Do stores lose money on coupons?
I had a rough week with a Kroger's cashier, turns out she was wrong, and the manager gave me a $10 gift card. I think maybe managers should let cashiers read this!!
The Life Cycle of a coupon:
1. The manufacturer
decides to run a coupon program and sends the coupon to a design agency that
handles coupons.
2. You acquire the coupon
through the paper etc.
3. You use the coupon, the store
takes the coupon
4. The cashier adds up her
coupons and cash to make sure the drawer balance.
5. The coupons are then
bagged by the store and sent to the corporate office where all the coupons from
all the stores are put into a bigger bag and sent to a big clearing house.
Publix and Kroger use one overseas… (note some stores do this in
house)
6. The clearing house puts all
the coupons that are in good condition on a big conveyor belt and they are
scanned, then an automated process sorts them by manufacturer and prepares an
invoice for the manufacturer.
7. They are mailed from the
clearing house to the manufacturer for reimbursement.
8. The manufacturer receives the
coupons and an invoice stating how many are there (think thousands). They then
pay the bill. Some will recount to check for clearing house fraud and then pay
the bill.
**The stores have on average 6 months past the
expiration date to submit a coupon to the manufacturer – while you should not
plan to use expired coupons unless allowed do not fret, they will still get
their money**
How the stores get their money:
- They can be paid directly by the clearing house – then the clearing house
gets reimbursed from the manufacturer
- They can pay a handling fee to the clearinghouse and they get a check from
the manufacturer
Reimbursement also
includes .08¢ per coupon to cover handling fees and the manufacturer’s reimburse
postage costs!
Now
for the details we care about:
If the coupon scans
in the store odds are it will also scan in the big clearing house’s automated
machine – thus the store should get reimbursed.
If the coupon doesn’t scan, is
damaged etc. it is labeled “hard to handle” and is hand processed. If it is the
coupons fault (poor design, bad barcode etc.) the grocer can then charge the
manufacturer a higher handling fee!
The store does not have
to submit any information about what you purchased with the
coupon. Therefore if you use a Prego coupon on Pepperidge
Farm Toast (because the cashier told you too) the manufacturer will only
care/notice if Publix submitted more Prego coupons than the amount of Prego they
purchased. Since Publix purchases thousands of jars of Prego per
year the odds they would have more coupons than product are pretty slim.
When does the store “lose” money?
Some Manufacturers have poor
practices with redemption that has nothing to do with the consumer, claiming
falsely that coupons are not eligible for one reason or another.
Copies/fraudulent
coupons- After a coupon goes through the clearing house and is sent to
the manufacturer the manufacturer can still deny the coupon.
Internet printables that have unique numbers (coupons.com or smartsource)
make it easy for the manufacturer to spot fraud. If a
coupon does not have a unique number or security code then the
manufacturer will usually accept the coupon (within reason – bad copies
even a cashier should catch). Why? Because the store’s
corporate office has a chance to challenge any denial and if the manufacturer
cannot prove fraudulent use then the store will win the challenge.
Again remember you are talking
about thousands of coupons from each store. Don’t think they are sitting around
analyzing them (unless they are one of the bad companies which will falsely deny
them anyway).
Store coupons:
These are processed in house. First, most people
assume these coupons are the store being nice and just giving you money off an
item… let’s think about that. This is a
business guys, it’s not about being nice.
Stores are reimbursed for “store coupons” through various
options:
- The manufacturer can pay an advertising fee to place their product or coupon
in the store flyer
- The manufacturer can work out a discounted deal for X product, the store
then decides instead of making the product the discounted price for everyone, to
require customers to submit a coupon to get that price. This is the
best plan overall, most shoppers would not care or know about the coupon so they
only have to sell the product at the discounted price to a small percentage of
shoppers. Therefore they make money on the other shoppers.
Fake Example (profit
widely inflated): Fresh Express Bagged Salad gives Publix
a discounted rate of $1 per bag for 500 bags. Publix decides to
sell the bag for $3 and to put a coupon in the flyer for $2 off.
100 customers buy the salad with a coupon
400 customers buy the
salad without a coupon ($2 profit per bag for Publix)
In the end: Publix gave
100 customers the salad without making any profit, however overall they made
$800 off the deal.
- Lastly the store can have a special reimbursement policy with the
manufacturer for the store coupons. So they are handled like actual
manufacturer coupons above.
The only time they are not getting reimbursed for these coupons in some way
is if it is for a house brand item. Keep in mind those are the items they make
the most money on so they still aren’t out anything.
In closing: I hope that gives you some idea
of how coupons are handled. The intention of this post is not to encourage
improper use of coupons only to make some realize that the use of coupons puts
money back in the pockets of grocery store. We are not taking these
stores to the cleaners. They are doing just fine. About
10% of American’s shop with coupons (effectively), they
get their money back from us through reimbursement programs. 90% of
Americans pay through the nose for groceries and they keep the profit always
growing for these stores. While profit numbers for 2008 are not out
yet, for 2007 Kroger had net profit of $1.18 billion up 15% from 2006,
and Publix had a net profit of $1.2 billion for 2007 up 7.9% from
2006.
