running with scissors: couponing, rewards programs and how everyone gets screwed
05/12/2012 44 Comments
For more than a few months (and years, honestly), I’ve grown increasingly distraught at the shell games business and consumers play with each other in the name of ‘savings’ and, now that ‘couponing’ has entrenched itself firmly in the mainstream of public conscience and every store in the universe has seemingly adopted a rewards program of some sort, it’s to the point where someone has got to stand up and ask why we bother at this point.
Why do we bother?
No doubt we have seen them: those dedicated folks who truck the binders of coupons around the store and hold up checkout lines to make sure every cent is accounted for. I know a few of them myself, and I mean no disrespect to anyone who carries the couponing torch. But it warrants mentioning that the marketplace is not a static environment; at some point, like the casinos, the stores will respond to the hit to the bottom line. And most of them have. The house always wins, and card-counters are, politely or otherwise, when the tactics are recognized, asked not to return. In the same way, you don’t see manufacturer’s coupons without an expiration date anymore, do you?
It didn’t take me long to discover the hollow nature of ‘savings’. Even when I was a small boy, the allure of savings never made sense: ‘savings’ mean that something has to be invested first in order for the savings to take place, and thus the stores could set any price they cared to and discount from there, competing with no one but themselves. When a store engages in this kind of economic solipsism–and ultimately, they all do, collusion is how every store from groceries to gas operate these days; to wit, when was the last time you saw a full-on, community-wide gas war?–it can claim a sale price based off whatever mark-up they’ve pinned on an item.
Everyone these days is looking for a way to save a buck; I get this, and try to be as fiscally-responsible as possible. Indeed, couponing was a way to keep merchants honest and social discounting sites like Groupon were great ways to try to get a business’ name out into the public, while rewards programs encouraged customers to keep shopping to see greater rewards. Now, all of them are counter-productive exercises in screwing us all over.
When there are enough cutthroat couponers out there to dent the gross revenues of a business, that business has no choice but to control costs to support themselves, either by cutting hours of the workforce or raising prices. When the binder-brandishing set descends on a marketplace, they may be leaving with a cart full for a fraction, but the rest of us are forced to pay more, while the store has to engage in more gimmicks and tactics to avoid the law of diminishing returns, figuratively and literally. Target, for a time, honored expired coupons. That didn’t last long. Eventually, the coupons are worth less, and even the frugal end up spending more. The house wins. Especially in a market that is watered down by cheap money, stealth inflation, and a flagging economy [overly] reliant on consumer spending.
Speaking of the Bullseye–and, in the interest of full disclosure, I used to work for their credit card division, first for the original parent company, Dayton-Hudson, then rebranded to, as it is now, Target Corp–as soon as their Red and Red Debit Cards became eligible for a 5% discount across the store–SAVINGS!!!!!1!1!!–I mentioned to a manager of the local Target in passing how I needed to sign up in order to avoid the 5% mark-up that was coming. She didn’t disagree, and all but said how the prices had already gone up. When Panera Bread, the usual haunt where I have written for this site in the past (lackluster coffee and all), started their MyPanera program, I asked the cashier when the prices were going up. She looked at me blankly, then, within weeks, they unrolled new magnetic menus with…you guessed it, higher prices. In fairness, the freebies that come with Panera’s program are typically pretty generous, but the fact is that though the program doesn’t cost the consumer any, the consumer pays via higher prices.
JCPenney, the fading American retail behemoth, with former Target and Apple exec Ron Johnson at the helm, tried stopping this tide of bait-and-switch sales gimmicks by promoting everyday values and minimizing said gimmickry. The public, so drunk with the thrill of couponing and anything to save a buck, didn’t bite. Steve and Barry’s, the flash-in-the-pan retailer who fell victim to their overexpansion, thrived by offering quality clothes at deep discounts, and then imploded by overextending its supply chain in time for the first economic implosion in the late 00s. With the S&B threat gone, the rest of retail America went about the business of protecting themselves against the recession.
So, what happens when this kind of downward spiral goes unchecked? After while, emboldened merchants begin to skew the promotions to their advantage: using fine print, technicalities and ambiguous phrases, what appears to be a good deal ends up being not much of a deal. Grocery stores with gas promotions where the savings on gas come at a premium throughout the store (as regional grocer Hy-Vee just launched this week, that is, both a gas rewards program and massive storewide mark-up…what happens when oil goes up again? It’s like they’re not even trying!), advertised sale prices actually not discounted from the regular price (Hy-Vee again, in their pet section), ‘selected varieties’ of products being valid for discounts, retailers working with suppliers to make sure model numbers differ to avoid price competition (Best Buy’s calling card for years now.) Target, for the longest time, even refused to compete with its own website’s prices!
The allure of the sale triumphs over any real savings actualized by customers. For each time a couponer makes out like a bandit, a hundred others now end up having to pay more, in the exact same way that shrink requires at least $500 of additional sales to recover. Couple that with loose–charitably put–fiscal policies from Washington, and we wonder why prices skyrocket and Black Friday deals haven’t actually been worth waiting up for in three years. (And the things that are the subject of BF doorbuster deals seem to be cheaper and crappier than ever before.)
Oh, and by the way, firsthand experience in monitoring hotel revenue dictates that deals on hotel rooms via third-party deep discount websites are largely savings-neutral, and end up raising rack rates for everyone else, which then results in even less savings next time you log on. Different segment of the retail industry, same principle.
Unfortunately, the answer isn’t as simple as not patronizing retailers with rewards programs and gimmick keycard programs: it’s a ubiquitous part of commercial life. Unfortunately, the Ron Johnsons of the world have the right idea: cut through the smoke and break the mirrors and provide real value directly to consumers. We don’t bite because we don’t see flashy advertisements and sales signs. We’ve allowed the free market to be controlled, and refuse to vote with our pocketbooks. Something about the eternal price for liberty being vigilance. (Meh. ZOMG!!!1!!!1!! another weekend sale!) Couponing and Grouponing fail to solve the problem, rather they contribute to it by giving businesses license to raise prices without consequence.
(The same can be said for the whole health care debate and the ACA, but that’s another discussion for another day. Suffice it to say that we can’t complain about escalating prices while expecting discounted rates without consequence. Last I checked, effects have causes, which have effects, which have causes…you get the idea.)
In short, when we clip coupons and refuse to demand wholesale changes in retail dynamics (truth in pricing, call retailers’ bluffs, etc.), we’re only bleeding ourselves dry, and hurting other people’s pocketbooks in the process. Running with scissors.
Plus, what does one do with 647 bottles of poppyseed vinaigrette salad dressing bought for 31 cents, anyway? OK, fine, that was a cheap shot.
Regardless, we can never claim it’s a corporate greed problem when we are equally complicit in allowing stores to raise prices without the restraints built into a truly free (read: truly competitive) marketplace. Freedom requires both responsibility and accountability, and the current state of affairs demonstrates that neither buyer nor seller are particularly interested in either.
Saving a buck for the sake of saving a buck, be it a store’s rewards program, or a consumer’s thirst for savings at any cost, leaves us all all the poorer.