Supermarket loyalty programs: Rewards for the wealthy
Katherine Albrecht and John Vanderlippe, CASPIAN
Guest column written for the Beacon Hill News and Capitol Hill News (Seattle, WA) For publication on June 12, 2002
First Safeway introduced the Club Card, then QFC came out with the Advantage Card. Now rumor has it that Fred Meyer and Albertsons may follow suit with card programs of their own. With so many card programs planned, South Seattle shoppers may soon have a hard time finding a grocery store that doesnt require customers to register for a card to receive advertised sale prices.
If you ask the stores, they will tell you that the card programs are designed to help them reward our valuable customers with better prices. Though this sounds nice on the surface, what the stores wont tell you is that the phrase valuable customers is an industry code word meaning shoppers who spend the most money in our stores. The truth is that cards are designed to identify and reward the wealthiest shoppers the ones who spend a lot of money on food while the rest of shoppers particularly those at the lower end of the income scale may soon find their access to affordable food dwindling.
Although expensive advertising and in-store promotion convince shoppers that the cards are there to save them large amounts of money, the stores see the cards as data collection devices designed to help them keep track of who buys what. This information is then used strategically to raise prices and increase profits. Heres how it works:
Each time you scan a card, every item you purchase is recorded into a computer file linked with data from your card application. Eventually, based on many shopping trips over time, a picture begins to emerge of your shopping habits and household characteristics. This is then linked to broader market segments based on age, race, income level, family size and neighborhood. The real goal is to determine how profitable each market segment is to the store, and to treat customers in those segments accordingly.
Though we all have to eat, supermarkets have been scrambling to cater to the wealthiest shoppers ever since researchers discovered that 75% of a stores profits come from the top 30% of its customers. Cards help the supermarket identify those big spenders and keep the stores well stocked with the products they like to buy. The result is that items preferred by top customers begin appearing in greater numbers on the store shelves, while low-cost items that are the staples of poor get squeezed off the shelf to make room for the food of the elite.
The loyalty marketing experts who sell card programs to the supermarkets encourage this phenomenon. In fact, they have even suggested that supermarkets use card data to identify and discard low income customers altogether. Michael Lowenstein, Managing Director of Customer Retention Associates, a supermarket consulting firm, recently wrote, [The] bottom tiers of customers should receive less, or no, investment [by the supermarket]. Some might even have to be discarded if the company is to concentrate its resources on retaining profitable customers. 
If the idea that grocers would want to discard customers seems shocking to you, it did to us, too. Could seemingly innocent grocery cards the ones that seem to save us so much money every week actually be used to discriminate against the poor in such an ugly way?
It turns out to be true. In just one example, a US store drastically reduced the shelf space for candy (even though it sold well) because card data showed that it was purchased primarily by low profit customers. Card information is also used to set prices, with big spenders setting the standard for what everyone else must pay. An item that once sold for .99 cents may be raised to $1.99 if card data shows that the high profit customers will still buy it at that price. As new technology allows card programs to grow more sophisticated, such customer segmentation will grow deeper.
But what about savings, dont they make it all worthwhile? Disturbingly, our research found that not only do shoppers not save money, they actually wind up paying more with card discounts than they had with regular sales before. Think about it. Is the Velveeta cheese with a manufacturers suggested retail price of $3.99 printed right on the label really a bargain when the store raises the non-card price to $5.99 and offers a card discount price of $3.99? (This actually happened last year when Albertsons introduced a card program in Texas ) Though the card stores are playing customers for fools with inflated prices and artificial savings, shoppers know when theyre being had.
The only escape from price manipulation and planned discrimination at the hands of the corporate giants is to take our shopping dollars away from these stores until they get the message. Fortunately for Southeast Seattle shoppers, you still have several locally-owned, card-free shopping alternatives right in your backyard. Such gems as independently owned Red Apple, PCC, and Thriftway stores have all taken a stand against privacy-invading gimmicks cards and promised to serve all of their customers with dignity. Lenny Rose, owner of three Red Apple Markets in Central Seattle, explains, We welcome all customers and dont want to exclude anybody. Everybody has value to us. Thanks, Lenny, that pretty much says it all.