Transactional uncertainty is a real issue for many types of businesses. These include so-called risky businesses such as online adult entertainment or CBD suppliers. It also includes legitimate nighttime businesses. If you operate a nighttime business, there are specific problems that can arise that will result in higher costs for the company. So what are these, and how will they affect the business? From reduced spending to staff problems, here are some examples.
Forgotten Customer Purchases
Nighttime businesses such as clubs, bars, and adult entertainment venues cater to a wide range of crowds. However, most also serve alcohol, and that means memory problems! A customer could potentially rack up a bill at a bar and not even remember it, or question exactly how much they spent, swearing they only purchased three drinks! However, something as simple as a billing description can be an excellent chargeback defense for strip clubs and bars/nightclubs.
Transactional Uncertainty through Reduced Spending
Businesses that operate at night, such as clubs and music venues, already operate on a tight budget margin of as low as 0.5%. However, things are even tighter these days with the cost of living, meaning night businesses could lose out because of reduced non-essential spending:
- Consumers today have much less disposable income to play around with at night.
- This can lead to sales volumes that are incredibly unpredictable during the week.
- Because of less income, customers are also spending less than they once did.
Increased Operational Costs
Most people love the nightlife, but customers don’t see how hard it is to actually run a business at night. While it might seem like a popular club or bar rakes in the money, there are specific costs of operation that can make things harder. For example, a business that runs at night will need to spend more on lighting and heating, increasing energy costs. There can also be higher labor costs placed on staff by agencies that capitalize on the shortage of skilled workers.
Changing Customer Behavior
While a lot of people have less disposable income these days, they still like to enjoy themselves. However, there has been a shift towards activities that can be enjoyed earlier in the day over the past few years. Bottomless brunch is a good example. That means there has been a decline in the number of customers willing to come out at night, especially to dangerous city centers. Many will prefer to enjoy a relaxing weekend doing something much safer in the day.
Compliance Increases Transactional Uncertainty
Compliance can be a complex thing to navigate, especially for nighttime businesses like clubs, bars, and gentlemen’s venues. In the US, the average nightclub needs between 5 and 10 different licenses at the federal, state, and local levels. This means starting up a business that will operate at night comes with much higher costs and operational complexities these days.
Unclear changing regulations
Nighttime businesses, especially, are subject to changing and unclear regulations. This adds a layer of challenge for companies that are already struggling to make it in a volatile market.
High costs and resource drain
Getting a business like a strip club or bar up to code requires a high upfront cost in most cases, including legal advice, consultation, security staff, emergency technology, and licenses.
Limits on operations
Another layer of uncertainty comes from operational limits placed on nighttime businesses. Hours of service and new forms of entertainment are heavily scrutinized during approval.
There is often a layer of ambiguity in regulatory changes that only adds to the already confusing and unclear systems that nighttime businesses have to face. These can impose a high cost of operations and financial burden and lead to uneven authority enforcement.
Chargebacks through Fraud
Chargebacks can be a nightmare for a business, and nighttime businesses can see more due to forgotten purchases that were made when a customer was drunk! However, these kinds of chargebacks are relatively innocent and often a misunderstanding. Yet a busy nightlife environment can be fast-paced and chaotic, and that leads to a higher potential for fraudulent chargebacks, which results in financial losses and payment processor relationship issues.
Unreliable Transport Services
It’s usually fun to get out and experience the nightlife now and then. However, even the largest of cities doesn’t operate in the same way at night as it does during the day. This can cause customers to think twice before heading out, as things like transport can be unreliable. A solo woman doesn’t want to be standing around dark corners waiting for a cab. And even men will be put off by poor transportation services if they have to wait around in the cold weather.
Transactional Uncertainty from Poor Staffing
They say nothing good ever happens after midnight and some nighttime staff might agree with that. In the UK, for example, 34% of nighttime hospitality staff leave their jobs within a year. Most people don’t want to work nights anyway, and certain businesses will find it hard to fill roles:
- The nighttime sector already struggles with a very high rate of staff turnover.
- This means businesses face costs when hiring, training, and replacing workers.
- As such, they might rely on agencies for staff, which further increases the costs.
Further Economic Issues
The economy of most major countries today is at an all-time low. Almost all of Europe, the US, and the UK are suffering. Although under Donald Trump, the US economy is picking up, it still has a long way to go. Economic factors such as lower employment, wage freezes, and inflation are causing chaos across most nations, and people just have less money. This has led to countless businesses shutting for good since the pandemic, which still casts a global shadow.
Forgotten purchases during a rowdy and drunken night out are one of the biggest reasons that nighttime businesses like clubs and bars face transactional uncertainty. There are also restrictive compliance reasons, such as extra licenses and uneven enforcement, that cause issues. Added to that, the entire economic situation of most major cities since the pandemic has caused many night spots to become a shadow of their former selves, as people have less cash.
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