Supermarkets deal loyalty cards, but are they benefit or bane?
When Albertsons introduced its Preferred Savings Card at local stores last week, it became the last of Puget Sound's three dominant grocery chains to roll out customer-loyalty cards. The cards, a controversial marketing tool, offer customers lower prices and allow the companies to keep track of shoppers' buying habits.
With loyalty-card programs in place at Safeway and Kroger-owned QFC, most Seattle-area supermarkets now require cards for the best deals, presenting a dilemma for holdout customers and competing grocers.
Customers who had bypassed loyalty cards by shopping at Albertsons now must decide whether to sign up for the cards or go farther out of their way to avoid them. Grocers who don't have cards are grappling with whether they, too, will have to follow suit.
"It's a discussion here as well as anywhere else," said Becky Skaggs, spokeswoman for Top Food & Drug, which has 16 stores in Washington state. "The real question is, is it the future of going to market?"
By offering discounts and promotions in connection with the cards, grocery chains are hoping to build customer loyalty in a cutthroat industry with slim profit margins of 1 to 2 percent. The cards give grocers access to a treasure trove of data that show which shoppers are buying what.
Mike Clawson, president of Albertsons' Northwest division, said that by adding the cards, the company "can focus on our customers and spend our money more carefully to offer the products and services our customers want."
Safeway's and QFC's card programs spurred a passionate backlash from customers who raised concerns about privacy and two-tiered pricing. Albertsons is hearing similar complaints. But Clawson said focus groups with Seattle-area shoppers left little doubt that most customers will sign up for the cards if they include perks.
"What we found out is, they like them if there's some substance to them," Clawson said. "What we heard was, 'You've got to give us some benefits. We will be loyal shoppers if there's enough benefits tied to these cards.' "
Albertsons' cards offer automatic sweepstakes entries, modest savings on future purchases, and the option of applying a percentage of purchases to college savings accounts. In a nod to the privacy-conscious customer, you can check a box saying you don't want to fill out the form but still want a card.
Because loyalty cards have become so common in the grocery industry, national grocery chains feel behind the curve if they don't have a card program, industry experts say.
"Once one starts doing it, the others have to follow suit," said Christopher Boone, senior analyst for IDC, a technology marketing and research firm in Framingham, Mass. "You've got merchandisers and planners all over the country in different regions trying to make different decisions.
"They're getting inundated with data, and any tool that's going to help them wade through that data is going to be attractive to them. Their margins are so tight, if they can get one more penny on some of these products, it can mean big returns."
On the other hand, Boone said, independent grocery stores and smaller chains may be able to capitalize on some of the flap surrounding loyalty cards by touting the fact that they don't have them.
Paul Kapioski, owner of the West Seattle Thriftway, said his store has gained shoppers who have shunned loyalty-card programs at competing stores.
"Once everybody has it, it's no longer a novelty or a competitive advantage," Kapioski said. "We won't be going in that direction."
Katherine Albrecht, founder of a group called Consumers Against Supermarket Privacy Invasion and Numbering, said options are shrinking for shoppers who want the best prices but don't want to sign up for cards.
"The thing I really take exception to — and I think millions of shoppers are finding this — is it's not about savings anymore, it's about avoiding a surcharge," Albrecht said.
Ronna Kowal, a retired Renton school employee who lives in Port Orchard, said she was livid when she returned from a recent vacation and discovered that Albertsons had added loyalty cards.
"I'm not a nutcase, a political activist or a privacy freak," Kowal said. "I just feel that for something as basic as buying groceries, you shouldn't have to be a card-carrying member of an organization. You have to buy into their monitoring system in order to get those prices."
Kowal said she's now shopping for groceries at Fred Meyer, which doesn't have a card — yet. Spokesman Rob Boley said the company, also owned by Kroger, is developing a card that will be used to reward frequent customers but won't be required for the lowest prices.
Haggen, the Bellingham-based company that runs the Top Food and Haggen chains, comes from a unique perspective: Top Food doesn't have loyalty cards, but Haggen has had them since 1998. Skaggs said the cards have helped Haggen better tailor its merchandise to customer preferences, and Top is weighing whether to add them.
While some customers are adamantly against loyalty cards, others are quick to sign up. Diana Adams, a Capitol Hill gallery owner, shops with Safeway and QFC cards.
"I feel like some of the people who are so furious are assuming that the rest of us are idiots and are just sheep that follow the trends," Adams said. "It's a lot about necessity and convenience."
Adams provides a fake name and address on the sign-up sheet. She was Miss America on one card until she recently lost it.
"For the one I'm using now, it's Princess Di," Adams said. "That's closer to my name."
Jake Batsell: 206-464-2718 or jbatsell@seattletimes.com.
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