ARTICLES

Is anybody winning the trading-stamp war?

Swamped by stamps, goggle-eyed at "free gifts" ranging from mops to mink stoles, jolted by a royal commission’s sharp attack on sales gimmicks, the Canadian consumer is a baffled non-combatant in the feverish fight for the nation’s three billion food dollars a year

ALAN PHILLIPS January 2 1960
ARTICLES

Is anybody winning the trading-stamp war?

Swamped by stamps, goggle-eyed at "free gifts" ranging from mops to mink stoles, jolted by a royal commission’s sharp attack on sales gimmicks, the Canadian consumer is a baffled non-combatant in the feverish fight for the nation’s three billion food dollars a year

ALAN PHILLIPS January 2 1960

IN THE BATTLE for the three billion dollars Canadians spend yearly on food, the victors have been those best versed in psychological warfare, the multimillion-dollar chains of glittering supermarkets. And nothing in their arsenal of razzle-dazzle sales schemes has captured so many customers and caused so many protests as the lure of something-for-nothing embodied in trading stamps.

The recent appearance of trading stamps as a national phenomenon signifies that the retail war is entering a fevered new phase. Having overwhelmed the small grocer and raided the realm of the butcher, baker, druggist, florist and hardware man, the chain stores are now locked in combat with one another, digging into profits to finance their fiercest fight yet.

In this struggle the trading stamp is the "S-bomb,” a weapon with such impact that the Canadian Association of Consumers, twenty-six thousand strong and representing another half million housewives through its sixteen affiliated women's groups, is demanding that all governments ban it.

The Royal Commission on Price Spreads in Food Products, bringing in its report at the end of November, recommended that stores with stamp plans should be required to give customers a free choice between accepting stamps or taking a discount on purchases. One supermarket chain, Steinberg's Ltd., announced immediately that it would redeem filled stamp books with vouchers that could be used to buy food, although it would still offer stamp premiums for those who preferred them. On the heels of this, the Young Progressive Conservatives, at their national annual meeting, passed a resolution that trading stamps should be outlawed.

No other consumer issue touches so many families as these insignificant tiny squares of gummed paper, worth a fifth of a cent each, which, as every housewife knows, are given out by stores, one for every ten cents' worth of goods bought. They hold a firm place in the shopping habits of more than a million Quebecers. They have beachheads in Newfoundland and New’Brunswick. Last October (through fifty-one IGA stores) they invaded Nova Scotia. Since August they’ve swarmed through Ontario and westward to Alberta, where the government, in November, by order-in-council, forbade their use.

Across the country in daily papers huge ads hard-sell the stamps. “FREE!” screams the bold black type, ”100 LUCKY GREEN STAMPS” (with the purchase of this or that product). Full page spreads show the housewife the “wonderful, wonderful gifts . . . absolutely free" which she can get by presenting the stamps she saves—electric mixers, aluminum ware, movie cameras. “They tell you the bargains available in stamps,” exclaims David Gilbert, managing director of the Retail Merchants Association of Canada, voice of forty thousand independents, “not the bargains available in food!”

Women have used stamps to outfit clubrooms and church kitchens. Some play for stamps in afternoon bridge games. And in the stores they've been known to count their stamps and leave their change on the counter.

The stamp companies who sell stores the stamps, the stamp books to stick them in, the gaily colored catalogues and the premiums they portray, feel it's only a matter of time till stamps spread, as they have in Quebec, to gas stations, bake shops, drug stores, pet shops, shoe stores, florists and theatres. In the U. S., according to stamp companies, two out of three housewives are licking and sticking stamps, and in Greensboro. N.C., a funeral home offers stamps with its caskets.

But in Montreal, an A & P spokesman claims, “They're already flattening out." And Thomas McCormack, president of Dominion Stores, which uses stamps in Quebec but nowhere else, contends they are nothing more than “a fad.”

The biggest barrier to their spread in Canada is the law. Under Section 369 of the Criminal Code "trading stamps’’ are illegal. But another section, 322, defines a stamp as legal if on it is printed its value and place of issue, and if the store will redeem it at any time with goods the store owns, in the place where the stamp was given out. In most cases tried so far these conditions were violated. But as the big chains use stamps now they appear to comply with the code.

