Inflation is a complex phenomenon influenced by many factors, from global supply chain disruptions to labor shortages. However, another often overlooked contributor is subtly driving prices higher across various sectors: fees.
These fees can take many forms—service fees, convenience fees, processing fees—and while they may seem insignificant in isolation, their cumulative effect can be profound, especially when considered across an entire industry or economy.
Take the facilities management industry, for example, where I operate daily. We see how hidden fees accumulate and significantly increase operational costs. From contract management fees to technology charges, these can sneak into agreements and strain company budgets.
Such fees are often passed down the supply chain, ultimately affecting pricing strategies and inflating costs for consumers. In retail, we’ve seen similar impacts, where incremental fees are contributing to the rising cost of goods and services.
The Proliferation Of Fees In Modern Business
In recent years, fees have become ubiquitous, tacked onto everything from airline tickets to hotel stays and banking services to utility bills and healthcare services. Companies often justify these fees as necessary to cover the costs of new technology, comply with regulations or provide additional services. However, many of these fees are more about padding the bottom line than covering actual costs.
An example is the rise of swipe fees in the retail sector. When consumers use a credit or debit card to make a purchase, banks and card networks like Visa and Mastercard charge retailers a "swipe fee" to process the transaction. The implementation of these fees, which average just over 2% of the transaction, has skyrocketed over the past two decades: Total swipe fees in the U.S. have grown from about $20 billion in 2001 to $172 billion in 2023.
The Ripple Effect On Prices
When companies pass on fees to consumers, the immediate impact is an increase in the price of goods and services. But the ripple effect goes beyond retail consumers.
It also affects the B2B environment, where businesses are not immune to the growing prevalence of hidden fees. As organizations encounter higher costs due to fees in areas like payment processing, shipping and vendor contracts, these costs are often passed along to other businesses in the supply chain, eventually reaching consumers.
In retail and B2B settings, these incremental fees can create a cycle of rising costs. In B2B transactions, where pricing can be complex, fees further complicate the financial landscape, squeezing margins and straining budgets. Whether a company is a direct consumer-facing business or a B2B provider, these rising operational costs can drive inflationary pressures that affect everyone down the line. Ultimately, even cautious and well-informed companies and consumers pay more as these fees accumulate.
Facilities Management: A Case Study In Hidden Fees
In facilities management (FM), fees are a pervasive issue. For example, backend fees—such as per-work-order charges, implementation fees and support fees for data downloads and tailored reporting—often add up across multiple service agreements.
At my company, we have encountered these costs frequently, and I think it’s clear that a lack of transparency in such contracts can quickly inflate operational expenses. Many companies managing multi-location facilities have found themselves blindsided by unexpected charges that quietly accumulate into significant annual expenses.
To read this full article in it's entirety, please visit forbes.com.
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