RC said:
The wire services lose money, big time, on the top senders, in the millions of dollars
David L said:
David,
Let's do some simple math.
A fictitious example with rounded numbers:
A large OG sends 100,000 wire orders and earns a ten dollar rebate per order, receives $1,000,000 in rebate money.
Their membership dues are probably $0, but let's say $300 a month or $3,600 a year. If their average order is $50, the wire service makes 7% as a clearing fee or $3.50. $3.50 x 100,000 orders is $350,000.
So the wire service makes $353,600 off of this OG and pays $1,000,000 in rebates. This means the wire service lost $646,400 on that OG.
Now you ask why would the wire services be willing to lose money on their top accounts and then send them on expensive trips?
The answer is simple. The wire services want the 100,000 orders because it's volume that keeps the wire services wheels turning. The more orders going through the system, the more shops the wire service can sign up. You see, membership dues and related services are where the real money is made, the more members, the more money. The wire services know they can't keep their members happy without feeding them orders, lots of orders.