This means that stamps in Canada aren't interchangeable. A U. S. housewife can fill her gas tank, get stamps, buy shoes, get more stamps, have her hair done, more stamps, lug home her week's groceries—and perhaps fill up a third of a book. (A book holds fifteen hundred stamps representing one hundred and fifty dollars in purchases.) But in Canada, because all the stamps that go into one book must be from the same store, a housewife must wait much longer to collect any premiums. Spending twenty-five dollars a week for food, she'd take a year to get a pop-up toaster, two years for a floor polisher and ten years for a TV set.

Loblaw’s thinks it "inevitable" that the law will be "simplified," and trading-stamp salesmen are telling small merchants of every type that soon everyone will be giving stamps and they'd better sign up first. "Nothing can stop them," proclaims C. R. McFadden of the Blue Chip Premium Company, which supplies Loblaw’s Lucky Green stamps. "Women love them and they've shown they're going to have them."

Not so, asserts Mrs. E. H. S. Piper, Quebec president of the Canadian Association of Consumers. “Consumer demand is really consumer tolerance. Women realize that if they don t take the stamps they're paying for someone else's gift or paying an outright gift to the stamp manufacturer.”

The CAC feels that stamps are "a bribe to buy" and a moral threat. The Retail Merchants Association labels their lure to that of a lottery and calls them “a parasitic infection in the mercantile bloodstream." The Canadian Congress of Labor sees them as “an attempt to levy tribute on the retail trade. The CCF opposes them. Alberta has banned them arbitrarily, by amending the Licensing of Trades and Business Act. And in B. C., the Vancouver City Council holds them at bay by threatening to use its power (by unanimous vote) to refuse a business license to any stamp-using firm.

The CAC is opposed, ironically, by Byrne Hope Sanders, who once helped set up (for the Wartime Prices and Trade Board) a now-defunct network of women that was similar in purpose to the CAC. Now a Toronto research and marketing executive, she has launched a pro-stamp campaign on behalf of Sperry and Hutchinson, oldest (since 1896) and largest stamp company of them all, grossing an estimated one hundred million dollars a year from sixty thousand stores. The firm has no stake in the battle here, but the anti-stamp war cries are so loud they might hearten defeated anti-stamp forces in the U. S.

The main issue is whether or not stamps raise the cost of living. An executive of Canada Safeway, biggest food chain in the west, says, "It's a shell game, to distract customers from the fact that they're paying higher prices.” George Metcalf, president of Loblaw's flatly states that "stamps have lowered prices." The royal commission's report stated that while grocery prices had risen by two percent a year, farmers were getting about the same prices in 1958 as they got in 1949. One reason for advancing food costs was "the tendency for firms to compete in offering services, the costs of which are passed on to the consumer."

While worth only one fifth of a cent each, stamps affect the fortunes of firms worth millions. They are agitating the whole vast network of merchandising. They force frequent meetings of top brass in manufacturing, food processing, wholesaling, advertising and retailing. Asked for his opinion on them, the advertising manager of a national food firm snapped, "I have only one thing to say. Stamps are a pain in the —!”

Though new as a national phenomenon, stamps were dreamed up in 1890 by an ad man in Schuster’s department store in Milwaukee. They slowly gathered momentum and crossed the border in 1903. Most "stamp companies” then were con men who worked town after town, putting a few premiums on display, signing up the local merchants, then skipping out before it was time to pay off. The cries of fraud caused stamps to be outlawed in 1905 by parliament.

They reached their peak in the U. S. in 1916. Then, with war, consumers became price-conscious. Stamps withdrew to a few local bases. In Ontario cities like Kingston and Stratford, department stores have used them for twenty-five years with acceptance and no fuss.

They made their U. S. comeback in 1953. King Sooper, a Denver supermarket, launched them with top-flight promotion. The result: an instantaneous and rather frightening success. In three years six of the top ten U. S. chains were fighting each other with stamps. And instead of fading away, as opponents predicted, they’ve become almost a way of U. S. life, with two hundred stamp companies selling their plans to two hundred thousand retailers, who hand out about four hundred and fifty million dollars a year in merchandise premiums.

