SUTTON UNIT TO SHUFFLE CERTIFICATES INTO SMART CARDS

DENISE ZIMMERMAN

ROCKVILLE, Md. -- Sutton Place Gourmet here will convert its gift certificate program to smart cards at one store this summer, eliminating a massive paper-shuffling task while gaining experience in a technology that might later be applied to electronic marketing.

Smart cards containing computer chips will be issued in denominations of $25, $50 and $100 at the Woodbury, N.Y., store currently under construction, said Ray Hamilton, vice president of management information systems and technology.

The chain anticipates the cards will speed certificate redemption in the checklane, ease clerical tasks in the back room and increase sales because smart cards will ensure the full face value of a gift certificate is spent in the store.

"The value stays on the card," and is kept current as shoppers redeem their certificates, often over the course of several store visits, he said. The current balance is displayed on card readers and updated instantly through an off-line system; accounting and reconciliation are conducted by a third-party provider that polls store processors nightly.

Under its paper-based gift certificate program, shoppers who don't spend the full amount may request the difference in cash -- "which doesn't benefit us in terms of additional shopping visits" -- or they must wait while a new certificate is issued with the new balance -- "which is time-consuming and tedious," Hamilton said.

"In a nutshell, the two primary reasons for doing this are to improve customer service in the lane and improve control. It's paramount that we expedite and automate the process," he said, noting that the food gift business is a primary niche for Sutton Place.

"We do a lot of gift certificates, relative to a traditional supermarket," he added.

Hamilton said the smart card-based gift certificate program, developed by National Transaction Network, Hudson, Mass., will likely be rolled out chainwide and future smart card applications could include a frequent shopper program.

Sutton Place does not have an electronic frequent shopper program today but will begin piloting a magnetic stripe card at the Woodbury, N.Y., store this summer. Hamilton said there are no plans to move the new frequent shopper program to smart cards, but should the chain decide to do so, smart card/magnetic stripe readers will already be in place. Looking ahead, Hamilton said it is difficult to predict how smart card technology might develop in the supermarket industry.

"I don't know where the industry is going to go with this because there is another competing [card payment vehicle], which is stored value," he said. Stored value cards are "loaded" with value and used for payment but processed on-line over networks.

In a recent survey by Ernst & Young, New York, retailers predicted growth in both smart cards and stored value cards.

Slightly more than 60% of respondents in six trade channels anticipate an increase in the use of smart cards while 51.1% said they expect an increase in the use of stored value cards, according to the report, "Survey of Retail Payment Systems."