Viewpoints

Critics Shouldn’t Look a Gift Card in the Mouth

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In recent months, media stories about the economy have tracked the rising cost of food and the growing pain felt by shoppers.

Most of the articles haven’t directly criticized food retailers, until now. We’re starting to see a few reports in which consumers charge price gouging. Even more surprising is a recent news story in The New York Times that relayed a different type of complaint: It spotlighted criticism of retailer gift card programs tied to economic stimulus checks. These charges are unfair, but store executives still need to know about the report in order to be prepared with a response.

The Times story was titled: "As Stimulus Rebates Go Out, Stores Want the Whole Check." The article refers to economic stimulus checks being mailed out by the government that pay up to $600 for individuals and $1,200 for married couples, with an additional $300 per child for families with children. A number of retailers have launched promotions around these rebates that tie into gift cards. Many of these offers, such as those at Kroger and Supervalu, follow this pattern: Retailers permit consumers to exchange their stimulus check or tax refund for a gift card that adds a 10% bonus, usually available in $300 increments. So, for example, if a customer receives a $600 rebate, it could yield spending power of $660 at that particular retailer.

The article included quotes from people who take retailers to task for forcing consumers to lock up money at one store rather than being able to use part of it for paying off debts or for other purposes. The story included a quote from Wal-Mart’s chief marketing officer, Stephen Quinn, saying his company avoided such a program because "we do not want to encourage any behavior that might be considered irresponsible."

Taking a closer look, it’s important to first refute the implication that consumers are being asked to hand over their entire rebates. In fact, most of these offers only require purchases of cards in $300 increments. So, for example, if a consumer who brings a $600 check to a store operated by Kroger or Supervalu wants only one gift card, the retailer will load the card with $300 plus the $30 bonus and return the extra $300 back in cash. That means retailers are giving consumers choices.

What about the notion that forcing consumers to devote money to one store could encourage irresponsible behavior? You might have a better case of charging a jewelry store or a casino with irresponsibility. It’s harder to imagine shoppers spending with wild abandon at a grocery store, which sells products consumers need to survive. Some of the criticisms would make you think that retailers are committing sins on par with the subprime mortgage industry, which is, of course, ridiculous.

These supermarket programs are boosting the value of the tax rebates, which has to be good for consumers and the economy.

Still, retailers have to be aware of the complaints — and the best counter-arguments — because it’s important to maintain positive perceptions. That gets harder to do as prices soar, the economy tanks and people begin to look for scapegoats.

Contributors

Julie Gallagher

Julie Gallagher’s delicious foray into coverage of the food industry was purely accidental. With a background in technology, she joined Supermarket News as associate editor of its Technology...

Mark Hamstra

Mark Hamstra is the editor of the Retail/Financial section of Supermarket News covering mergers and acquisitions, quarterly earnings reports, executive changes and other significant events and trends...
What's Viewpoints?

In their Viewpoints columns, SN editors give their perspectives on current industry issues.

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