Vons Cuts Double Coupon Offer
By George Anderson
Vons is no longer doubling coupons in parts of Orange County and all of San Diego County in California after finding that few of its customers were taking advantage of the offer and that consumers were still flocking to Wal-Mart, Target, Costco and elsewhere even with the promotion in place.
The chain is not the only grocer to see a drop off in coupons. According to CMS in North Carolina, the number of coupons consumers redeemed last year was off three percent from the year before and six percent from 2004.
With one of its traditional promotional tactics no longer working as effectively as in the past, grocers such as Vons are looking for other ways to drive traffic to stores and increase market baskets once shoppers are inside.
Vons’ parent company, Safeway, has turned its focus to its lifestyle concept in an effort to differentiate itself from discounters while increasing bottom line results
David Livingston, principal at DJL Research and a member of the RetailWire BrainTrust, told the San Diego Union-Tribune, that double coupons do not mesh with the more upscale approach of the lifestyle concept and are more for a retailer looking to position itself as a discounter.
Vons can expect to lose some shoppers as it moves away from double coupons, but that is a risk the chain is willing to take.
Ralphs, owned by Kroger, has no plans to discontinue its own double coupon program. Company spokesperson Terry O’Neil said, “Customers continue to tell us that they like double coupons.”
Moderator’s Comment: Is Vons making the right move discontinuing its double coupon program? Has the chain been able to position itself as a lifestyle
solution provider to reduce its dependence on price promotions in general? –
George Anderson – Moderator
This really depends on how long Safeway can maintain the “lifestyles” format before eventually returning to the center. The lifestyles store today will be tomorrow’s plain vanilla supermarket. Safeway had lifestyles stores when they bought Dominick’s in Chicago and Randalls in Houston. But as sales dropped, they eventually started to look like those 1980s Safeway stores once again — the kind that offer double coupons to increase traffic. From experience, when I am evaluating trade areas and see a chain being the Lone Ranger and only one offering double coupons, I usually expect to find it doing a low Winn Dixie-eque volume. I rarely see the classier chains offer double coupons.
If only 1 in 100 shoppers care about doubling coupons, Vons is risking a comp sales decrease of 1%. Of course, it’s unlikely that “doublers” are profitable customers. And it’s odd that the policy isn’t being ended everywhere the company has stores, but perhaps this means they’re testing the change before rolling it out. I’m not sure that Ralph’s should be happy to be the last major chain to double coupons at every location. This might mean they get the monopoly on money-losing customers. Maybe this is a great time for Ralph’s to drop the doubling, too.
It’s likely a good move, although they should be as store-specific on this as possible. If their desire is to compete on things other than price, they should take away what they planned to invest in this and put the money into something more differentiating.
When double coupons are no longer appealing to grocery shoppers, a retailer should drop them and broaden their appeal as “a lifestyle solution provider” … whatever that might mean today in Orange & San Diego counties. Time — and consumer customs — keep marching on!
So the pendulum swings. Double coupons are a costly way to attract lower-profit customers. Supermarket operators know there are times when they may be justified by competitive conditions, but they are a poor choice for a way of life.
Brand marketers don’t like double and triple coupons much either, as they distort carefully-designed value propositions and alter redemption rates. If Vons can provide more enduring reasons for its customers to shop and return it will be far better off in the long run.
Two things pop into my head: one, the Lifestyle Concept which Safeway is incorporating will be a winner. Von’s can take advantage of that. People don’t expect the lowest prices in supermarket, but they do expect great service, experience and choice. The other thought is, we have to assume Von’s is looking at who their very best, most profitable customers are and what drives their purchase behavior. Incorporating this knowledge into the Lifestyle planning is a long term decision vs. using double coupons.
There are a certain small set of long term discount shoppers (the grocery game gang for instance) that shop with coupons and have for years, and as long as there’s double coupons, that’s where they’ll shop. In highly competitive Southern California, other similar grocers have had success without coupons (i.e. Stater Bros). I would note, the lifestyle concept had better work, as Safeway absolutely needs to put the dollars into service to differentiate – their service is not good right now.
From my limited anecdotal experience of California shoppers, Vons will not be losing much by losing those who did double coupons. It’s one of my mother’s favourite games – trying to see how little she can spend. Ditto sister and sister-in-law and all of their friends. These are not the sort of shoppers I would expect any store to work hard to keep.
Oh no! Say it ain’t so! What’s happened to supermarkets’ favorite, no-brainer, knee-jerk, can-start-it-tomorrow competitive tool? Rarely, almost never, will just one retailer in a market feature double coupons. If one jumps, the others do, too. And then, just as predictably, when one stops the others usually stop. (In my days in Philadelphia, our response to a competitor introducing double coupons was to counter with TRIPLE coupons. That usually stopped all multiple coupon offers in the market.) Thus, look for Ralph’s to discontinue double coupons, too.
Vons can offer whatever explanation they want for discontinuing double coupons but, as always, it was just time for the market to stop the promotion and Vons happened to take the lead. Double coupons will be back some day, at Vons and other stores in the market.
Whoever came up with the idea to double coupons in the first place? Let alone triple coupons!?! It’s simply a bad idea from the start. It’s completely misdirected and uncontrolled money directly from the bottom line. Vons absolutely made the right decision. The funds can be much spent by using them to better serve their customers.
To the question of who gains competitive advantage from the Vons decision – Vons should have been a choice. They are the winners in the decision.