepting less than the full cash payment at
the point of sale. However, it is common practice to receive payment for
invoices in the following month.
- The vouchers would have to be
pre-printed and may incur the same postage distribution costs if it is intended
for rateable properties to only receive the vouchers.
- The Voucher does not encourage
spending by visitors to the city as vouchers would have to be distributed
locally to residents.
Rebate or ‘cashback’ on qualified purchase
(Option C)
This option is to provide a cash rebate on a purchase from a
qualified business within the city boundary, which can be validated on presentation
of the original receipt of purchase.
The mechanic for a rebate redemption is outlined at high level
below:
- The consumer purchases goods and
services to a total value of $30 incl. GST (or more) from a registered business
within the Choose Manawatu buy local campaign.
- The transaction is completed in
store as normal and the merchant receives full payment at the point of sale.
- Within the set timeframe - the
purchaser furnishes the original receipt to appointed Council staff and
exchanges the receipts for a rebate of $10 cash, provided in an envelope.
- Appropriate controls would be
put in place to mitigate the risk of misappropriation of funds prior to the
release of cash rebates. This would include retaining the receipt, checking
identification, reconciliations etc.
The advantages of cashback rebate are:
- The Merchant receives full
payment at point of sale and has no administration requirements placed upon
them.
- Council staff administering the
cash back rebate could be located at the iSite in the CBD, so the purchaser
will likely not have to wait or travel significantly to receive the rebate
after purchase.
- Purchasers who visit the iSite
can receive the Choose Manawatu hard copy of the retail and service guide and
provide this to businesses at the time of redemption. This is an opportunity to
cross sell and upsell goods and services available in the city.
- iSite staff can provide real
time reporting daily on the rebate redemption uptake against the allocated
budget and there is no delay in reporting of redemptions. There is a fixed
running total of fulfilment that can be provided at any time to measure success
of the offer.
- site staff are trained in
handling cash receipts and stocktake daily currently.
- several security checks and
balances are already completed every day at the site during normal business
hours, and physical security guard checks occur daily by Allied Security.
- Enables scale into other areas
political boundaries and areas without limitation through staff being able to
extend the eligible businesses from the Choose Manawatu list.
- The Council will utilise inhouse
resources to implement appropriate controls to mitigate any risks prior to
offering cash rebates. This includes daily reconciliations, checking identification
of customers, internal audits etc.
Disadvantages of cashback rebate:
- It requires staff to manage the
cash handling. They are currently trained with receipts and will need to be
trained for cash payments.
- It may lead to consumer
disappointment if they try to redeem their receipt after any time period.
- Several controls will need to be
implemented and tested to mitigate risks such as misappropriation of funds
(fraud, theft and human error). This would in turn increase administration
costs to enable the secure release of cash rebates.
- Public organisations are
generally discouraged to deal with cash payments, therefore we would need to
provide ratepayers with assurance that we have put in place sufficient controls
to mitigate risks to an acceptable level but this is not a practice we would
encourage in normal circumstances.
- There is no mechanic to stop
people claiming multiple times, although one could be introduced.
Rates remission alternative (Option D)
As an alternative to distributing a voucher of a value to
ratepayers a voucher, council could electronically provide a rates remission of
the equivalent amount to each ratepayer. However, this would not have the
desired effect of encouraging additional spending in the CBD.
QR code or e system (Option E)
There is no appropriate QR code or similar electronic app
system that is available which acts as a voucher or discount system which is
separate from an existing program already listed.
Palmy card offering other controllable benefits (Option F)
Issued to ratepayers, the card printed in-house by Council
would provide the cardholder with a benefit that Council could offer directly.
For example three hours of free parking at all Council parking meters. The cardholder
displays the Palmy card on their dashboard to qualify for the free parking
period. This allows people access to shop for a longer period of time and
therefore, potentially spending more locally.
In addition, the card could be used as a discount card with
Council venues, facilities and services which would be negotiated separately
e.g. the Lido, Freyberg Pool, Splashhurst, Palmy merchandise at the iSITE, and
so on. This would provide a connection and recognition back to Council for the
programme.
