Grocer may have a deal - for you alone

  • Article by: STEPHANIE CLIFFORD , New York Times
  • Updated: August 9, 2012 - 9:24 PM

More stores are offering prices based on your shopping habits.

It used to be that with dedication and a good pair of scissors, one grocery shopper could get the same coupons -- and prices -- as another.

But going to the grocery store could become a lot less egalitarian.

At a Safeway in Denver, a 24-pack of Refreshe water costs $2.71 for Jennie Sanford. For Emily Vanek, it's $3.69.

The difference? The vast shopping data Safeway maintains on both women through its loyalty card program. Sanford has a history of buying Refreshe brand products, but not its bottled water, while Vanek, a Smartwater partisan, was unlikely to try Refreshe.

Safeway added the personalization program to its stores this summer. It says it has the ability to adjust prices based on shoppers' habits and may add that feature.

Airlines and hotels have long offered variable prices, usually based on capacity and timing, or given to groups.

Now grocers like Safeway and Kroger are going one step further and determining individualized prices.

Hoping to improve razor-thin profit margins, they are creating specific offers and prices, based on shoppers' lifestyles and behaviors, that could encourage them to spend more: a bigger box of detergent, bologna if the retailer's data suggests a shopper has teenage boys (expensive bologna if the data indicates the shopper is not concerned about lunchmeat prices).

The pricing model is expected to extend to other grocery chains -- and over time could displace standardized price tags almost entirely, analysts say. Even though the use of personal shopping data might raise privacy concerns among some consumers, retailers are counting on most people accepting the trade-off if it means they get a better price for a product they want.

"If our consumer information is right, personalization is really a consumer desire right now, not so much a consumer fear," said Michael Minasi, president for marketing at Safeway.

There are skeptics. Joseph Turow, a professor at the Annenberg School for Communication at the University of Pennsylvania, said shoppers should be cautious. The pricing at grocery stores and other retailers is not transparent enough to give consumers any real power or choice, he said, and "there's a sense of fairness that's derailed here."

Kroger, the Cincinnati-based grocer, has long been sending its frequent customers specialized coupons with the help of dunnhumbyUSA, a consumer research firm. A Kroger spokesman, Keith Dailey, said that 70 percent of customers who received the coupon mailings redeemed at least one of the offers, a high response rate. Kroger has had 34 consecutive quarters of same-store sales growth, which both it and analysts attribute in large part to the coupon offers.

Kroger has been sending customers mailings with "multiple price points," Aitken said. Now it is testing personalized prices via "other devices, or other ways of reaching out to the consumer," he said, which could include things like smartphone apps or loyalty card swipes.

At Safeway, the digital customization program allows the company to respond to current events. After a recent power failure in Washington, for example, it sent city residents coupons for freezer items to encourage restocking once power was back.

So far, consumers say, the programs seem to reflect their buying habits. Sanford, who says she tries to buy health-conscious items, says offers for Kashi cereal and bagged lettuce reflect her preferences.

Ainy Kazmi, 35, a mother of four in Ellicott City, Md., said Safeway's program encouraged her to change what she bought. She tried to use the offers for a large bottle of cranberry juice, rather than the smaller bottle of cranberry apple juice she usually buys, and a box of Cocoa Puffs that was not on her shopping list -- but she said the discounts for some reason were not loaded onto her card at checkout. She bought the items anyway.

She has used the program again since then, getting discounts on bananas, among other products, and says she is happier with it since Safeway worked out the kinks.

"It's a little bit creepy, but I figure they're checking everything anyway," she said. "I might as well get a good deal out of it."

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