SMBs And Customers Wrestle With The COVID (But Not Covert) Surcharge

To help save at least some top line, to perhaps even help margins a bit — enter the COVID-19 surcharge.

Businesses across a variety of verticals have, in isolated cases, started charging end users to help defray the costs of cleaning, disinfecting and other processes tied to battling the pandemic. In other cases, COVID-related fees have started to appear in tandem with healthcare-related services.

To be sure, this doesn’t seem to be a trend yet. But add up enough anecdotal data points, and it seems there is at least some consideration of what the “new normal” looks like for firms reopening their doors — and it’s a bit more expensive for them … and their consumers.

In one example reported by abc13.com, in Texas, Houston based Upper Hand salon owner Rachel Gower, said that the business was adding a $3 charge, tied to sanitation, to guest checks.

“The cost of reopening includes all the extra supplies that we need and all the cleaning supplies that we need,” she told the network.

And, separately, as reported by the Tampa Bay Times, for restaurants and other firms that have levied those charges, the Better Business Bureau has said COVID-19 surcharges are ethical, if disclosed.

Cinthya Lavin, a Better Business Bureau spokeswoman for Southeast Florida and the Caribbean, told the news outlet, “Although there is no specific amount as to what these charges should be, again the ethical thing is to not take advantage by charging a gross amount over the services rendered.”

As firms making the leap to pass along coronavirus-related costs to consumers, the reception has been mixed. The Wall Street Journal reported that in at least one case — where the Kiko Japanese Steakhouse & Sushi Lounge in West Plains, Mo. tacked on charges — owner Billy Yuzar said there was backlash on social media (but not from paying customers). In the wake of that backlash, according to the reports, Yuzar removed the surcharge and opted to boost menu prices.

In the meantime, companies are grappling with higher costs of basic inputs (for restaurants, that would be food, for example), and steep drops in customer traffic. Even where there are reopenings, social distancing means floor space and turnover cannot be leveraged to maximum impact.

For healthcare providers, personal protective equipment (PPE) including masks, gowns and gloves have become part of the treatment protocol as offices have started to open up for routine, in-person visits. The American Dental Association (ADA) recommended in April that third-party payers alter fees to reflect the increase in costs that dentists carry as they must buy and use PPE to protect themselves and patients.

“Third-party benefit programs should either adjust the maximum allowable fees for all procedures or allow a standard fee per date of service per patient to accommodate the rising costs of PPE,” according to an ADA statement late last month.

Larger companies have gotten into the act, too. The Journal reported that large package carriers such as United Parcel Service, FedEx and DHL have put surcharges in place for some international shipments. In one example, the “peak surcharge” from UPS, in place since April, comes in at $1.81 per pound for express shipments that come from China.

“The peak surcharges, which apply to international shipments, reflect the current dynamic market conditions and uncertainties caused by the coronavirus,” a UPS spokesman told the Journal.

There’s always the risk that the sanitation surcharges could drive away business. As reported by CreditCards.com, an American Express survey has found that, in general, if a business instituted a surcharge, 86 percent of respondents said they would take their business elsewhere. And, Amex found, seven out of 10 customers said surcharges make them feel as though the merchants do not appreciate their business.