The crux of merchandising prepaid calling cards like other packaged goods sold in a supermarket is the cash value associated with the cards.
Despite the development of sophisticated and often expensive point-of-sale activation systems that go a long way to deterring loss, most supermarket chains have been conservative when it comes to openly selling prepaid phone cards.
Most executives, like Mike St. Clair, category manager for nonfood at Scarborough, Maine-based Hannaford Bros., have tackled the problem simply by selling prepaid cards from behind the service counter. "They're not open to the public," said St. Clair.
But this solution is contrary to the tenets of good merchandising. How can retailers drive sales of a relatively new product category like prepaid calling cards without giving it exposure on the selling floor?
Like other store executives around the country, St. Clair is looking for a way to prevent employee and customer theft while maximizing sales. He relies on extensive signage at store entrances and around the service desk. "We do lose the impulse buy," he admitted.
To give better exposure to phone cards, Brad Buckmaster, merchandising manager for Beaverton, Ore., convenience chain Plaid Pantries, displays dummy phone cards at each cash register. The live cards are kept inside cash registers. To prevent internal theft, cards are set up on a count sheet, with serial numbers matched for each employee shift. Employees treat the cards as cash and must reconcile them at the start of each new shift.
In use since January, this system has been problem-free and "much more profitable than anything we've tried before," Buckmaster said. "We sell more cards and make more money."
Plaid Pantries' customized cards, supplied by Cable & Wireless, Vienna, Va., bear the store logo and are sold throughout Oregon and Washington.
Marlene Waltz, director of prepaid cards for the Spree Prepaid Foncard division of Sprint, Westwood, Kan., said the company provides free to retailers -- Salisbury, N.C.-based Food Lion among them -- locked acrylic dispensers in several styles.
"Dressed in our point-of-purchase materials, they're at customer-service countertops, cashier lanes or courtesy desks. The shopper sees the live card, but it's locked up," she said.
SmarTalk Teleservices, Los Angeles, services chains such as Ralphs Grocery Co., Food 4 Less Supermarkets, Dominick's Finer Foods, Winn-Dixie Stores, Stop & Shop Cos. and Schwegmann Giant Super Markets. Karen Wilson, vice president of sales, said shoppers have to see a phone card to want it.
Working closely with chains' loss-prevention departments, SmarTalk created color-coded packaging that allows cards in different dollar amounts to be marketed from pegged displays at the register. The customer pulls a dollar-bill-size placard, which looks like the actual product's packaging, and hands it to the cashier, who then takes a live card pack from the drawer and scans the bar code on the back of the package.
Wilson said retailers using color-coded cards like cash have cut employee pilferage enormously. This system also makes it easier for the cashier to balance the drawer's contents, she said.
The method that gives retailers the most freedom in merchandising prepaid cards is POS activation. Atcall, Vienna, Va., spent two years seeking a solution to card theft and developed POS activation via a magnetic reader. The card has a magnetic strip and is inactive until a cashier swipes it through a reader. It has no value if stolen from a shelf.
Yet thieves have tried to beat the system by claiming they paid for an inactivated card. However, they need a separate receipt with a tracking number from the card or the last four digits of the personal identification number, plus the time and date of purchase.
"If someone steals worthless plastic and calls to complain, we check the PIN number, see the card was never swiped, and ask for the receipt," explained Chris Huemmer, director of Atcall's prepaid division, who added that stickers on cards read "cannot be returned without receipt."
Like Huemmer, Wayne White, general manager of prepaid card services for Ameritech, Chicago, endorses POS activation to ensure both consumer protection and to prevent employee shrinkage.
Ameritech, which supplies Aldi Foods, several IGAs and other small independents, uses batch activation, with a dummy card on display. Cards to be activated on-site arrive in sets of six, which limits risk. Shoppers bring a dummy card to the cashier in exchange for a live card from the register. The dummies are then returned to the display, usually near the checkout.
Retailers with POS activation can display their phone cards without fear of shoplifting. The cards are given greater visibility, which leads to more impulse purchases by shoppers buying $10 or even $20 cards. "This system lures customers back. They can recharge the card at the same terminal, encouraging repeat business," White noted.
Consultant Steve Capka of International Telecard Services, Portland, Ore., works with supermarkets to find the best ways for them to sell phone cards. "POS activation is the solution to securing cards," he said. "Stores are billed on scanned sales. If someone steals one, it makes no difference."
