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Alternatives to Loyalty Cards

Retail Chains Largely Mum About Their Policies

By Martin H. Bosworth
ConsumerAffairs.com

August 3, 2005

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As we explored in our previous article on loyalty cards, there are dangers in giving up too much information just to get a discount from your favorite supermarket or retail store. But many people don't have the option of traveling long distances or paying higher prices just to avoid the clutches of loyalty cards.

In Dawn V.'s hometown of Carbondale, Illinois, shopping choices are limited, but she still patronizes her Schnucks, a regional supermarket chain, even though she has a discount card from Kroger.

"At least on the sale items, you're gonna pay almost exactly the same at Schnucks without the card as you would at Kroger with the card," Dawn said. "I like Schnucks better, having grown up going there, so I don't bother with Kroger and their card. Some of my friends swear by it, though."

So what alternatives are there? What about stores that don't use loyalty or gift cards? How do they market offers to their customers? And how do they retain customer information?

It's hard to say, as stores are not very forthcoming with information about how they handle customer data.

One common thread linking the stores ConsumerAffairs.com investigated was that while they all have general privacy policies governing the usage or trading of customer information, they would not comment specifically on issues of information trading, didn't have a particular department or spokesperson to make statements on that issue, or were simply unavailable for comment.

Regardless, here's a roundup of some of the major supermarket and shopping outlets that don't offer loyalty cards, and what they do offer instead.

Wal-Mart and Sam's Club

The Bentonville, Arkansas, behemoth sells just about everything a supermarket or drug store shopper might want. Wal-Mart caters to higher-end shoppers and small businesses via its specialty line of "Sam's Club" stores. In order to shop at Sam's Club, you must purchase a membership, which can range from the $30 yearly "Business" membership to the $100 "Plus" membership. Sam's Club offers services ranging from health insurance plans to low-cost Web site hosting for its small business clients.

Sam's Club found itself in hot water when it partnered with data-reseller ChoicePoint to sell software packages that enabled users to sift through ChoicePoint's databases in 2003.

The packages could be used for employment reference checks, criminal background checks, and so on. The products were targeted at small business owners who wanted to build customer bases or investigate the histories of potential employees. Both ChoicePoint and Sam's Club quickly discontinued the "pilot program" after criticism that it was too easy for individuals to purchase the software packages without proving their identities or purpose for using them.

More recently, both Wal-Mart and Sam's Club have been marketing products containing radio frequency identifier (RFID) tags designed to track the product from placement to purchase. Sam's Club expected to roll out the RFID program for its stores in January 2005. This system does not gather or retain any customer data; it merely traces the movement of each item through the retail chain.

Costco

Rather than offer loyalty or gift cards to its customers, warehouse retailer Costco provides a multi-tiered "membership" plan for shoppers. Potential members can choose from the "Gold Star", "Business", or "Executive" membership levels.

The Issaqah, Washington-based retail giant has grown to become Wal-mart's chief competitor due to its emphasis on combining low prices with a customer-friendly attitude and concern for its workers.

Costco wins raves from shoppers for providing items in family-sized quantities and having selections expansive enough to carry, in one shopper's words, the "buy it now or it's gone forever" items. Trevor B., a project manager from Virginia, likes shopping at Costco for their "amazingly cheap" gas prices in his area.

In terms of privacy and information sharing, Costco's privacy policy is no more or less restrictive than the average, and openly states that applying for an American Express card through Costco will require the same information sharing as any other credit request.

Trader Joe's

A privately-owned supermarket chain headquartered in Monrovia, California, Trader Joe's has won fame for specializing in private-label brands and emphasizing discounted prices without sacrificing customer services or employee benefits.

Kim M., an administrative assistant from Herndon, Virginia likes the store for its "eclectic and unique" selection. Trader Joe's has developed an almost "cult-like" following for its shopping, as well as for employee wages and benefits well above the norm for the retail food sales market.

Although representatives of Trader Joe's did not comment for this article, the anti-loyalty card advocacy group CASPIAN (Consumers Against Supermarket Privacy Invasion and Numbering) notes that Trader Joe's management has "consciously decided" to not institute shopper registration programs for its customers.

Trader Joe's even eschews the use of data-tracking "cookies" for visitors to its Web site, as its press office claims it would rather take "bites" of cookies than "bytes."

Whole Foods

The Whole Foods supermarket chain caters to the high-end shopper who prizes organic foods and "natural" ingredients. The chain founder, John Mackey, is an aggressive proponent of what he calls the "Whole Foods, Whole Lifestyle" approach, which favors natural, additive free foods for exotic tastes—and bigger wallets.

Equally aggressive is Whole Foods' anti-union stance, which Mackey has compared to being infected with herpes on more than one occasion.

Whole Foods came under fire earlier in May 2005 for marketing Quorn, a fungus-based meat substitute that made its buyers sick. The Center for Science in the Public Interest stated Whole Foods and the Food and Drug Administration were culpable due to their not placing warning or advisory labels on the packaging.

In terms of privacy and information sharing, Whole Foods' policy is on a par with other major chains. To sign up for its customized newsletter, the user has to provide specific information about his or her shopping preferences or interests. Otherwise, the store says it can't promise that "all the recipes you receive will be meat-free."

"Living in Caves"

Most of the shoppers interviewed for this article were not terribly threatened or concerned with the possibility that their supermarkets or "club memberships" might be saving their personal information or using it for other purposes.

Kris, a service administrator from Annapolis, Maryland, sees loyalty card information as less a problem than an expected side effect of modern-day shopping.

"I honestly don't ever think about it, because while someone's hoarding info somewhere, does it really matter how many packages of paper cups and paper towels I buy for the company in a year? Why do people get so hung up about having a store card - but they give over their Social Security number and driver's license number without even blinking?"

John M., a graphic designer from Chantilly, Virginia, agreed: "As for being in someone's database, the cheaper prices are worth it. We all have more demographic labels attached to us in various databases than we'll ever know, and thinking about it would make me insane, so I just do what I can to limit my exposure to them and let the rest go. The amount of work required to be free of it all would probably result in me living in a cave as a hermit."

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