TRADING STAMPS: A Hidden Charge in the Grocery Bill

IN their race for the consumer’s dollar, U.S. retailers have turned the old trading-stamp gimmick into the hottest sales idea of the postwar decade. By playing on the housewife’s weakness for giveaways, supermarkets and department stores have rung up astonishing records at the cash register. After Detroit’s Big Bear chain of 33 supermarkets introduced Gold Bell Gift Stamps last March, gross sales jumped 40%; Miller’s supermarkets in Denver increased their business about 30% by plugging trading stamps. From Los Angeles to Boston, filling-station operators, dry cleaners, used-car dealers and beauty parlors have signed up for stamp plans. Well over 100,000 U.S. retailers are using some form of stamps to boost sales, and the U.S. Department of Commerce estimates that stamp savers are redeeming their books for more than $1 billion worth of premiums yearly.

The grassfire spread of trading stamps has also touched off a hot argument among retailers. Many an independent merchant swears by stamps as the best answer to chain-store com petition. Says San Francisco Grocer Wayne Bingham: “They’re like a snowball, once you get the thing rolling. Let one customer get his first premium, and the whole community is going to hear about it. For us, that’s better than any ad over television.” But the stamp plan’s biggest foe, giant Safeway, calls it nothing but “a shell game to distract the consumer from the fact that she is paying higher prices.” Because Safeway met stamp competition by slashing prices, the U.S. Justice Department slapped an antitrust suit against the chain, charged it with selling goods below cost (TIME, July 18).

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While merchants argue among themselves, U.S. housewives seem in solid agreement that stamps are dandy. In one busy day a West Coast grocer ran a check on his 1,700 shoppers, found that only one failed to ask for stamps. Grand Union President Lansing Shield has a simple explanation for the stamps’ popularity: “Getting something for nothing and the squirrel instinct -some people even save string.” For the budget-strapped housewife who needs a new toaster or set of dishes, and can get them simply by collecting stamps for money she had to spend anyway, the plan is irresistible. One Dallas matron considers the stamp plan “a sort of painless savings account.”

By collecting stamps, she points out, “I don’t have to ask my husband for the money.”

The Stanford Research Institute conducted a study of the Denver area, found that almost two out of every three shoppers believed that the stamps meant they were getting something for nothing. Though few had any idea of the actual worth of the stamps, four out of five customers saved them, partly because of “inner satisfactions from saving the stamps,” partly because “redeeming the completed book gives a feeling of thriftiness.”

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To subscribe to a stamp plan, a retailer may sign up with one of scores of companies in the business of supplying stamps and premiums. If he buys the service of Sperry & Hutchinson, biggest U.S. trading-stamp dealer, he will pay about $3 per 1,000 stamps, one of which he will give away with each 10¢ purchase. In return, S. & H. supplies the books for pasting up stamps, helps with local advertising and promotion, opens a convenient premium store. To cover the cost of the plan (2% to 3% of the yearly gross), a retailer must boost sales an average of about 20%. For the merchant who is first in his neighborhood with stamps, this is usually easy. But as each of his competitors buys a rival stamp plan in self-defense, the advantage wears off. Then the old standards of price and quality return, and the merchants are right back where they started -except that they are stuck with paying for the stamps. When one Albuquerque, N. Mex. supermarket decided to drop its stamp plan, it lost 80% of its business in two weeks.

No matter how painless stamp plans may appear, it is still the customer who eventually pays. Though most retailers publicly deny that they raise prices to cover the extra cost, the price of the stamps ultimately finds its way into the store’s markup. In a study of western retailers, the University of New Mexico Bureau of Business Research discovered that most raised prices about 4% to make sure that all extra expenses would be taken care of. Thus, if a shopper filled four books of stamps by buying $480 worth of groceries and won a $13 chafing dish, she would get nothing free. She would pay about $20 in inflated markups. As far back as 1916, the U.S. Supreme Court saw the danger of trading stamps, called them “an appeal to stupidity,” and gave states authority to make them illegal. But so far, no states have had the temerity to interfere with a housewife in search of a bargain.