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Caveat Lector
Online newspaper registrations can lead to more than articles

(See our note at the bottom of this article about the "bugmenot" service)

CASPIAN staffers often spend much of their online time reading through various articles throughout the world on privacy and retail matters. We are growing weary, (as I suspect are many of you), of having to go through a lengthy registration processes in order to read a single article at a publication we are unlikely to revisit for years, if at all. And while many newspapers may employ reasonable tactics in their registration process, one recent experience opened our eyes as to how far some businesses will go in order to collect your personal information and then surreptitiously use it to market to you.

The Press-Enterprise is a southern California newspaper owned by Belo Interactive. In order to access any content within the site you must register, and I've archived the top half of the registration page here with the bottom half here. The first thing I like to do before submitting my personal information to a site I know nothing about is to take a look at the Privacy Policy, however the link shown on the top of the registration page that leads to the Privacy Policy actually lead to a "page not found" error, as archived here.

Strike one.

I did some digging around, and managed to find the actual Privacy Policy located on another page. Along with the usual wording it contained this statement:

We may also use your Personal Information, such as your e-mail address or mailing address, to contact you regarding products and/or services that may be of interest to you [...]

KOMO TV in Seattle has reported that a veteran Lieutenant with the Tukwila Fire department was arrested for attempted arson after a fire at his own home. The station stated "Lyons' arrest came after detectives learned a grocery store card in his name showed he had purchased several fire starters." We have no way of knowing for certain why detectives decided to search those records but speculate that such data collection has probably become routine with at least some police departments.

We decline to speculate on the possible guilt or innocence of the suspect, focusing instead on a number of reasonable explanations for why the purchases could have shown up on his record. Fire starters are not an uncommon item, and it is quite possible the Lieutenant purchased them for camping or in his home fireplace. Even if he did purchase them with the attempt to commit arson wouldn't most people forgo the minor savings the card provides in order to avoid having the purchase tracked? And what better way to frame someone than to purchase an item identical to one you observed them buying in the past?

Retail stores attempt to portray privacy fears as being groundless but the fact remains that this data is accessible, and will continue to be so for years. And even though this data "might" help law enforcement officers, the potential is equally large to implicate people who have committed no crime.

The Surveillance-Industrial Complex
ACLU releases report on government access to consumer databases

The ACLU has released a 38 page report titled The Surveillance-Industrial Complex: How the American Government is Conscripting Businesses and Individuals in the Construction of a Surveillance Society. With the "The Privatization of Surveillance", the ACLU states:

The U.S. security establishment is rapidly increasing its ability to monitor average Americans by hiring or compelling private-sector corporations to provide billions of customer records. The explosive growth in surveillance by government and business is creating a "Surveillance Industrial Complex" that threatens all of our privacy.

On a visit to the local OSCO store recently we discovered that Albertsons' has decided to impose their dreaded "Preferred" card on OSCO shoppers. We find this to be somewhat ironic in that OSCO was one of the first stores in the U.S. to have a card program which was dropped many years ago, (to the applause of OSCO shoppers everywhere). That previous failure may well have formed part of the genesis of Albertsons' long forgotten pledge to their customers of "great prices without a card".

The customers don't forget though: while card free stores such as Publix have managed comparable store sales gains of 4.9% and 3% in the last two quarters, Albertsons' sales have climbed a pitiful .2%, and .3%, (omitting California sales figures, which, if included, dropped the comparable store sales to -1.3% and -3.7%). Throw in the negative statistics from the strike battered California stores, (where customers who returned after the strike found they needed a card to get the same sale prices they always received), and it would appear that Albertsons' shoppers are "preferring" to shop at stores that have more respect for their privacy.

How safe is your card data?
Programmer leaves secret "back door" into database

Businesses that run "loyalty" programs frequently state how important it is to protect their customers' privacy, but three recent articles show that consumers have ample reason to be concerned. In Information Week we found the following quote regarding one supermarket chain's database:

"Unisys chief security adviser Sunil Misra tells of a case where a member of the senior IT staff at a large supermarket chain created a secret backdoor so he could access and sell protected information."

While this security hole was found, (and we don't know if any information was indeed sold), there is no way of knowing if, or how many, others might exist. Even without a "back door" the data is still vulnerable, as outlined in a Bloomberg.com article concerning the recent theft of customer data at AOL. 92 million AOL screen names, along with their phone numbers and zip codes, were pilfered by an AOL employee, and then sold to spammers. Criminal intent isn't required for data release, as noted in this Register article that investigates a hard drive sold on Ebay that contained sensitive customer data.

