Supermarket chains are speed-dialing into the burgeoning prepaid telephone card category, with some even selling private-label cards.
Though supermarkets have lagged behind other retailers -- including convenience store chains, drug store chains and gasoline stations -- in offering the prepaid cards, the picture is changing.
An increasing number of retailers have begun to experiment with phone card sales through vending machines, and at the service counter and checkout.
Some are even dabbling with private-label products. Among them are Abco Foods, Phoenix; Shaw's Supermarkets, East Bridgewater, Mass.; the Met Foods and Pioneer groups in the metropolitan New York area, and Albertson's, Boise, Idaho. Food Lion, Salisbury, N.C., is also testing a private-label card, according to one supplier.
As reported, Abco launched a store-brand card last fall in three stockkeeping units: $9.90 for 30 minutes of phone time, $18 for 60 minutes and $30 for 120 minutes. Each SKU features an Arizona sunset scene, along with the words "Abco Prepaid Long-Distance Phone Card" printed along the top left corner. The cards, which are sold at the checkout, can be renewed, meaning customers can buy extra phone time once they've used up the minutes they purchased.
Nick Borze, director of nonfood, said Abco opted for private label because it helps market the chain better than a regular stock card.
"We have a very attractive card, with different Arizona sunset scenes on it. Every time someone uses it, they're going to think about where they bought it," he said. A private-label card also costs about the same as a standard phone card, Borze added.
What's been most surprising about the Abco phone card is that it's maintained consistent sales since introduced, Borze said. "It's been doing very, very well," he said. He did not have exact sales figures.
Shaw's has been selling its private-label phone card in all 94 stores since late November, after a four-store test. Customer response to the cards has been good, noted Bernard Rogan, spokesman for the chain. Shoppers were buying them as gifts before Christmas, even though Shaw's was not promoting them that way, he added.
The cards feature the Shaw's logo and are available in two denominations: a $10 card with 30 minutes of calling time and a $20 card with 60 minutes.
They are sold at the checkout and also at the service desk in shrinkwrapped packages that conceal the access number. A large Southeastern chain, which did not want to be identified, has also recently launched a private-label card that includes the chain's logo on the front. Additionally, each time the card is used a customized message is played that identifies the chain and thanks customers for shopping there.
Many retailers describe private-label cards as a new promotional tool that helps market their chains.
"We see the cards as yet another way to get our name in front of the customer," said a chain executive from a large Southeastern chain that did not want to be identified. "Shoppers are not too aware of the cards yet, but every day they get more educated about them."
A 14-store Midwestern chain, which also didn't want to be identified, has been selling prepaid cards from Western Union, and has ordered a private-label phone card program. The program has not been rolled out yet.
Other supermarket chains are opting to go with stock prepaid card programs rather than a private-label card.
Weis Markets, Sunbury, Pa., offers a prepaid phone card from ConQuest Telecommunications in new stores it opened in 1995. "We will offer the cards chainwide by Easter," noted Dennis Curtain, director of consumer affairs.
"Where people know about prepaid cards, they have sold very well," he said. Weis is using in-store signs to explain and promote the cards and will advertise them in the near future.
"Overall, we have a pretty good response, and expect the cards to do very well as customers become more aware of them," Curtain said. Weis sells the cards at the customer service desk.
Genuardi's Family Markets, Norristown, Pa., tested both over-the-counter and vending machine distribution for branded prepaid phone cards before deciding on an over-the-
counter approach, said Dorrie Martyniuk, operations manager.
"Selling the cards over the counter provides another opportunity for customer contact. We also felt people might be a little reluctant to put a $10 or $20 bill into a vending machine," she said.
The chain rolled out the program to all 26 stores in late spring. Cards in $10 or $20 denominations are available at the checkout, and other denominations may be purchased at the service counter, along with additional time on existing cards.
Genuardi's has run two promotions on the cards, offering a $15 card for $10, one in August with a back-to-school tie-in and one in mid-December, suggesting the cards as gifts or stocking-stuffers. Both were successful, said Martyniuk.
"The business is growing every month. Some of our stores have recently done as much business in a month as the whole chain did when we started," she noted. The cards sell better at stores in less-affluent areas where customers are not as likely to have phone credit cards, Martyniuk said. A store near a hospital reports strong phone card sales, perhaps for patients to use rather than having to call collect, she said.