It was May 1956 before stamps erupted in Canada. A fast-stepping, forty-three-year-old wholesaler, Bertram Loeb, had in just five years brought ninety-five small Ottawa Valley grocers under the banner of the Independent Grocers Alliance, offering them the benefits of bulk buying and IGA know-how. Now he was seeking a gimmick to counter the chain stores’cash-prize contests. A visit to Gold Bond Stamp Company's Minneapolis headquarters sold him on stamps.

"A crazy idea,” protested William Horsey, then Dominion Store chairman.

"A racket, pure and unadulterated,” said Thomas McCormack, Dominion’s president. "We will not go into it unless we are forced to.”

Loeb’s sales rose rapidly, and, reluctantly, Dominion, Loblaw’s, Steinberg’s and Thrift Stores launched rival stamp plans in the Ottawa district.

In Montreal, the vice-president of another IGA group of one hundred and twenty-five stores, Wesley Younkie, reassured his competitors that "We don't like stamps plans. We think they’re bad for trade.” Two months later, in January, 1959, big IGA ads were plugging Gold Bond stamps in Montreal.

Like nations that fear war, the chains in Quebec had prepared for it secretly. That same afternoon Steinberg's announced a stamp plan (Pinky) for its sixty-three stores throughout the province. Two days later Dominion (thirty-four Quebec outlets) and the sixty-two store Thrift chain joined the fray with Horizon stamps. A fifth and smaller chain, Dionne, came in with United stamps. Seven weeks later, Richelieu, a chain of independents, stilled its qualms and signed with the Three Star Stamp Company.

Until then stamps, like the right to sell beer, were a weapon of the small Quebec store in its fight to survive the onslaught of the chains. Today there is scarcely a district without a stamp plan. Gold Star Stamps are said to have eight thousand small-store customers, mainly in Quebec. The provincial College of Pharmacy asked its members to stop using stamps but, as one store owner says, "It’s like riding a tiger. Once you start it’s disastrous to stop.” A sign over the cash register in a Dorval drug store reads: PINKY IS A NUISANCE BUT WE LOVE HIM.

Why did IGA open the flood gates? Younkie says it was the threat that Steinberg’s would beat them to the punch. Steinberg’s say they set up their stamp plan in fear of IGA. By the summer of 1957, while stamps were catching on in Quebec, all chains except IGA had dropped their plans in the Ottawa area.

"After all the hullabaloo,” Dominion Store president Thomas McCormack told the Association of Canadian Advertisers, "trading stamps are on the wane . . . the flush of fadism has settled down.”

It was the lull that precedes a major conflict. It prevailed until last June when Steinberg’s invaded Ontario, stronghold of its mightiest competitors, by buying thirty-eight Grand Union-Carroll’s stores. They led off by offering a free towel and a coupon worth one dollar in goods with every ten-dollar purchase. Promptly Dominion offered two towels and two dollars in goods for the coupons. Power Super Market ads called attention to the fact that Toronto’s food prices were lower than prices in Steinberg’s home town. Steinberg’s slashed prices. Its rivals followed suit. And it was inevitable that someone would unleash stamps, the “S-bomb.”

Late in August George Metcalf, president of Loblaw’s, Canada’s No. 1 food chain, called most managers of his two hundred and five Ontario stores to Toronto for a 6 a.m. breakfast. Their customers, he told them, would get Lucky Green stamps that same day. As he spoke, trucks were rolling out of warehouses carrying stamps, books and premiums, a campaign planned with such secrecy that locks, it is said, were changed on top executives’ doors to guard correspondence.

Within twenty-four hours three other chains were handing out stamps in Toronto: Steinberg’s, IGA and Power. "If Loblaw's hadn’t done it. Steinberg's would have,” says Leon Weinstein, president of Power. "We were ready but we didn't want to be the bad boys to do it first.”