While it is difficult, if not impossible, to reduce the chance of incidents such as the second and third happening in any company with which you do business, you can certainly limit your liability by reducing or eliminating your participation in programs where it is not mandatory for you to provide personal information. And as a reminder, even if you are using a "fake" identity with your local supermarket as soon as you write a check or use a credit card they can tie that information to your "fake" profile.

For more information on why using a fake name is not a solution, please see our page located here

How safe is your card data part II
Information sold on open market

Regular CASPIAN readers will remember that after the 9/11 tragedy a supermarket voluntarily gave their "loyalty" card data to federal authorities in the hope it might help find the perpetrators. Two recent articles caught our eye that suggest the release of this data may be more routine than the supermarkets would lead us to believe.

In the Atlanta Journal-Constitution database analyst Joe Patel is quoted as saying:

"Grocery stores routinely sell and trade customer preference databases compiled from those ever-popular discount shopping cards"

Personal Privacy a thing of the past?
A future where employers monitor your every breath

A Businessweek Online interview with futurist Faith Popcorn points to a rosy world where your employer will take care of your every need and personal privacy fails to exist.

"[...] your employer will be taking care of all your personal and physical needs to increase your productivity. Your kids, your dinner, your clothing needs, your books, your movies -- would all be provided through your company. For instance, your vital signs will be measured at work. If the measurements say you have high cholesterol and too much fat in your diet, you might get prescription menus. And the food would be delivered to your refrigerator at your home nearby. "

"Sensors will measure your stress levels, your food needs levels, your psychological levels. They'll measure if some problem with your kids or your mate is affecting your productivity. All your needs will be measured and prescribed and fulfilled. The happier the worker, the higher the productivity -- and companies are starting to realize that already."

The interactive urinal
The latest in intrusive advertising

We thought we'd seen it all, but this new device tops everything for intrusive advertising. As reported in The Washington Times, "Wizmark", is marketing a new "interactive urinal display". A 3.5" screen is activated by movement or the flow of fluids, and includes flashing lights and a message.

Unless we miss our mark, we expect similar intrusions to continue.

TIA alive and well?
If the government isn't monitoring us, where ARE they getting all this information?

Every once in a while you run across something that just makes you go hmmmmmm, and a few recent articles have had that effect on us. First up: a Sulphur Daily News report that authorities questioned a Louisiana woman about credit card purchases made at Lowes, investigating "spending habits that entailed the purchase of large quantities of material conducive to the manufacture of bombs". While possible, it would seem unlikely that a credit card company would install software to flag such purchases, and virtually impossible for it to be found in any other way. One reasonable explanation would be that a cashier flagged the purchase, but the article states the questioning arose due to credit card purchases. So how'd they get the data?

In the middle of the country, the The Riverfront Times reports that a St. Louis man was visited by the Secret Service after using the words "Bush" and "bin Laden" in the same sentence in an email to a neighbor he was feuding with. The man believes that the neighbor may have turned him in, but there has been no confirmation on where the Secret Service obtained a copy of the email.

And finally, Capitol Hill Blue is reporting that TIA is alive and well and living in Arlington, VA. Even though Congress cut off funding for the program, this report states it was just moved into the pentagon's secret "black bag" funding.

We're sure there must be some mistake, as nobody would ever lie to Congress about secretive programs. Ollie North told us so.

Albertsons rolls out California card program
When labor lockout ends, card program begins

On November 22nd, 2003, the North County Times ran this article which stated:

"Some of the goods on the shelf in Albertsons were posted with "club" prices, despite the fact that Albertson's in Southern California has no loyalty or club card program."

"When the labor strike is over, saving money will get a whole lot easier"

Card free supermarkets top survey
Publix, Supervalue obtain highest ratings in customer satisfaction

The American Customer Satisfaction Index, a joint project of the University of Michigan School of Business, the American Society for Quality and CFI group, recently released their 4th quarter satisfaction index, a copy of which can be found here. The supermarket sector was led by Publix with the outstanding score of 82, (the highest score of any brick and mortar retailer), a 1.2% increase from the previous year. Following a close second at 77 was Supervalue, with the general category of "all others" next at 75. Rounding out the bottom 4 are our not-so-favorite card stores: Albertsons (73), Winn Dixie (73), Safeway (71) and Kroger (71). Both Safeway and Kroger slipped dramatically during the past year: -6.6% and -5.3% respectively, and Kroger has dropped an alarming 9% since the baseline study in 1994.

