MAKING THE RIGHT CONNECTION FOR CARDS

JOEL ELSON

Due to the hundreds of companies on the market, choosing a phone card supplier often can be an overwhelming task. To help make the process easier, supermarket executives say retailers should find out the supplier's track record, ability to customize a private-label logo, cost per minute and add-on options, such as whether the card can be recharged.

The vendor's card price and dependability were two of the most important issues for Grand Union Co., Wayne, N.J., said L. Andrew DePaolis, corporate vice president of advertising and sales promotion.

"We previously did business with our phone card supplier and were familiar with their top management. We had a high degree of confidence in their ability to deliver," said DePaolis.

Kash n' Karry Food Stores, Tampa, Fla., searched the market for a phone card supplier that could "do some customization with our own logo," said Gary Shell, senior vice president of marketing.

The retailer, which plans to have cards in all 99 stores by Oct. 1, plans to cross-merchandise free phone cards with other product purchases.

The two most important criteria in picking a vendor for Hughes Family Markets, Irwindale, Calif., "were the per-minute cost to the consumer and the reliability of the phone company card in terms of the provider [that marketed the card] and the carrier," said Mike Schultz, senior vice president of sales and merchandising.

"We first eliminated right off the top some [companies] that seemed to be fly-by-nights. We then whittled down to a couple of suppliers, down from the 25 to 30 we had talked to," added Schultz. With "hundreds of phone card providers you don't know who can provide what, or what sets one provider apart from the others," said Al Booth, assistant director of general merchandise and health and beauty care at Jitney Jungle Stores of America, Jackson, Miss.

Booth said the chain is waiting a while longer before it plunges into phone cards. It's heard from two or three providers, but the fact that "there are many out there is probably why we haven't made this a hot issue," Booth added.

Here's what retailers had to say about the fast-growing category:

L. Andrew DePaolis

corporate VP, advertising and sales promotion

Grand Union Co.

Wayne, N.J.

With so many phone card companies in the market, we went through a pretty exhaustive culling process. We reviewed about a dozen or so prospective suppliers who had various promotional offerings.

We wanted a card that we could customize. A lot of the people out there can't do that. They want to give you a stock card.

Price and dependability of the vendor were important considerations. We previously did business with our phone card supplier. We were familiar with their top management and had a high degree of confidence in their ability to deliver.

We introduced a phone card in August with the company logo in $10 and $20 denominations good for 30 and 60 minutes, respectively. They're sold at the checkouts and the courtesy booth.

The card is perfect for back to school and for kids going off to college. People are also talking of using them as stocking stuffers for Christmas.

The consumer seems very accepting of phone cards as a vehicle for long-distance calls at very reasonable rates.

Gary Shell

senior VP, marketing

Kash n' Karry Food Stores

Tampa, Fla.

Besides selecting a supplier based on customizing the cards, cost per minute was another factor in picking the provider.

We're paying 23 cents a minute. Some suppliers charged as high as 38 cents per minute. We considered five providers before we finalized on one. Our phone card margins are in the 35% range, which is comparable to other general merchandise.

We started putting phone cards in during August and expect them to be in all 99 stores by Oct. 1. Phone cards can do especially well in college areas.

Once we get the card in all stores, we'll have cross-promotions with product purchases. This could be offered in conjunction with a holiday or seasonal promotion, with the phone card offered at a reduced price or given away free with five minutes of calling time with a required product purchase.

Our phone cards are in $10 to $50 denominations and sold at the checkstands.

Ken Johnson

VP, general merchandise

Hannaford Bros.

Scarborough, Maine

We don't carry phone cards yet, but we've had 15 different presentations and will probably make a decision sometime in October whether to carry them.

We're very concerned about security because phone cards are very marketable on the street, if stolen from a store.

Phone cards sell very well in cities and poor neighborhoods where a lot of people don't have phones or can't get a long-distance credit card. But we don't have a lot of those areas in our markets.

Al Booth

assistant director, general merchandise and HBC

Jitney Jungle Stores of America

Jackson, Miss.

We're not actively exploring phone cards now. If we offered phone cards we'd most likely carry them in our video departments.

We've heard from two or three providers, and there are many out there. That's made it hard to focus on and probably why we haven't made this a hot issue. You don't know who can provide what, or what sets one provider apart from the others.

The provider's track record is going to be the biggest indicator as to which one to choose. We're going to look at whether they've been in the field providing phone cards to other chains.

Mario Laforte

treasurer

Minyard Food Stores

Coppell, Texas

We've had Western Union phone cards for about six months. They are slow and haven't been booming in our stores. The problem is that they are sort of high priced at $20 and $25 denominations. They also cannot be recharged with extended air time.

They're sold at the courtesy counter. People may have questions and we don't want to jam up the checkouts. It's more of a service center type of product. You wouldn't do a money order at a checkout counter.

I think Western Union stays away from smaller $3 and $5 phone cards. With 40 cents per minute air time cost, a $3 or $5 card can run out quickly on international calls.

Our phone card margins are running around 10%. I don't see any relationship to sales doing any better in affluent or nonaffluent areas. This could be due to a glut in phone cards on the market and because people have other long-distance calling cards or the provider needs better marketing.

Norm Rich

president

Weis Markets

Sunbury, Pa.

Before deciding on our supplier, we sifted through many phone card providers. There were several important factors, including the company's price and the ability to customize a card with our logo. The card is very much like selling postage stamps in the store, and we do that too.

Another important factor was quick card activation for customers. We looked for a card that was easy to use. In checking we found some suppliers didn't offer cards that were easy to start using. At this point, however, we haven't developed a private-label Weis phone card with a store logo.

We've carried phone cards for five months as part of a six-month test chainwide. At the end of that period we'll sit down and look at it again.

The cards are sold at the courtesy counter and we're still assessing their performance.

Phone cards are being used by other companies as promotional tools, and all you need is a good imagination. A phone card is a convenience item. It carries 30% to 40% margins.

VP, marketing

major Eastern supermarket chain

The only downside I can see to handling prepaid phone cards, which carry 20% to 30% margins, is not selling them and being stuck with them. But since we've started offering our private-label phone card, that hasn't been our experience.

There is also no more theft in phone cards than any other products, and you control them by selling them at the checkout.

You have to judge the provider by whether it can give the service you're selling, and be reliable. It also should provide a nice looking card that's easy to use.

When we promoted phone cards by launching a $3 card with a greeting card purchase it was successful and helped the sales of both greeting and phone cards. Our $15 to $30 phone cards carry the store name and logo and are another advertising vehicle.

Mike Schultz

senior VP, sales and merchandising

Hughes Family Markets

Irwindale, Calif.

Our two most important criteria in picking a vendor were the per-minute cost to the consumer and the reliability of the phone company card in terms of the provider and carrier.

We talked to others who looked to be fairly substantial and then made our final decision.

We identified the suppliers we wanted to eliminate due to their carrier and the lack of information they were willing to share with us.

Our phone cards are in the 25% margin range.

We started selling standard stock $10 to $50 phone cards in March or April, mostly at checkstands, which hasn't clogged lanes.

We're exploring the possibility of a private-label phone card that our supplier is capable of producing.