By Mitch Lipka
Oct 4 (Reuters) - 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 come back.
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 percentage-off deals.
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 percent discount.
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 limits.