Copyright 1999 The Chronicle Publishing Co.
The San
Francisco Chronicle
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APRIL 20, 1999, TUESDAY, FINAL EDITION
SECTION: BUSINESS; Pg. B1
LENGTH: 1312 words
HEADLINE:
Privacy Worries at the Grocery Store;
Lawmakers fear that
frequent-shopper cards may come at high price
BYLINE:
Rebecca Smith, Chronicle Staff Writer
BODY:
Frequent-shopper cards are sweeping the grocery industry with eye-catching
discounts for consumers.
They have also caught the eye of California
legislators who are considering consumer protections amid growing fear the
discount cards pose a threat to privacy.
Two bills are moving through
the state Senate to restrict the collection and use of data gleaned from
"loyalty marketing" cards like the Safeway and Vons "Club" card and the Lucky
"Reward" card. A third bill would beef up privacy rights of consumers throughout
the state.
Though they differ in their particulars, the bills share a
common fear of the way the grocery industry could use its computer-based tool to
monitor and modify consumer behavior. The bills brush aside industry assurances
that the discount cards are harmless successors to previous supermarket
promotional gimmicks like green stamps and coupons. Not everyone objects to
having information collected on their buying habits, says state Senator Debra
Bowen, D-Marina del Rey (Los Angeles County), one of the concerned legislators.
"But right now, people have no ability to find out what's being
collected or how it's being used or shared," she says. "We need to give that
control back to consumers."
Although it's true that shoppers sign up for
cards voluntarily, the best savings often are reserved for cardholders, who must
give personal information when filling out application forms. Those without
cards must rely on coupons for savings.
To date, there's no proof the
industry is abusing its power to collect information on shopper preferences and
purchases. But legislators like Bowen fear chains eventually will find the
temptation to sell or share data irresistible.
What would happen, for
example, if health insurers could buy lists of people who buy cartons of
cigarettes? What if liquor-purchase records were readily available to employers
for pre-employment screening? What if weight-loss companies could get the names
of couch potatoes?
The supermarket industry insists it uses discount
cards to funnel savings to the best shoppers, making scarce promotional dollars
work harder in an era when it's facing withering competition from new food
retailers like Kmart, Costco and Arco's AM/PM markets.
"Grocers are as
concerned as anyone about privacy issues," said David Heylen, spokesman for the
California Grocers Association in Sacramento. "I'm not aware of any company that
uses information inappropriately or that supplies it to outsiders."
Nonetheless, powerful database software gives grocers the ability to
merge data on millions of individual transactions and to reveal for the first
time purchasing patterns. And they can track the spending habits and tastes of
individual shoppers.
Here is how it works: Shoppers are issued
individual cards with bar codes on the back. After groceries are rung up, the
cards are scanned and a computer deducts savings in a matter of seconds. It
keeps a running log so discount certificates can be issued when certain spending
thresholds are reached, such as for $250 or
$500.
Consumers like the ease of getting discounts
automatically with no need to clip coupons. Stores like being able to trim
advertising budgets and funnel the best savings to shoppers who bring in the
most revenue.
"We use the information to provide better service to
shoppers," said Kevin Herglotz, spokesman for the 325-store Vons chain in Los
Angeles. "We do not sell information or provide it to any outside vendor."
But earlier this year, Vons fought allegations that its lawyers
threatened to use liquor-purchase information in a lawsuit pressed against the
chain by a shopper who slipped and fell in a Vons store.
That case was
thrown out of court and Herglotz said no such threat ever was made by Vons'
attorneys. But the story continues to circulate.
Right now, there's
nothing in California law to prohibit such a use of club card information,
legislators point out.
That makes the supermarket industry different
from other industries that possess sensitive information. For example, the video
rental industry can't sell or share movie rental information. Credit card
issuers can't tell others what you're buying, and telephone companies can't
reveal whom you're calling.
Three bills could establish similar
protections over supermarket data:
-- The proposed Supermarket Club
Disclosure Act of 1999, which passed the Senate Appropriations Committee
yesterday and is headed for a vote on the Senate floor later this week, would
require club card issuers to disclose how they use data. The bill, being carried
by Bowen, would give shoppers the right to have sales data deleted.
--
The proposed Supermarket Privacy Act of 1999 would give cardholders the right to
prohibit the "collection, distribution, aggregation or marketing" of cardholder
information collected after January 2000. Under the bill by state Senator Jackie
Speier, D-Hillsborough,unauthorized sharing of information would subject the
chain to a $500 fine, per infraction.
-- The most
sweeping bill, however, is the Personal Information and Privacy
Act of 1999, carried by state Senator Steve Peace, D-El Cajon (San Diego
County), which would presume privacy has been violated anytime information is
collected without the consent of those from whom information was garnered. The
bill would apply to any industry or government agency collecting the data.
"The objective is to do something globally so we don't have to keep
plugging privacy holes, industry by industry," said Peace. "We have to act
because the commercial interests simply are overwhelming any practical right of
privacy in this state."
Peace said it makes most people uncomfortable to
have data collected on their purchases, even if it's used innocently.
"If I were to collect information on every supermarket purchase I made,
I'd view myself as having an anal-retentive compulsive disorder," Peace said.
"It's an extraordinary violation, to me, to think someone else can document my
behavior just because I shop at their store."
He thinks the need for
privacy is deep in human DNA and explains why the "loyalty" programs cause such
uneasiness. His theory is based on the idea that Early Man hid himself in order
to hunt. Privacy wasn't a frill, it was a survival skill. Those who couldn't
hide or whose patterns of behavior could be unlocked became the prey.
This fear of being understood and exploited is not irrational, says
Joseph Turow, communications professor at the University of Pennsylvania, who
has written on loyalty marketing programs.
"The supermarket is the place
where you can learn important information about how people live their lives," he
says. "There are Big Brother aspects to this that need to be understood."
He thinks the industry will be driven to sell data eventually, because
it has great value if combined with other types of information. "You wind up
with lifestyle data that was never possible to get before the computer," Turow
says.
Club cards, though they have proliferated rapidly, are a
relatively new addition to the shopping scene. The trend started in 1993 when a
study funded by the Coca Cola Retailing Research Group found that not all
grocery shoppers are equal.
In a nutshell, the study concluded that 30
percent of shoppers generate 75 percent of sales revenues. Rather than
distribute promotional dollars across the board, the study suggested, it would
make more sense for grocers to identify and reward the top tier with loyalty
marketing programs.
Lucky Stores was the first major chain in California
to offer a card -- in April 1995. Safeway was one of the last and didn't get its
card to shoppers until September 1997. No one knows how many cards are being
used, today, but industry analysts think a majority of consumers have at least
one card.
GRAPHIC: GRAPHIC, BY TOM
MURRAY/THE CHRONICLE
LOAD-DATE: April 20, 1999
