Turns out those irritating grocery cards don’t even save you money overall. They just make you feel like you’re saving money and let stores boast of savings they don’t offer to everybody.
The Poynter Institute has a good summary on the latest on the cards, which includes a WSJ story comparing savings in stores with and without cards and a Businessweek story on the privacy issues.
http://www.poynter.org/column.asp?id=2
Those Annoying Grocery Cards
It does annoy me that I now have three — count them, three — grocery cards to carry around so I can pretend I am saving money. You probably use them too, those little “discount” cards they swipe at the grocery checkout to “save” you money. But do cards save money? You might have guessed the answer is no. Stores use them to track your purchases.
The Wall Street Journal reports, “How much cash are you really saving by shopping at a supermarket that has a card, instead of a noncard store? To find out, we went shopping at both types of stores and talked to a range of card experts. We found that, most likely, you are saving no money at all. In fact, if you are shopping at a store using a card, you may be spending more money than you would down the street at a grocery store that doesn’t have a discount card.
We learned this the hard way, by going on a five-city, shop-till-you-drop grocery spree. In each city, we shopped at a store using its discount card, and afterward went to a nearby grocery store that doesn’t have a card and bought the same things. Then we rolled up our sleeves, unrolled our receipts and crunched the numbers.
In all five of our comparisons, we wound up spending less money in a supermarket that doesn’t offer a card, in one case 29 percent less.
The bottom line: Sale prices — which were once available to all shoppers — are now mostly restricted to cardholders in stores with cards and are called “card specials.” In our experience, items not covered by card discounts tended to be more expensive than at nearby noncard stores. As a result, we paid more at card stores than at noncard stores.
Supermarkets strongly defend their programs. The cards let stores “target savings” to their most loyal customers, says Ertharin Cousin of Albertsons. Still, according to industry experts, the WSJ shopping experience was typical, because cards are designed to make customers feel like they got a bargain, without actually lowering prices overall.
Less income, higher prices? BusinessWeek also explored the issue in a thoughtful article. BusinessWeek said:
Longer-term, the impact of data collection could be far more disturbing. Using cards to track purchase histories, stores are beginning to segment customers into groups based on how much and how often they purchase. Such information will help stores target desirable — read: profitable — customers and cater to their needs.
This is high priority in the grocery business. After all, the top 30 percent of customers account for 75 percent or more of sales, while the bottom 30 percent account for just 3 percent, according to independent grocer Gary Hawkins, who also serves as president of the Syracuse (N.Y.) consulting firm DataWorks Marketing. Ultimately, the information could be used to tailor prices to individual shoppers — much the way airlines charge vastly different prices for two seats on the same flight. While that makes economic sense, under a worst-case scenario, the system could discriminate against lower-income shoppers who may simply have less money to spend.
The strategy is called customer-specific marketing, and it’s the supermarket industry’s Holy Grail. The reason? In a nutshell, Wal-Mart. As grocery stores see revenues and profits flatten, Wal-Mart, with its low prices and huge selection, continues to lure shoppers.
Supermarkets need to fight back. But they don’t want to compete on price, says DataWorks’ Hawkins. “They need to extend special prices, but only to certain customer segments,” he says. “As stores begin to better understand the data they’re collecting, they’ll use it not just for marketing but to develop new metrics to manage and serve customers.”
Some stores even rate their customers. They have a system that gives more discounts to people who shop more.
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