The explosion of credit, debit and charge card use may be costing supermarkets unwanted transaction fees and other charges, but the cards are also spurring higher sales, in some cases to unexpectedly profitable degrees, according to retailers and wholesalers interviewed by SN.
What was considered a necessary competitive evil for doing business just a short time ago -- having to accept electronic forms of payment and their associated added charges -- is now increasingly seen as a potent lure for attracting new customers and business.
Indeed, the use of electronic payment options is still expanding rapidly as growing numbers of retailers launch their own co-branded credit cards, often featuring 2% to 3% rebate offers, and more and more supermarkets accept charge cards, such as American Express.
While the fees associated with accepting these payment vehicles may be troublesome, the rewards are plentiful, retailers said.
At Stater Bros. Markets, Colton, Calif., the average order is up 30% among customers using the cards, said Jack Brown, president.
Average orders at some of Nash Finch's corporate and affiliated stores are running 100% higher among customers using plastic, said Doug Steen, director of retail technology at the Minneapolis-based company.
Similarly, Stop & Shop Cos., Quincy, Mass., which began accepting credit and debit cards in late 1994, is continuing to rack up significant gains in terms of sales and average orders through its program, a spokeswoman told SN.
Credit card growth, which has been explosive in supermarkets during the past several years, will continue to expand even further as consumers "attempt to get every mile they can get on various card incentive programs, such as rebates and airline mileage," said Jay Nelson, manager of electronic services at Giant Food, Landover, Md.
"Just like scanners, it's one of the costs of being in business," said Paul Nicholson, vice president of management information systems and finance at Pay Less Supermarkets, Anderson, Ind.
According to many retailers, the acceptance of cards has helped attract more affluent shoppers, in some marketing areas in particular, and enhanced the viability of engaging in some higher-margin business opportunities, such as catering.
Stater's Brown said acceptance of credit and other cards has helped boost the company's carry-out deli and party tray business, "items that appeal to the more sophisticated shopper."
Credit cards also have proved exceedingly popular for paying for deli orders taken via telephone, said Sid Maurer, owner of Atlas Supermarket, a single-unit independent in Indianapolis. Atlas caters many office parties. "It's a convenience for our customers," he said.
One issue that still remains is which market areas -- and demographic populations -- represent the best target opportunities for boosting sales through use of electronic payment vehicles.
For Dierbergs Markets, Chesterfield, Mo., "there has been a big variation of usage among our stores," said Roger Dierberg, vice chairman, "but it is used in our West County stores more than anywhere else."
Dierbergs' West County stores encompass several higher income neighborhoods. "We haven't yet hit 20% of sales with the cards, but we'll get there sometime," he said.
Credit and debit card transactions account for more than 20% of sales in the stores Pay Less operates in an affluent college community, Nicholson said.
Pay Less, like many other retailers, began accepting electronic payments because of competition. It launched a credit card program in 1991 "when we began to feel competition from the Phar-Mors and conventional Wal-Marts. They were eating into us, little by little," he said.
At present, 75% of all electronic payment activity involves credit cards at Pay Less, but Nicholson said he would like to see more of that activity switch to debit cards because of lower processing costs.
Brad Riffel, information systems director at Ball's Food Stores, Kansas City, Kan., would also like to see the use of debit card increase rapidly.
Riffel said he noticed a sharp increase in the use of all forms of card activity following a consumer education program in which the transaction terminals were placed "right out in front at checkstands."
Customers can now swipe their own credit or debit cards through the terminal. "It takes 12 to 20 seconds to do a debit authorization, vs. 40 seconds a year ago when the transaction had to be handled by the cashier," Riffel said.
Ball's, which has been tracking credit card results since 1992, has found that the average order is $2 more when customers use plastic. Today, 5% of the company's sales are transacted via credit cards and 1% with debit cards.
Bill Corbean, retail technology specialist at Fleming Cos., Oklahoma City, said about 3% to 5% of sales at Fleming now involve credit and debit cards.
Customers sometimes use the cards for large purchases, such as sporting and outdoor equipment, especially in stores at resort areas, which sometimes generate 35% on sales on credit cards, he said.
Dahl's Food Markets, Des Moines, Iowa, for its part, does 17% to 20% of its business through debit cards, said Ross Nixon, vice president of merchandising. Credit cards, in contrast, make up 3% to 5% of volume.
Giant Food, meanwhile, began accepting credit and debit cards about three years ago -- to meet consumer demand and because competitors were beginning to use them, Nelson said.
Since then, Nelson said, acceptance has become widespread, and he has begun to spot another trend. "People are using them more frequently for smaller purchases in an effort to get every last rebate that is available. Cards will continue to grow as incentives grow."