Image source: American Express

American Express in The Time Where Nobody Could Afford Its “Deluxe”

The market trend without a doubt is changing and we could tell no certainty under this pandemic. Announced the profit drop of 85%, American Express is hitting rock bottom. Over 100 years building up such empire, will it surrender?
By Ally Nguyen | 9 min read
on October 1, 2020
Image source: American Express

If any company deserves the honor for giving away a host of free offers to its customers, it’s the one that’s been doing it with credit cards for more than 60 years: American Express. As one of the biggest credit card companies in the world, American Express generates revenue from transactions occurring at partner merchants, as well as through annual member fees and interest income. Not many other corporations can offer such a wide array of cash rewards, flights, theme park admission, rental cars, hotel upgrades, and gift cards, all in exchange for you doing absolutely nothing. Nothing short of buying stuff that you presumably would have bought anyway, that is. American Express doesn't even add your personal information to an invasive and all-encompassing database, in the manner a tech giant might. With all this giving, it might be difficult to surmise how American Express remains a profitable company, yet it delivered more than $40 billion in revenue and nearly $7 billion in net income—according to its last annual report. Let’s break down a few highlights in its business recently!

How do Amex face its desperate fall off this challenging economic situation?

When Covid-19 effects were at their worst and the only thing a business- even a giant as American Express could rely on was uncertainty. At the end of the first quarter, the company announced its four priorities of this downturn: supporting its workforce, protecting its customers and brand, keeping the focus on growth, and staying financially healthy.

Will there be brutal layoffs for a better cost math?

As freezing hiring American Express has sent about 60,000 workers off to work remotely for the whole year of 2020. So far, the company announced it is avoiding layoffs this year but still looking for ways to reduce short-term costs. More than two-thirds of AmEx’s customer-service teams now work remotely, Chief Executive Steve Squeri said.

He said that "in two weeks, we have completely transformed our global servicing operations, going from a brick-and-mortar, traditional call-center environment to a totally distributed, home-based servicing one." The company seems to be looking at all expenses and ways to cut back without damaging any services and ensuring its position in the market after the crisis ends, and the only mean to do it is through its professional workforce.

Beaten Up by Covid-19, How Do They Change to Meet New Demands?

Second-quarter results continued to be significantly affected by the impacts of Covid-19. American Express’s profit dropped 85% in the three months through June as customers cut spending while holed up in their home during lockdowns. Profit from the global consumer group fell 40 percent to $527 million while global commercial services lost $60 million after turning a profit of $561 million a year ago. Meanwhile, profit at the global merchant and network services division fell to $66 million from $564 million last year. American Express almost hits rock bottom, so what is it planning to turn this table upside down?

As the pandemic hit, American Express created a CPR program- customer payment relief- as well as a deeper program for those who needed more time and help. As of the end of the second quarter, three-quarters of those in a pandemic relief program are now back to paying bills.

Besides, due to this crisis, the company is adding most value possible to its travel cards, as announced the temporary addition of several non-travel benefits to its travel cards portfolio. The additions include new credits on the issuer’s personal and business Platinum cards, the personal Green card, and improved perks and rewards on many of its Delta, Marriott and Hilton credit cards. While none of the new benefits are permanent, some of them will last until the end of 2020.

Launching Tons of Campaign and The Subtle Art of Recover

As a global giant whose services are considered luxurious and members are mainly high-rank individuals, American Express is facing a challenging event as travel and high-end shopping activities are now pleasures not everyone could afford. And to face off such difficulty, what should it do as a largest corporation in time? The targets now seem to be small businesses since those are the base of an economy, American Express is putting effort through many campaigns.

$10 Million Program to Support Black Business Owners

a small business conference from Amex
Image source: American Express

American Express in collaboration with the U.S. Chamber of Commerce Foundation, just announced the formation of the "Coalition to Back Black Businesses" with a $10 million commitment to fund a grant program and support Black-owned small business recovery from the impacts of the pandemic in the U.S. over the next four years.

"Small businesses play a crucial role in our communities, and when the pandemic hit, Black-owned small businesses were hit the hardest," said Anré Williams, Group President, Global Merchant & Network Services, American Express. "The Coalition is aimed to provide eligible Black-owned small businesses with much-needed capital to help recover from the devastating impacts of the pandemic and help them rebuild their businesses."

According to research from the U.S. Chamber of Commerce and MetLife, minority-owned small businesses are more likely to report trying and failing to secure a loan to help survive the economic turmoil (13% vs. 8% of non-minority businesses) and, most recently, 66% of minority-owned small businesses reported concerns about having to permanently close their business. Even American Express is helping, there are still requirements to meet, if you are a business owner let’s take note: Must be a Black business owner of about 3-20 people, your business must be in an economically vulnerable community, must have been negatively impacted financially by the Covid-19 pandemic. That’s the case!

Why Is Amex Backing Small Businesses and What is “Shop Small”?

A product demo from Hackathon event
Image source: American Express

Under the pandemic circumstance, American Express has pivoted to deal with current behaviors. As spending habits changed, it adjusted its rewards program to reflect new shopping trends. It has been offering promotions toward in-demand categories such as wireless, grocery, streaming, and food delivery. This has resulted in increased member engagement with these value-added categories. Especially its small business membership with a "Shop Small" campaign to which it's devoting $200 million to encourage spending at small businesses. In this new Shop Small initiative, card members can earn $5 off purchases over $10 at most small businesses near them up to 10 times this summer, for a total of $50 off. What a bargain!

As basic as second grade math, we all know supporting small business is vital- it is the foundation of a community. According to the Consumer Impact survey from American Express, 73% of people feel that empty storefronts are a national issue and 84% agree that the increase in empty storefronts and closing of small, independently owned businesses negatively affects their local community. According to Elizabeth Rutledge, Chief Marketing Officer at American Express. “Retail is changing, but local shops are the fabric of our communities, helping them to thrive in the future is part of our brand ethos and backing promise”. And to keep the cash flow flowing, support the “foundation” is now its priority move.

How do we benefit as a local business owner and customer?

young professionals at small business conference
Image credit: Press associate

An average of $0.67 of every dollar spent at a small business in the U.S. ends up staying in that local community, but the impact does not stop there.

American Express’s goal is to support small businesses impacted by COVID-19 by incentivizing card members that they could earn $50 in statement credits when they spend up to $10 at up to ten different small businesses. Trying to spark spending at local establishments remains the same as it did.

Besides, for the 10th annual Small Business Saturday, American Express has developed an interactive experience and handbook to help small businesses prepare for the future of shopping small. The company is also committing to making shopping small a year-long movement by recognizing Card Member’s spending at small merchants.

American Express has also made it easier for consumers to locate U.S. small merchants that are open for online or in-store purchases through an updated Shop Small Map with a new data driven filter that allows merchants to easily update their information, like store hours as well as contact details, and will be providing merchants with turnkey marketing tools, expert insights and advice, special savings on curated solutions to help them market their business and other resources to assist with reopening.

The Bottom Lines

As a deep-rooted and most upscale financial service company, American Express- the owner of the fancy black card now confronting a downturn where no certainty could be foreseen. The US is facing many macroeconomic issues due to the pandemic and all class of citizen suffers. There is no time for such fancy pleasure as American Express provides, therefore, a lot of efforts have been made as cost cutting, products changing, promoting campaign, etc.  American Express is doing its best to not only survive but also able to back on track smoothly after landing the current hardship.

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