Viewpoints

More Retailers Promote Fee-Based Shopper Services

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You've seen it in the air, as carriers increasingly ask fees for everything from checked luggage to special seating. You've seen it on websites, as some content providers, such as newspapers, start charging for access.

Well, a mini fee frenzy has hit food retailing as well. Retailers are seeking payments for everything from wellness plans to Community Supported Agriculture programs (both subscription based) and in one case even for an enhanced rewards card.

These fee-based programs have little in common except for one crucial factor that allows them to soar higher than efforts from the airlines: the benefits offered are considered value added, and for the most part were never free.

A prime example is CSA initiatives, in which retailers partner with third-parties to enable shoppers to receive produce directly from area farms. Typically consumers pay subscription fees to receive weekly boxes of fresh produce. In the case of Dorothy Lane Market, its CSA initiative was so popular that after its partner ran into financial challenges, Dorothy Lane decided to launch a membership-based local food club of its own.

Another type of fee-based program is subscription wellness plans, with retailers involved including Hy-Vee and Tops Friendly Markets. Tops, for example, works with Propel Health for a program called Savings for Health, which charges $19.95 a year to provide access to information on food and menu planning options, coupons and a weekly healthy shopping list.

Some retailers are asking upfront fees for programs that promise to save consumers money. One of the boldest examples was just launched by Big Y Foods in the form of a paid membership rewards program called “Silver Savings Club.” In a notable difference from other supermarket loyalty programs, Big Y is charging a $20 annual fee for this effort, which offers shoppers bigger savings and simplifies the rewards process. This framework evokes the paid memberships of retailers like Costco and Sam's Club, but it's extremely uncommon in the supermarket sector. And that will be a challenge for Big Y, because the retailer will need to convince shoppers it's worth spending money on.

Here's the rub on any of these fee-based programs: shoppers will pay if a service seems to provide enhanced savings or a compelling, unique proposition. Consumers are increasingly accustomed to fee-based programs in other aspects of their lives and probably more willing to pay these charges as the economy shows gradual improvement. All of which is good, because consumers should pay for things they really get benefits from.


The danger lies in seeking payment for services that aren't really worthwhile, which is bound to happen at some point. A retailer's reputation is at stake here, even if the fee goes to a third party program sponsor. If consumers cry foul, the Internet will go wild with blog posts about a retailer trying to take advantage.

All of which would help insure retailers think twice before pitching a second-rate effort in the future.

Contributors

David Orgel

David Orgel is executive director, content & user engagement, of Supermarket News (SN) and its website, SupermarketNews.com. Orgel delivers his opinions on industry trends through a bi-weekly...

Jon Springer

Jon Springer has been writing about food, food retailers and food retailing for more than 10 years, and is in his second tour of duty with Supermarket News. His prior experience includes covering the...
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