'This is not business as usual': You may start seeing a COVID-19 surcharge on your receipts

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By Nicole Bogart, CTV

 

TORONTO -- As small businesses begin the arduous task of reopening amid the ongoing coronavirus pandemic, some have opted to tack on a COVID-19 surcharge to their receipts in an effort to recoup funds spent on new sanitation and physical distancing measures.

The so-called "COVID fee" is designed to help cover the cost of personal protective equipment (PPE) for employees, increased sanitation measures, or income lost from reducing the number of customers a business is allowed to serve based on physical distancing measures.

Hair salons and restaurants are among the first to embrace the surcharge in provinces where they have been allowed to reopen, such as British Columbia, but experts warn it’s a delicate balance to strike at a time when consumers are wary about spending.

“In a situation where many people are scared to go back to the hairdresser, or scared to go out to eat, charging an extra dollar or some type of surcharge just adds to that. It’s extra incentive to stay home,” Darren Dahl, professor at the University of British Columbia's Sauder School of Business, told CTVNews.ca.

“This is not a ‘business as usual’ situation for consumers either. A lot of consumers will have to be lured back to some of these services.”

Experts agree that consumers will need to see proof that there has been an added cost to a business’ operation because of the pandemic—be it Plexiglas shields, employees wearing PPE, or new operating measures.

But even with these obvious changes, news of the COVID-19 fee has consumers divided.

Photographic evidence of a restaurant charging a “COVID fee” in the U.S. ignited fury from some Twitter users who suggested ordering from local restaurants is support enough. But hundreds of others reacting to the same photo said the $2 fee was a small price to pay to support small businesses.

The decision to tack on the added surcharge has divided business owners too, as they navigate lost income and the added financial challenges of operating during a global pandemic.

“You can’t recuperate what you’ve lost,” Mandy McFadden, owner of Newmarket, Ont.-based Salon Decorum, told CTVNews.ca Thursday.

“There’s no charge you can give at this point to make up for lost time. But you can’t go back to doing business without raising prices.”

McFadden says the cost of business has increased significantly for hair salons whose supplies have skyrocketed in price. A box of gloves used for colour services used to cost the salon $8.95 plus tax per unit. McFadden’s distributors are now charging up to $20 per box.

She also expects the salon’s utilities to increase to accommodate for increased sanitation rules. Plus, in order to comply with physical distancing standards, her team will only be able to see half of the clients they normally would in a day.

“My costs have automatically gone up anywhere between $5 and $10 per client just to operate,” she explained. “But I’ll only be allowed to service 50 per cent of the people that I used to [once we open].”

McFadden said she and other salon owners she has spoken with will undoubtedly be forced to increase their prices in order to acclimatize to the new cost of business. But she is against the idea of instituting a COVID-19 surcharge, saying that the constant reminder of COVID-19 stamped on a receipt is no way to move forward.

WHY IS THERE A COVID-19 SURCHARGE ON MY RECEIPT?

Transparency and credibility will also be a big issue for businesses who choose to adopt these surcharges.

As Dahl notes, surcharges are typically a temporary measure introduced to cover a sudden rise in cost, like those implemented by the airline industry, which became notorious for adopting a fuel surcharge when oil prices skyrocketed.

“Are businesses going to remove the COVID surcharge when they have paid off the investment that they need to make, or when we move into phase three? That’s an open question,” he said, noting that surcharges are often rolled into a company’s prices when they choose to do away with them.

David Soberman, professor of marketing at the Rotman School of Management at the University of Toronto, says there is a big issue of credibility for businesses who take this approach.

Soberman says any business that tacks on a surcharge must disclose the added fees upfront and clearly communicate those changes to customers.

“Transparency is not an option for a business — it’s an obligation,” he told CTVNews.ca by phone.

“Companies need to make it clear what consumers will be expected to pay before they engage the business. And if they don’t, I would go as far as to say they have every right to refuse to pay.”​ 

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