Merchandising: New Licks in the Stamp Battle

The average supermarket stocks more than 6,000 items, but none has lately been more advertised or scrutinized than the final one tucked into many shopping bags: the trading stamp. As their contracts with stamp companies expired, several big merchants recently dropped the stamps and announced that they would lower prices. Stop & Shop Stores wiped out stamps in 73 New England markets. A & P cut them out in Michigan, and Safeway Stores eliminated them in Arizona. In New York City, two chains with 162 stores between them last month threw out all stamps, plastered newspapers with DOWN GO PRICES ads, and caused a run on stamp redemption centers. Last week the oldest and largest of the 200 U.S. trading stamp firms, the Sperry & Hutchinson Co., struck back. It took full-page ads warning, “Watch out, Mrs. Shopper,” and claiming that “food chains that dropped stamps later raised prices higher than when they gave stamps.”

Sophisticated & Mobile. Introduced in supermarkets in volume 15 years ago, stamps have been a source of controversy ever since. They proved to be remarkable promotions for the grocers who offered them first; they more than made up in increased business for the 2% of gross sales that they cost. As more stores stocked stamps, however, the competitive advantage vanished—while the fixed cost of stamps remained. Says Waldbaum’s Supermarkets President Ira Waldbaum, whose 62 New York stores, along with the 100-store Daitch-Shopwell Supermarkets, dropped stamps last month: “We found that the cost of stamps was becoming an excessive burden and they were not as competitive as a few years ago.” New York’s irrepressible Rep. Emanuel Celler has called for a Congressional investigation of the trading stamp industry.

Before it canceled, Waldbaum’s carefully surveyed customer preference; it says that only 4% definitely wanted stamps. Grocers in general have discovered that shoppers are more sophisticated and more mobile than they were a generation ago; housewives now scout all food prices, use their cars and convenient parking facilities to move from store to store for selected items. Many housewives who formerly shopped only at one supermarket now divide their weekly grocery budgets among several. Like the earlier competitive advantages of newer stores, broader product variety or better parking, trading stamps have ceased to be a decisive lure. This fact, along with the advent of discount supermarkets in many parts of the U.S., has begun to cause grocers to fight their competitive battles again on the old ground of lower prices.

Inspiring Salesmen. Supermarkets account for about 45% of the $900 million annual business done by stamp companies (among whom, ten giants led by S. & H. account for 90% of stamp distribution). The total of stamp outlets has increased, but the number of supermarkets distributing stamps has decreased. To offset supermarket losses, the stamp companies have been cultivating new clients. Sperry & Hutchinson, which reported a 5% increase in first-half sales, also had a 29% jump in sales of stamps to 4,000 corporations, including Westinghouse, RCA and Du Pont. The stamps are used as incentives for salesmen or safety awards for workers; in case U.S. women tire of trading stamps, the industry may turn to men.