AN OPEN ROAD

Most leading grocery chains are selling prepaid phone cards today.This fact illustrates how far the calling-card industry has come in a few short years. Phone cards have gone from the local bodega to major food retailers, boasting names such as Albertson's, Food Lion, A&P, Giant Eagle, Grand Union, Shaw's and the list goes on. In their efforts to cash in on a high-margin, emerging product category,

Most leading grocery chains are selling prepaid phone cards today.

This fact illustrates how far the calling-card industry has come in a few short years. Phone cards have gone from the local bodega to major food retailers, boasting names such as Albertson's, Food Lion, A&P, Giant Eagle, Grand Union, Shaw's and the list goes on. In their efforts to cash in on a high-margin, emerging product category, supermarkets are helping to spread the word about calling-card benefits and value to their customers. The retail chains have become a key distribution point in propelling prepaid-card sales to a projected $2.5 billion industry by the year 2000, according to Atlantic-ACM, a research-consulting firm based in Boston.

Prepaid-card suppliers will be exhibiting on the floor at the Food Marketing Institute's annual convention, May 4 to 7, in Chicago. To coincide with this event, SN has produced this special supplement to better focus attention on the prepaid-calling-card market and the implications it has for grocery retailers.

Those heavily involved in the industry, who have an expertise or special view on prepaid-phone-card retailing and promotions, were asked to discuss the state of the prepaid-card category as it exists today, and how it will exist in the future.

The seven participants in the discussion were: Frank Canty, a principal and senior project manager for Atlantic-ACM; Steve Capka, president of International Telecard Services, Portland, Ore.; Max Goldberg, this year's chairman of the Promotional Marketing Association of America, New York, and vice president of promotion for Walt Disney/Buena Vista Home Video, Burbank, Calif.; Ilene Kaminsky, an industry consultant based in Miami Beach, Fla.; Gary Schloss, vice president of general merchandise for Carr Gottstein Foods, Anchorage, Alaska; Howard Segermark, executive director of the International Telecard Association, Washington; and Laurette Veres, president and chief executive officer of Quality Publishing, The Woodlands, Texas, which publishes Intele-Card News.

The industry has come a long way since it emerged in the late 1980s when many entrepreneurs discovered they could enter the business on a song and a dime. Yet the road ahead is still wide open.

Penetration and usage of prepaid cards remains low. As retail channels have opened up, so has consumer awareness of phone cards -- but much more can be done to bring the products from the niche markets into the mainstream of consumer usage.

The industry also is still trying to heal from a few black eyes it suffered at the hands of some unscrupulous phone-card vendors. Some refer to them as "trunk issuers" (fly-by-night firms who sell calling cards from the back of their cars and get away quick). As reported in SN's April 22, 1996 issue, Meijer and Kmart got stung, as did a few other big retailers.

The International Telecard Association has made progress in helping the industry clean up its act. This year, the organization hopes to issue its version of a "seal of approval" to members who follow mandatory standards now under development.

These seven executives shared their views on these issues, as well as how technology may change prepaid phone cards in the future. What follows are highlights of an in-depth discussion on distribution and growth trends, supermarket merchandising, promotional phone cards and their impact on grocery, efforts to legitimize the industry and how prepaid phone cards may benefit from smart-card and advanced technology.

Phonetically Speaking

The following executives involved in the prepaid-phone-card industry were contacted by SN to discuss the industry's future direction and how supermarkets are becoming a critical point of distribution for calling cards.