TRADING STAMPS: A Hidden Charge in the Grocery Bill

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To subscribe to a stamp plan, a retailer may sign up with one of scores of companies in the business of supplying stamps and premiums. If he buys the service of Sperry & Hutchinson, biggest U.S. trading-stamp dealer, he will pay about $3 per 1,000 stamps, one of which he will give away with each 10¢ purchase. In return, S. & H. supplies the books for pasting up stamps, helps with local advertising and promotion, opens a convenient premium store. To cover the cost of the plan (2% to 3% of the yearly gross), a retailer must boost sales an average of about 20%. For the merchant who is first in his neighborhood with stamps, this is usually easy. But as each of his competitors buys a rival stamp plan in self-defense, the advantage wears off. Then the old standards of price and quality return, and the merchants are right back where they started -except that they are stuck with paying for the stamps. When one Albuquerque, N. Mex. supermarket decided to drop its stamp plan, it lost 80% of its business in two weeks.

No matter how painless stamp plans may appear, it is still the customer who eventually pays. Though most retailers publicly deny that they raise prices to cover the extra cost, the price of the stamps ultimately finds its way into the store's markup. In a study of western retailers, the University of New Mexico Bureau of Business Research discovered that most raised prices about 4% to make sure that all extra expenses would be taken care of. Thus, if a shopper filled four books of stamps by buying $480 worth of groceries and won a $13 chafing dish, she would get nothing free. She would pay about $20 in inflated markups. As far back as 1916, the U.S. Supreme Court saw the danger of trading stamps, called them "an appeal to stupidity," and gave states authority to make them illegal. But so far, no states have had the temerity to interfere with a housewife in search of a bargain.

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