While it is difficult to attribute the winners excellent scores entirely to their card free status, we believe it certainly has a major impact. After all, stores that respect their customers don't require them to jump through hoops to get savings, nor do they try to pull the wool over their eyes by stating savings that are inflated due to excessive prices. The only way a business will gain respect is by giving it, and our thanks go out to Publix, Supervalue, and all the other small stores who scored well by respecting, and not manipulating, their customers.

In a related development, Accenture released a new study on consumer and business attitudes towards trust, privacy, and access to personal data. While consumers were most trusting of their employers, banks and health insurers, they were least trusting of online retailers and supermarkets. This is in stark contrast to a study from two years ago which showed 69% of Americans didn't trust corporate America, yet of the businesses they did trust, supermarkets came in at number 1. As Ann Landers once said, "Wake up and smell the coffee". American consumers have, its time for supermarket executives to do so as well.

Sources:Progressive Grocer, The Wise Marketer (registration required).

"Loyalty" program data for sale
Footaction "Starclub" membership information found on list broker web site

Most companies in the United States supplement their income by selling lists of their customers, most often without their knowledge or consent. If you subscribe to a magazine or have purchased something through a catalog the odds are high that your name, and your personal information, is being sold to others. Most "loyalty" programs though are quite explicit in stating your personal information will not be sold or rented to third parties.

While looking through various list brokers we came across this listing at Walter Karl Interactive for the Footaction "loyalty" club. The membership is described as "trend-setting, highly fashion conscious consumers" who are "Extremely Direct Mail Responsive", with an average age from 14 to 26. Beside the basic listings of 1,595,645 - 12 Month Loyalty Club Members, 50,808 - Monthly New Members, 376,148 - 12 Month Active Gold Club Members and 46,122 - Monthly Gold Club Members, purchasers can also select additional items such as Phone Number, State, Zip code, Gender, Date of Birth, Internet Source, Dollar - LP (last purchase), Dollar - AP (annual purchase), and product. This is not particularly unusual in the list brokerage business, and similar lists can be found by the thousands. It only gained our attention because it is not often you see "loyalty" club data for sale.

In investigating this story we were unable to determine what, if any, privacy policy governs the data of "starclub" members, or if the sale of the information violates any stated promise to consumers. While Footaction.com does have a privacy policy online, there is no way of knowing if it governs their "starclub" members as well, and it in fact does allow for them to "share the information with their business partners or others that are prescreened by Footstar". Many people would be surprised to learn that this "sharing" happens through list brokers, and that the listing contains no mention of "pre screening" by Footstar. (Some listings DO state within them the mailing must be pre approved by the company.)

As "loyalty" programs proliferate throughout the world we expect to find similar lists for sale in the future. For anyone considering joining one of these programs you might want to read through the application form to make sure your purchases don't end up being sold to the highest bidder.

You're not paranoid: they ARE watching you
Retail surveillance surreptitiously monitors shoppers

Two recent articles highlight the depths retailers will go to in order to determine the optimal method of selling their products. Tracking Hot Spots, appearing in the Portland Maine Press Herald on January 27th, takes a look at how one local Hannaford grocery allowed an Oregon business to set up an extensive tracking system in their store. The system collected data on where the shoppers traveled, and then married their register purchase information to with the route taken. While the store stated the information was not tied to individual users, that is small comfort for the people who were used as lab rats.

In Soon, marketing will follow you, Wired magazine investigates if the futuristic scenario from the movie "Minority Report" is actually in the future, or if it exists today. While widespread implementation has yet to see the light of day, primarily due to cost, devices that can determine your profile and then produce marketing that is directed to you are already in the testing phase. Using facial recognition technology that can determine race, age and sex, these devices then produce a marketing message geared towards your demographics. It isn't hard to imagine in the near future these devices being coupled to the extensive data being compiled on the general population, especially the information gleaned through "loyalty" programs, and the messages truly become targeted to one individual. But in one telling comment retail consultant Paco Underhill, the founder of Envirosell,stated:

"One of the realities of our lives is that we have a consumer base out there that is reacting very badly to some of the ways technology and marketing have met," he says.

