Card-carrying controversy

Consumer advocates say supermarkets’ ‘loyalty cards’ are a privacy-invading rip-off

CARD SHARK <br>Michael Painter of Hamilton City has resisted signing up for supermarket loyalty cards because he believes the programs end up costing shoppers more, not less.

Michael Painter of Hamilton City has resisted signing up for supermarket loyalty cards because he believes the programs end up costing shoppers more, not less.

Photo By Tom Angel

Data driven:
Here’s an example of how interested supermarkets are in your personal data: In 1994, an audit revealed that California’s Department of Motor Vehicles, for $5 a head, sold Safeway the addresses of 1,000 drivers, gleaned from the license plates of cars parked in the lots of competing stores.

The first time Michael Painter saw a big “$2” sign over a product and it rang up at nearly twice that, he figured it was some kind of mistake. It turned out he just hadn’t joined the now not-so-secret Safeway society and gotten a “Club Card.”

“I think everyone’s going to assume that you’re going to pay the lower price,” said Painter, a Hamilton City consultant whose father and uncle ran grocery stores in the “old-school” days when things were more straightforward: Put up a sale sign but charge the regular price for it.

While “loyalty” cards, as they’re called in the industry, may just seem like a way for customers to save at their favorite supermarkets, to those in the anti-card movement the little pieces of plastic with bar codes are the embodiment of George Orwell’s 1984.

Opponents argue that the cards are the next step on the way to the government tracking citizens’ every move, and—even scarier—you might not be saving as much money as you think.

The practice of harvesting customers’ purchase records is called “data mining,” and while it can be used to find out, say, which products are commonly bought together so stores can merchandise them together on the shelves, it could conceivably form the basis of a system where different shoppers end up paying different prices for the same product.

Katherine Albrecht, who in 1999 founded Consumers Against Supermarket Privacy Invasion and Numbering (C.A.S.P.I.A.N.), saw the light when she was living on two coasts, with a wallet full of cards for chains in California and New England. “I guess the epiphany was when I realized that every card in my wallet represents a database.”

Albrecht, who is working on a Harvard doctorate in consumer psychology, said loyalty cards have turned into less of a means to pass along savings and more of a way to track what you buy for marketing purposes that may not be in shoppers’ best interests. “It’s all about how they can squeeze the most money out of you,” she said.

Most of the major chains promise they will not sell customers’ data to anyone else (Albertsons adds: “except when compelled by law"), but Albrecht is skeptical.

Her research for an article slated for publication in the Denver Law Review detailed cases of grocery shopping records being used to identify buyers of Middle Eastern food, a store that planned to use a man’s history of alcohol purchases against him in a slip-and-fall case, and the potential use of purchase records in alimony cases to check spending against reported income. HMOs could even use the data to build nutritional profiles of clients to determine their insurability.

It could be a slippery slope from trading personal data for savings to, as Albrecht puts it, a “totalitarian nightmare” where children grow up conditioned to report everything they buy or do to marketers and, eventually by extension, the government.

“I think it’s not going to be long until it becomes mandatory for you to register all your food purchases with the government,” she said. It may sound far-fetched now, Albrecht said, but imagine the logic of the government’s being able to easily recall poisoned baby food because it has tracked who bought it.

There are already shopping carts with screens that track where you pause in the supermarket, and the Food 4 Less chain is experimenting with the use of a fingerprint check-cashing system.

C.A.S.P.I.A.N. estimates retailers pay about $70 million a year to offer the card programs, and many of them—like Albertsons, Safeway, Kroger, Fred Meyer and Ralph’s—contract with a Florida company called Catalina Marketing Corporation. CMC claims to reach 75 million households and boasts huge profits for stores that use its various services.

The latest to join the card game is Albertsons, the Boise-based chain that the anti-card movement had flocked to as the last refuge of card-free shopping. When Albertsons bought out Lucky in 1999, one of its leaders proclaimed that the Lucky Rewards Card would be the first thing to go, and the company even donated money to breast cancer research for each card turned in. The ad slogan for a time was “No cards, no hassle.”

Albrecht said when Albertsons did an about-face, C.A.S.P.I.A.N. members felt “horribly betrayed.” Several protested outside stores in Texas when Albertsons first unveiled its new card. The system reached Northern California just over a month ago.

Now, Albertsons says, it’s in the card business because that’s what customers want. Stacia Hill Levenfeld, public-affairs director for Albertsons in California, said the chain did a great deal of research before unveiling its Preferred Savings program here in late September.

“Traditionally, Albertsons has not had a loyalty card program,” Levenfeld said. But Northern California is what the industry calls “a mature card market,” and customers indicated they wanted a program.

Levenfeld said the chain took into account privacy concerns. “You can get a card without even giving your name,” she said. The goal, she said, is to track shopping trends in a particular geographic area so Albertsons can decide what it should carry and put on sale. “It’s not about individuals. It’s about meeting the needs of the market.”

Safeway, which has long offered cards, does so because customers desire them, said spokesman David Bowlby. “The main purpose of the club card is to provide savings.” Customers can ask to have their name and address removed from the database, and using an ATM card at the check stand doesn’t trigger knowledge of their purchases—unless the customer has signed up to link the two for convenience.

But Raley’s, which operates two stores in Chico, doesn’t have cards and doesn’t plan to.

“It just doesn’t fit our culture,” said Carolyn Konrad, corporate communications manager for the West Sacramento-based chain. “We are very customer-oriented. It just doesn’t feel right to us at Raley’s for one customer to pay one price and the person behind them in line to pay another price.” The second customer ends up subsidizing the first, she said.

Konrad said Raley’s has heard from customers who appreciate the no-card approach. “They don’t want their lives to be put on some kind of spreadsheet,” she said. Konrad also pointed out that usually products go on sale because the manufacturer or supplier has offered a price break to the seller, not because the supermarket is taking a hit in any way. “We’re really proud of the fact that no card is required in order to get the savings.”

Painter isn’t worried about privacy—he figures there’s enough information about us floating around out there already—but he doesn’t like the idea that consumers are footing the bill for the card programs. “Somebody’s got to pay for the cards and the extra labor involved in putting up two signs instead of one sign,” he said. “I just know it’s going to raise prices.”

During Albertsons’ test-marketing of the loyalty card in Texas, Albrecht noted Velveeta processed cheese being sold at a cardholder’s price of $3.99—the manufacturer’s suggested retail price. But the store marked the regular price as $5.99. “They’re paying $4 for $4 Velveeta and patting themselves on the back.

“You do beat the system if you only buy what’s on the card,” Albrecht acknowledged. But 10 percent of customers don’t bother to scan their card—or never sign up for one. Perhaps not coincidentally, those people tend to be the elderly, people with disabilities or people who don’t speak English. They’re often “the elements of society who can least afford paying these inflated prices,” Albrecht said.

Perhaps the most offensive part of the supermarkets’ suspected strategy, says Albrecht, is if, once they find out who’s buying what, they stop offering savings on frequently purchased items, since they know the customer is going to buy them anyway. And the stores could ditch products poorer shoppers buy to make room for those preferred by the high-profit, better-off shoppers.

Albrecht said that besides shopping at a no-card store, or complaining to legislators or the chains themselves, "Whatever you do, don’t shop at a card store and pay the non-card price." And if you sign up as, say, George Orwell, pay with cash, because the second you swipe your ATM card, they know who you are anyway.