The Truth Behind Grocery Store Discount Cards
Consumer Savings or Information Collection Scheme?
The debate regarding grocery store discount cards and the real value in participating in such programs has been going on since the concept was first initiated. The big question, of course, is, does the consumer save by utilizing these programs, or are they simply trading their data for perceived deals?
Several advocacy groups that are strongly opposed to these cards will say no, but to the consumer who is shopping and compares the member price to the non-member price of items, it certainly feels as if they are saving by being in the loyalty club.
Recently, the NBC 10 Consumer Alert team conducted a study to see if being a member of a grocery store discount club was advantageous to the consumer or not.
They compared prices of six different supermarkets in Pennsylvania, Delaware and New Jersey, three of which had discount cards and three that did not. They purchased mostly brand name products from each store. After adding the plus and minus of the test, they found that they came out cheaper in the non-discount card stores by $22.14.
Where Are the Savings?
If you ask the industry leaders, they may tell you about the other benefits of being a member of the discount clubs such as member-only double coupons or rebate type credit dollars on total spending. But in an article in Smart Money Magazine, industry executive, David Diamond, then President of Emerging Business for Catalina Marketing, the St. Petersburg, Fla., company that handles many supermarket card programs, offered some clarity to how the programs work and who pays for them.
"The whole point is to give the best shoppers something special, and you have to pay for that out of something," says David Diamond. "It used to be that everybody got Rice Krispies for, say, 79 cents. Now they're available to anyone for 89 cents, but the best shoppers get them for 49 cents."
The real proof is in the store prices of a product compared to the MRSP (manufacturers' retail suggested price). Have you ever noticed the swing in price between the MRSP and the actual price you are paying? If you belong to a discount club, do not be surprised if an item's MRSP is a lot less than the actual price that the store is charging but equal to the amount that you, as a discount card holder, pays. This is what is often called "padding" by retailers. Basically, it's a practice of upping the price of an item and turning around and offering it at a discounted price, giving the appearance of it being on sale when in actuality it is not.
Why do grocery stores go to such trouble to boost the prices of products to attract consumers to participating in discount card programs?
It Comes Down to Privacy
Many advocacy groups across the country will warn you that these types of programs are an invasion of privacy because the real purpose is to track what shoppers are buying and how much they are spending. Do you want your grocery store to know what you drink or how often? What your preferred birth control method might be? What kind of over the counter medicine you use? Do you trust that this information won't be sold?
The practice of segmentation is a bit more complicated to understand, but the risk factor is high, says John Vanderlippe, in an article written for CASPIAN.com. In the article, he does an in-depth study of the practice of using grocery store discount cards and cites several examples of questionable practices by nationwide grocery store chains. He also warns consumers of the potential practice of segmentation.
"Though consumer segmentation does not specifically target people by wealth or class, the net result will be the same, says John Vanderlippe. He goes on to explain, "Much as the elderly were targeted by Wells Fargo for banking price increases, the people that can least afford increased costs will be hit the hardest."
It is important to be aware that our privacy is at risk each time that we sign up for programs that can track our spending.