On September 24 Loblaw’s took the offensive again, loosing Lucky Green against rival chains across the prairies. Advertising soared as competitors fought back. "Rockbottom prices, no gimmicks,” promised Safeway, the west's biggest chain. “Cash is still the best thing to save," proclaimed A & P. "Stamp Book or Bank Book?” cried Woodward’s in Regina.

The prairie-wide Shop-Easy chain and Jenkins Groceteria Ltd., with its forty-one stores in Alberta, counterattacked with a punch card. For every hundred dollars in goods bought they offer a chance on prizes ranging from one dollar to a thousand dollars. “The stamps had cut into our business to such an extent,” says Ronnie Jenkins, Jenkins' president, "that we found it necessary to bring out a gimmick of our own. If Loblaw’s decide to do away with their stamps we'll throw out our card game. These selling gimmicks are nothing but parasites preying on customers’ gullibility.”

"It’s like a disease,” says Wayne Smith, manager of Alberta’s Associated Grocers. "A cancer that just keeps growing.”

The war has now become national and the faster and farther it spreads the more bitter and less factual the arguments grow. Are stamps good or bad for the public? Do they raise prices? Are they immoral? Economically sound or a fraud?

“Stamps kick food prices up two percent,” says an A & P spokesman. "There’s the cost of the premiums and stamps the store buys from the stamp company," points out Mrs. Helen Morningstar of the CAC’s Ontario branch. "There's the bookkeeping cost, handling, the time stamps take at the checkout counter—it all must come out of our pockets, who else’s? We know there’s no Santa Claus and I don’t believe Loblaw’s is a philanthropic organization.”

Loblaw’s president, George Metcalf, answers that boosting sales by twelve to fifteen percent raises profits enough to pay for the stamp plan. In other words, the more customers who share the store's operating costs, the more profit the store can make on each item. “Increased turnover is a remedy for almost all ills," says Power’s Leon Weinstein.

The anti-stampers claim that the break-even point is nearer twenty-five percent. The most comprehensive survey of stamps, made by Eugene Beem for the University of California, shows that sales increases needed to pay for the average stamp plan range from seven percent for a jeweller whose goods have a high mark-up, to sixteen percent for the average supermarket. (Loblaw's, because it buys stamps and premiums in huge amounts, would be lower.)

Can stores get this increase by using stamps?

No, say A & P, Dominion and Safeway.

Yes, say Loblaw’s, Power and IGA.

"In most of our stores," says Wesley Younkie of IGA in Montreal, “the increase in sales was twice as much as we needed to break even on the stamp plan and in some stores it reached one hundred percent." "We never lost our advantage (a forty-percent rise in sales),” says Bertram Loeb, who started it all in Ottawa.

But what happens when everybody has stamps, the skeptics want to know. Everybody can't increase their sales.

The retailer then, suggests J. Scott Feggans, in charge of advertising and public relations for Dominion, "is right back where he started except that he's still paying out two percent of his sales volume," a cost "which he's got to pass along to his customers, and only the stamp promoter is left with a profit."

"Nonsense,” scoffs Bertram Loeb. “What happened when every chain began advertising? The store that does the best job of promoting the stamps gets the business. The others drop out as they did in Ottawa.”

"They're only effective for the person first in,” says Hartley Ayre, an anti-stamper, head of Ayre's Supermarkets, biggest food sellers in Newfoundland. "And only while he remains ahead of the competition.”

This has been the U. S. pattern. In Buffalo, for example, says Loblaw’s George Metcalf, “there is only one supermarket company utilizing them”—Loblaw's.

“Even the strongest stamp stores are vulnerable in their cost structures,” Beem suggests in his University of California survey. They “create not a threat but an opportunity for the alert retailer to develop non-stamp attractions which will bring more shoppers to his store.”

In Ontario, for example, Dominion Stores are meeting stamps with weekly Bonus Buys, quality items of wide appeal like blankets and dinnerware, which the customer can purchase with every seven-dollar order. "We're saying, in effect, we'll get it for you wholesale,” says president Thomas McCormack. "Why pay ten dollars in higher prices to save for a ten-dollar blanket when we'll let you have it for $4.95?”