Anti-card legislation proposed in Colorado
Senate bill would prohibit card programs in supermarkets

Colorado State Senator Ken Chlouber recently introduced Senate Bill 04-081 which would prohibit supermarkets from offering discounts tied to a card. Senator Chlouber stated in a Durango Herald article "I think it's an incredible violation of privacy, and I don't like them keeping records on what I buy". Senator Chlouber indicated the bill would likely face a fight and even if the bill should fail the public will have gained knowledge about how these programs operate.

CASPIAN has always advocated a free market approach to this issue and has not taken a stance on this legislation. however we have offered our assistance to the Colorado legislature to provide pertinent information on the issue as needed. The bill is currently in committee.

Sources: The Durango Herald, Rocky Mountain News.

QFC struggles to regain lost customers
Chain relaxes card usage requirements

When Kroger owned QFC started their card program CASPIAN was inundated with letters from upset and concerned QFC shoppers. The opposition was strong with extensive media coverage, much of which is detailed on our QFC page. QFC initially responded by telling people to use a fake name to apply, a move that surprised even us, and one that has now been repeated by Albertsons.

Almost two years have passed since the debut of the card, but according to this King County Journal article things are still not going well for QFC. Seattle grocery analyst Jeff Tryka stated "The quality's declined, but the prices haven't". In an attempt to woo back lost customers QFC has now gone one step further; eliminating the need to identify each card with an individual. All customers now need to do is flash their card at the cashier, and then punch in any ten digit number.

While this certainly makes card programs somewhat more palatable for those in Seattle, it still doesn't change the fact that our research shows stores with card programs have the highest of prices, and Seattle consumers would probably be better off taking their business elsewhere.

Card focus shifting
Future discounts to be based on purchase history

One of the great laments about card programs within the industry has been the inability to capitalize on all the data that has been collected. That is all starting to change with new programs that allow retail establishments to base their offers on past shopping history. For the average consumer, (and statistically that includes 70% of us), the likely outcome will be less offers and higher prices, as discounts are geared only towards the most profitable customers.

Super Fresh, an A&P owned chain, recently modified their "loyalty" program to one with three different levels of benefits, with membership in each level based on the customers past purchase history. Super Fresh is working with Denver based Customer Communications Group to develop the program, and Sallie Burnett, CCG's vice president of national sales, had these interesting comments about the program:

"Our role was to take this data and make it actionable and relevant to the customer, and to develop programs to communicate to that customer based on the customer value to the organization."
"The loyalty program itself becomes an infrastructure to deliver targeted offers for the course of the year and to respond to customer behavior accordingly"

[...]gives Giant Eagle the opportunity to strengthen one-to-one relationships with valued customers by presenting personalized offers based on purchase history from the Giant Eagle Advantage Card(R) loyalty program

Government officials seek card data
Information to be used to fight obesity

In a recent parliamentary hearing in the United Kingdom addressing obesity MPs suggested that data gained from "loyalty" cards could be used to monitor customers eating habits. David Hinchcliffe, the committee chairman, stated to the Tesco representative:

"You have enormous power with these," he said, holding up a Sainsbury's Nectar card. "Perhaps there is a use for these to steer people, in some respects, towards more healthy products."

"Do farmers and growers benefit from this information? Yes they do, because when they know about this they can aim for a premium for their basic products."

Publix chooses privacy over "loyalty"
Supermarket chain confirms commitment to customers

Florida based Publix supermarkets recently confirmed their commitment to privacy by declining to start a two-tiered pricing card program when they joined the "UPromise" college savings plan. A store spokesperson stated:

"We don't have a loyalty programme because we think it's unfair to treat customers differently. We appreciate all our customers' business and offer the same price to everyone in the store,"

As you sit down to this years Thanksgiving or Christmas dinner, there is a good chance your main course cost more than it has in previous years. While holiday turkey offers are still a staple of the supermarket industry, the amount of the discount appears to be declining, at least in stores with card programs.

Ukrop's, a Richmond Virginia based grocer, formerly gave free turkeys to each consumer who met any of the three qualifying spending levels, which started at $500. This year the program has been scaled down so that only the top tier, those that spend at least $1,250 between September 15th and November 8th, qualify. A check of their web site shows Ukrop's currently has frozen premium turkeys on sale for 37 cents per Lb which results in a cost of $7.40 for a 20 Lb turkey. Is it really worth spending $1,250 to receive something worth $7.40?

