By Mitch Lipka
Oct 4 Do not expect shopping rewards like Kohl's
Cash, Old Navy Super Cash, Gymboree Gymbucks or CVS Extra Bucks
to stuff your pockets with actual currency this holiday season.
Most are gimmicks that aim to lure shoppers back to the store to
spend more money than they intended.
The deals appear better than they really are. Consumers can
lose by overspending to earn or redeem the bonuses or by not
redeeming them at all.
So it will take some savvy -- reading the fine print and
doing the math -- to really come out ahead with these customer
retention programs. Retail analyst Ken Perkins, who operates
Retail Metrics Inc., says it's going to become more common for
stores to offer these cash-value teas ers.
Higher-end retailers like Bloomingdale's, Saks Fifth
Avenue and Nordstrom are also dangling bonus
dollars in front of their customers and tying them to store
credit cards, says Mary Delk, director in the retail practice of
the consultancy Deloitte LLP in Charlotte, North Carolina.
For instance, a recent Saks promotion offered a $25 gift
card for purchases of $250-$499, increasing the reward to $35 if
a Saks card was used. It offered a gift card of up to $450 for
spending $3,000 or more, and $700 if you charged $3,000 on their
card -- a store credit worth 23 percent of their purchase.
Bloomingdale's and Nordstrom both reward customers for
achieving purchasing levels with store cards. The ability to
earn varies according to where and when the cards are used.
On the other end, Kohl's, more of a mid-market
retailer, has a redemption coupon deal that requires no store
card at all, instead providing $20 in paper "cash" store credits
for every $50 spent.
"The obvious benefit here for the retailer is the additional
trip," Delk says. And the hope is you'll spend more when you
The more consumers are lured to a story with these offers,
the more likely they are to come back on their own at other
times. "They're looking for loyalty," says Villanova University
economist David Fiorenza.
If you have a $10 certificate to spend, after all, "you're
going to spend $13 or $15," says Doug Hardman, CEO of Cleveland,
Ohio-based SparkBase, a loyalty card processing company.
Consumers may be confused by limits on how and when the
money-back certificates can be spent. Many end up becoming
Old Navy's offering, for instance, gives consumers a
$30 reward for spending $75, but also only allows the full $30
to be used if $75 or more is spent on the next trip. That means
if you spend exactly $75, you are rewarded with up to a 40
CVS' Extra Bucks requires a card in order to cash in, and
certain purchases are excluded, like prescriptions. If you spend
less than your reward, you don't get the difference in cash.
Many of these deals must be taken advantage of during a
narrow time window. Child clothing retailer Gymboree's
"Gymbucks" program has a maximum reward of 50 percent off.
Consumers earn $25 worth of Gymbucks for every $50 spent during
a specified period for accumulating bucks. A redemption period
follows, which allows the use of the Gymbucks at the same rate -
for every $50 spent, you can use $25 worth.
The optimal use of the discount is to spend as close to an
increment of $50 during the purchase window and the same during
the redemption period. So, not counting other sales, you would
get $100 worth of merchandise for $75, or 25 percent off.
While Saks' purchase thresholds for rewards are high, it
offers more freedom with a gift card that can be spent on
anything, including the purchase of items that do not typically
discount, such as cosmetics, Delk says.
Upscale retailers don't want to be seen as discounting, says
Nick Hodson, a partner specializing in retail at the consultancy
Booz & Co in San Francisco. "It's a way to bring traffic into
the store without doing something as downmarket as discounting."
In the end, Perkins says, sales planned for the upcoming
season are going to be a bigger draw that the growing number of
bonus programs - especially those tied to purchase and time