In Calgary, Safeway has countered with price cuts and stepped-up advertising. "Stamps haven’t affected our sales too noticeably,” says James Johnson, Safeway’s zone manager.

"The initial impact is bad,” admits A & P, "but business is just about back to normal.”

“Our sales are on the upswing,” echoes Dominion’s Thomas McCormack.

Who’s losing then?—the U. S. Department of Agriculture estimates that stamp stoics have boosted their share of the market 10.5 percent.

The losses, says Beem, “appear to have been divided between non-stamp chains and the tiny food stores.” And Bertram Loeb of IGA in Ottawa, declares: "The unaflilialed grocer is a disappearing breed. He can't buy at the right price. His name is meaningless. He can’t get the money to expand. It takes $100,000 to $150,000 to modernize an old-style grocery store and if he's got that much he's crazy to go into the grocery business."

Not only the grocer, but the tobacconist, the jeweler, florist, gift and record shops, appliance and hardware stores, the door-to-door fruit and vegetable man, bread companies and dairies—all are victims of the housewife’s yen for convenience, for what is known as one-stop shopping. The realm of the clothier is the latest to be raided—by Dominion Stores, with what it calls "canned clothes,” soft goods in rigid cardboard containers.

These non-food items carry a much higher mark-up than food, a fact often overlooked in the hot debate about how much more sales it takes to pay for stamps. And between 1953 and 1956, according to a study by the National Association of Food Chains, supermarkets more than doubled their non-food items. "At the rate the chains are extending out of the grocery field," says a druggist, "it won’t be long before we’re just filling prescriptions, and maybe they'll find a way to do that too."

The villain here isn't stamps, suggests F. M. Shore, editor of Canadian Grocer magazine, but competition, abetted by the fact that goods are pre-packaged and pre-sold (in national ads). But stamps are speeding up the trend. The premiums the chains give away are cutting into the retailer's business. Says Bertram Loeb. now half-owner of Gold Bond stamps in Canada. "We’re the biggest account of one blanket manufacturer, and one of the biggest in luggage and silverware." In the U. S., stamp companies estimate that they buy almost fifty percent of all small electrical housewares manufactured.

Anti-stampers say these goods are simply "sales stolen from retailers.” Loeb claims that the three million dollars in premiums which Gold Bond sold last year “in a sense is new purchasing power, just like installment selling, only ours is anti-inflationary. Manufacturers fight to get their products listed in our catalogues.” (Manufacturers are noncommittal, but they privately admit that while stamps have brought them criticism from dealers, they're selling more goods.)

McCormack of Dominion Stores interprets the same facts differently: "Supermarkets are approaching the limits of their expansion. Stamps are a way of breaking the barrier. When you strip away all the subterfuge they’re just a way of selling the merchandise in the stamp catalogue—and without having to stock it. It puts the supermarket in the mail-order business, and because it can't give credit it charges the customer in advance. It’s advanced installment buying. and not at competitive prices. You can usually shop and buy the premiums for less.”

In Montreal, Mrs. H. E. Vautelet, a former CAC national president, reports that a CAC member checked on ten stamp-store items before and after stamps struck Montreal and noted an average increase of two cents an item. Says Mrs. Helen Morningstar of the CAC in Toronto: "My phone rings off the wall with women complaining to me that products cost more since the stores went into stamps.”

Everyone in the trade, however, including the Ambler Pricing Service, a company which does comparative shopping for the chains, agrees that stamps have brought more price cuts than hikes. "I’ve issued a challenge to the CAC,” Leon Weinstein says, "to come in and check our books. The public never had it so good.”

Dominion’s McCormack agrees that prices are lower today but he foresees a rise. There are three things you cannot do, he reiterates. "You can't drink yourself sober, you can't spend yourself out of debt, and you can’t add two to three percent to the cost of selling food without adding to retail prices.”

A survey of 1,360 U. S. supermarkets by the trade paper Super Market Merchandising revealed that stamp plans caused higher prices in 5.4 percent of the stores, lower prices in 9.3 percent, and no change in 85.3 percent. A three-year study in twenty-one cities by the U.S. Department of Agriculture shows that customers pay slightly more (seven tenths of one percent) in stamp stores, but get back premiums worth, on an average, 2.45 percent of their food bill.