A&P's Atlanta division has been selling prepaid cards from Western Union at store service counters and registers for some time, noted Richard Flaherty, vice president of sales and merchandising for the division.
"We advertise them on a pretty regular basis," he noted, adding that "sales are climbing."
Pay Less Supermarkets, Anderson, Ind., is testing a vending machine, a phone kiosk from MCI, in one store, said Dick Sizemore, general merchandise merchandiser. The machine offers 20-minute cards for $10 and 40-minute cards for $20. Shoppers insert the cash and receive a card; store personnel stock the machine with cards.
Sizemore prefers the machine concept because of the minimum time and labor investment required. The machine is located in a high-traffic area near the service counter, and the store is seeing a good response to the cards. While Pay Less has not decided how it will sell prepaid phone cards at other locations, Sizemore pointed out that the vending machines saves service-counter personnel labor in not having to deal with the cards.
"They have enough to do handling things like utility bills and hunting and fishing licenses," he said.
The test store has used signs, advertising and literature to promote the service and explain it to customers. "Most people seem to know what to do," he noted.
Other chains that are selling prepaid phone cards but not private-label cards include Vons Cos., Arcadia, Calif.; Giant Food, Landover, Md., and Kash n' Karry Food Stores, Tampa, Fla., according to card suppliers. Safeway, Oakland, Calif., is said to be using vending machines in some of its Phoenix and Washington state stores, and Bashas' Markets, Chandler, Ariz., is also considering vending machines, said one executive.
Jim Paterni, director of general merchandise and health and beauty care at Glen's Markets, Gaylord, Mich., said he will hold off on prepaid phone cards for a while longer.
"They are hard to sell. Customers are not that familiar with them yet," he said, adding, "We still have to figure out who all the carriers are."
Executives at phone card suppliers said they expect the market for the cards to grow rapidly and for supermarkets to become increasingly involved in it.
Peter Buonaiuto, vice president of sales and marketing at ConQuest Telecommunication Services Corp., Dublin, Ohio, noted that the prepaid cards have only been available in the United States since late 1992, though they are widely used in other countries.
Since the industry is so young, estimates of its size vary widely, from $500 million to $1 billion in face-value sales for 1995, with Buonaiuto estimating the size closer to the high end of that range. By the year 2000, he said, projections of prepaid phone card sales range from $4 billion to $12 billion. "I would guess it will be $6 billion to $7 billion.
"We do see supermarkets as a major distribution channel, perhaps tied in with frequent shopper programs or as a promotion," he said.
The cards can be quite profitable. Jeff Penchina, vice president of sales and marketing at BLT Technologies, Vancouver, Wash., which markets a card under the Talk 'N Toss logo, said cards sold through vending machines can carry margins of about 20%, while margins on private-label programs can run from 28% to 40%, depending on the denominations and the program. At present, prepaid phone card sales are strongest on the West Coast, followed by the East Coast, noted Edward W. Ragar, president of Global Link Telco Corp., Philadelphia. The vendor executives noted that sales to date have been strongest in communities with large immigrant populations and to such "transient" populations as students, military personnel and truck drivers, rather than to middle-class consumers who are eligible for credit cards. That market will expand, they said, as more consumers become familiar with the cards.
Penchina estimated only about 20% of U.S. consumers are aware of prepaid phone cards and only 4% to 5% have used one. "Over 1996, that awareness should change dramatically, reaching perhaps a 60% to 80% awareness level by the end of the year" as retailers and others begin to advertise the cards, he predicted.
"I would predict that within 12 to 18 months, virtually every supermarket chain will be involved with prepaid phone cards in some fashion," said Adam Rubenstein, president of Convenience Products Corp., Boca Raton, Fla., a company that works with ConQuest to distribute the cards. "Many have already done some promotions with phone cards" issued by different manufacturers, he noted.
Methods for handling phone cards in the stores vary by chain and by supplier. While many chains are handling the cards at the service counter or register to avoid theft, some cards are offered in a dummy display package to encourage impulse sales. The customer takes the package to the register to pay for it and receives an activated card at that time. In other programs, a customer buys an inactive card, then takes it to the service desk to be activated.