Kroger is offering $5 off any turkey up to 18 lbs., and $10 off turkey's 18 lbs. and over. FoodLion customers can get a $20 gift certificate if they spend $35 for 6 out of 8 weeks leading up to the holidays, but not only do they have to use their "MVP" card, they also have to turn in their receipts! (So much for the argument that card programs save consumers hassle)

Meanwhile, a quick look at our local non-card store Meijer shows consumers can receive $13 off any turkey 16.1 lbs. or more. Our suggestion: forget the gimmicks and "free" turkey; shop at stores that both respect your privacy and give you everyday low prices.

Source: Richmond VA Times Dispatch

Off-shoring of jobs raises privacy concerns
Medical, tax and credit data heading overseas
A recent series of articles by David Lazarus in the San Francisco Chronicle detailed a number of different situations where privately held data was finding its way overseas. The first article looks at a Pakistani medical transcriptionist who threatened UCSF medical center with exposing patient records online unless she received back pay. The second investigates how some accountants are sending sensitive tax information offshore, while the third examines the how credit reporting agencies are either using foreign sub-contractors or are planning on doing so in the near future.

We do not know if any supermarket data is currently being processed outside the United States or if there are any plans to do so in the future, but with the financial incentives involved, (read: REAL cheap labor), we expect it is only a matter of time before this begins to happen. At that point your shopping history will be in the hands of people that are not subject to U.S. laws and who may be compelled by their financial circumstances to accept offers from third parties that wish to acquire the data.

Point of Sale data being collected and sold
Credit and debit card information collected at retail stores

Hooked on Phonics and GNC Nutrition data compromised
Data sold despite assurances of privacy policy

Two recent events demonstrate why consumers should be leery of trusting the "privacy policy" of any business collecting large amounts of data about them.

In the first, 5 million General Nutrition Center "loyalty" customers may soon be in for a surprise: more junk mail. Two former company executives obtained the GNC list "through a legal loophole" and were offering it for sale. General Nutrition has said it has since taken steps to protect its member lists.
WPXI
The Pittsburgh Channel

Hooked On Phonics also found themselves on the hot seat after the Washington Post revealed they were selling customer lists, despite a privacy policy stating they would never do so. The solution for Hooked On Phonics? Change the privacy policy to allow for these sales.
The Washington Post

Big business = Big prices
Detroit study shows highest markups by national drug stores

Ohio grocer "segments" shoppers with personalized prices
Shopper card data being put to discriminatory uses

Dorothy Lane Market, an upscale grocery chain in Ohio, has implemented Customer Specific Pricing (CSP), a practice where different prices are charged to each group of customers. Now the majority of all discounts available in the store only go to the identified top 30% of Dorothy Lane shoppers. 

After starting  their card program, Dorothy Lane eliminated newspaper advertising and switched to an "in-store ad-sheet".  Once they were able to  analyze their program data to determine who their most profitable customers were they started mailing them exclusive offers while at the same time reducing the size of the discounts on their ad-sheet making them only marginally better than the regular prices.

The store even segments the top 30% into three groups, with discounts given according the customers' stature within that elite grouping.

Of course none of this would be possible without the rich databases stores are compiling with their "loyalty" programs.  While this is the most complete example of CSP we have found to date, there is evidence that the practice will soon be widespread.  For example, this quote from an NCR division president explains how wireless shelf tags will soon work:

"A customer would be able to point a key fob at an electronic label and it would flash back a specific price based on that customer's value to the store."

It's important to keep in mind that most supermarket discounts are not given by the store; they are given by the manufacturer.  Not only do the stores profit by denying sale prices to the "bottom tier" of customers, they are profiting off the manufacturers as well by keeping the difference.

For more information on pricing issues see our pricing overview page. For more information on Dorothy Lane Markets' CSP practices, see Brian Woolfs new book Loyalty Marketing: The Second Act. 

"Smart Card" News

If the news here is not scary enough for you, now you can get creeped out on a regular basis by Smart Card News. This misguidedly optimistic site will inform you of the progress of "Smart Cards," the gateway to a cashless world where chip-encoded ID numbers will be required to buy food (and everything else). It's produced by Faulkner & Gray EC Research, publishers of such gems as Card Marketing, Card Technology and the ever ominous, and now hopefully defunct ID World magazines.