Over time, Choose Manawatū retailers could also join the
scheme when they are better positioned to offer discounts. This could be a
campaign Council runs closer to Christmas time to remind people to shop
local.
Distribution of the card would be online thereby creating a
database of our community with the ability to opt-in to receive regular
information about Council activities. A paper-based sign up form could
also be available at Customer Services.
4. FEASIBILITY
Any costs are subject to the value of the voucher, quantities
distributed, any print and distribution costs, as well as advertising costs to
ensure the programme is widely used by locals.
There is a total of 30,693 rateable residential and rural
properties in PNCC boundary, of which approximate5ly 280 ratepayers reside
overseas, with an additional 500 properties owned by PNCC. Thus the rateable
properties suitable for a voucher or discount programme is expected to be
29,913 properties.
If the voucher is valued at $10 incl. GST per voucher, this
equates to a total cost to council of $299,130 incl. GST plus print and post
costs estimated at $14,760.85[1].
If council were to include the voucher in the next rates
notice, or in a Palmy Proud magazine it would be distributed on 1 August 2020,
or in June 2020 respectively, and incur minimal postage costs.
To produce a plastic membership card the print costs are
approximately $78,000 based on $2.60 per card.
5. ADDITIONAL
CONSIDERATIONS
Many stores offer their own discount/incentive scheme and some
consumers are not wanting to take advantage of these right now while businesses
are struggling financially.
Wide scale discounting can create new expectations of price
and value, and provides a ‘new normal’ pricing for consumers. If
there is a large uptake, consumers who do not have the card / voucher or
benefit - may refuse to pay full price and shop around on this basis forcing
business to offer the discount regardless of whether the customer holds the
card or voucher, or the business is registered as part of the program. This may
not be a concern for council as any spending may be considered good under the
circumstances.
The perception of a voucher from the Council back to ratepayers
may be perceived poorly overall in that a proportion of people will think they
are being sent $10 of their rates back in the post in the form of a voucher.
With some publicity of a council sponsored voucher in the
media, it has prompted some social media feedback from the public and the rates
remission alternative has provided in response to this public feedback.
Previous comparison has been made between the redemption rates
of vouchers under ‘normal’ circumstances and a council
‘sponsored’ voucher or discount system.
This can be misleading for the following reasons:
- Gift vouchers are usually
purchased from businesses for goods or services when the purchaser knows it
will be attractive to the recipient e.g. as a gift to a restaurant that the
purchaser knows the recipient uses already or will like.
- Gift vouchers usually hold a
higher dollar value, than that which is feasible for council to provide across
all ratepayers or residents. For example a $50 voucher to 29,913 ratepayers
equates to a $1.495m cost to council.
6. NEXT
STEPS
1. Decide which system Council wish to offer,
if any.
2. Decide the total budget, preferred method
of fulfilment, and length of term
7. Compliance
and administration
|
Does the Committee have
delegated authority to decide?
If Yes quote relevant clause(s)
from Delegations Manual
|
Yes
|
|
Are the decisions significant?
|
No
|
|
If they are significant do they
affect land or a body of water?
|
No
|
|
Can this decision only be made
through a 10 Year Plan?
|
No
|
|
Does this decision require
consultation through the Special Consultative procedure?
|
No
|
|
Is there funding in the current
Annual Plan for these actions?
|
No
|
|
Are the recommendations
inconsistent with any of Council’s policies or plans?
|
No
|
|
The recommendations contribute
to Goal 1: An Innovative and Growing City
|
|
The recommendations contribute
to the outcomes of the Economic Development Strategy
|
|
The recommendations contribute
to the achievement of action/actions in Not Applicable
|
|
Contribution to strategic
direction and to social, economic, environmental and cultural well-being
|
Enhance the economic
wellbeing of the city as a part of the Recovery Plan.
|
|
|
|
Attachments
Nil