Who pays for them? “At least half of the stamp cost," Beem’s survey says, is "offset by declining profits." Chain stores also get the food manufacturer to share the cost by saying, in effect, “We'll feature your product. On every purchase of it well give away twenty-five free stamps." The manufacturer shares this cost because stamps will win new customers. Nevertheless he’s perturbed that stores are featuring stamps more than his brand name.

But, like Frankenstein, he created his own monster. Supermarkets boomed in the palmy postwar period and big manufacturers vied for the best shelf space. They began to offer bribes by picking up part of the tab for advertising. They offered gaudier packages, more sizes, more brands. The items in the average market doubled to six thousand, and the housewife found it hard to remember prices. So price became less important, except on staples, anti the era of gimmick promotion dawned.

The stamp is simply the latest in a long line of gimmicks. But where the coupon and premium switched people from one brand to another, the stamp switches their loyalty from the brand to the store.

"It's just a new promotion idea,” says Power's Leon Weinstein. "A discount for cash. Everybody in business gets it. Everybody but Mrs. Housewife. Look, suppose I took two hundred billboards. They'd cost me approximately thirty thousand dollars a month. There'd be no squawk at that. But for some reason I can't get through my thick head, some people take exception to trading stamps.” 

A survey by Progressive Grocer, a U. S. trade paper, shows that twenty-seven percent of grocers offset some of their stamp costs by cutting back other promotions. “In the final analysis,” says Loeb, “stamps will replace contests, giveaways, loss-leader selling. Make no mistake about it, the consumer pays for stamps. She pays for color spreads in magazines, TV extravaganzas, throwaways and jingles on the radio. At least with stamps she’s getting something out of it." As Consumer Reports observed: “Stamps are better than hot air.”

But the CAC would sooner see prices reduced, better service, good parking and honest advertising. “Maybe even a lounge to rest tired feet,” says Mrs. Morningstar. “We’re unalterably opposed to stamps, coupons, gimmicks and bribes to buy. They tempt women to spend foolishly, make quality secondary and lower merchandising ethics.”

“The sensible housewife,” says Wayne Smith of Associated Grocers in Calgary, “knows that if she wants that mink stole or percolator she can shop carefully, save a penny here, a nickel there, and get it a lot quicker than with stamps. But there’s some sort of hypnotic attraction in getting free stamps and pasting them in a book.”

“We ran a check in one of our best stores for three days,” says Bertram Loeb, IGA head in Ottawa. “We asked the customers what they’d sooner have: stamps, cash, food, or some other type of promotion like giveaways. Ninety percent of them said they’d sooner have stamps.”

David Gilbert, director of the Retail Merchants Association, claims stamps’ primary lure is “something for nothing.” But a survey by Dr. Bertrand Klass, of the Stanford Research Institute, shows that stamps “satisfy the collecting instinct.” Women felt “satisfaction in the actual redemption of the completed saver books . . . a majority (of women) report a sense of urgency to start saving again once the first premium is obtained.” It gave housewives “a feeling of thriftiness.” They can satisfy their desire for possessions without feeling guilty about buying something they can’t really afford.

Stamps also gave a wife a sense of independence. “I can save for what I want; I don’t have to ask my husband,” says one.

“I guess A & P would save me money,” another says, “but how would I get an electric frying pan?”

“Another factor is children,” says Bertram Loeb of the IGA. “They’re a real pressure group for toys.”

Mrs. Morningstar disagrees that women like stamps. “I’ve talked to literally thousands who don’t, and if we can just organize them then these sales increases some of these stores talk about will fall off.”

Mrs. Vautelet, in Montreal, reports that opposition to stamps is swelling CAC membership at the rate of three a day. “We must keep housewives at a white-hot pitch,” she says.

All the surveys show that a lot of women like stamps and a lot don’t. “Let the housewife decide the issue,” says E. S. Cooper, president of Western Grocers, Winnipeg, which doesn't plan to introduce stamps. “She has a vote by patronage every day.”