How Stores Get Paid For Coupons....

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Old 01-01-2010, 10:31 AM
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Facts How stores get paid for coupons....

As couponers we should understand how Q's are handled once we hand them to cashiers. Knowing the facts gives you the upper hand when cashiers claim they won't get paid because.............(fill in the lame excuse of the week).
How do store coupons work?
Thanks to Howstuffworks:
The Coupon Process
If you use coupons, you know that when you reach the check out counter, you hand the cashier your coupon(s). The cashier scans them and puts them into the cash drawer. What happens next depends on the store, but here's a typical process. At the end of the day the coupons in each cash drawer are added up as if they were cash, and that amount is added to the cash sum to be sure the overall total for the drawer is accurate. Then all of the manufacturers' coupons (and any coupons issued by the grocer) are sent in plastic bags or pouches to the store's corporate headquarters, typically once a week.

In the big store chains, the value of the coupons can easily total several million dollars per week. There is a person in headquarters in charge of processing the coupons. That person boxes all of the bags of coupons (still separated by the individual stores from which they came) and ships them to a third-party clearinghouse.

This is where the real work starts. The clearinghouse has to sort through millions of coupons, largely by hand. The first goal is to separate the coupons by manufacturer. Another goal is to separate coupons with scannable UPC codes from damaged (torn, smudged, etc.) coupons. This is so much hand work that some clearinghouses pay other clearinghouses -- in Mexico, for example -- to do part of the work. One system places scannable coupons face up on a conveyor belt, where they are moved along under a scanner that reads the UPC codes and tallies the amounts, then adds up the total value of each manufacturers' coupons. Damaged coupons that can't be scanned have to be sorted by hand and added up separately. The other system is to do the whole thing by hand. The clearinghouse then sends all the sorted coupons with an invoice to the manufacturer.

Several things can happen here. The manufacturer might reimburse the clearinghouse for the amount of the invoice, and the clearinghouse will send a check to the store for the amount of the coupons. Or the manufacturer will send a check directly to the store and the store then pays the clearinghouse. The clearinghouse is paid a certain amount per coupon by the store, plus shipping and handling. The whole cycle takes about a month. In many cases, the manufacturer will recount the coupons to avoid fraud -- a process that may send the coupons through another clearinghouse!

This is another great example of how a simple idea -- "let's give people a little scrap of paper that they can redeem for 25 cents off a can of beans" --turns into a whole lot of work for somebody!



Thanks to Jenny @ SS (can't name her site per AFC policy)
I get a lot of comments and questions every week asking if the stores are going to get reimbursed for a certain coupon or if they will lose money on a deal. It is also becoming a peeve of mine to see people say that we should not get free items because we are going make them stop issuing coupons. So, I decided to give us all a crash course in how coupons are redeemed by the store.

The Life Cycle of a coupon:

1. The manufacturer decides to run a coupon program and sends the coupon to a design agency that handles coupons.

2. You acquire the coupon through the paper etc.

3. You use the coupon, the store takes the coupon

4. The cashier adds up her coupons and cash to make sure the drawer balance.

5. The coupons are then bagged by the store and sent to the corporate office where all the coupons from all the stores are put into a bigger bag and sent to a big clearing house. Publix and Kroger use one overseas… (note some stores do this in house)


6. The clearing house puts all the coupons that are in good condition on a big conveyor belt and they are scanned, then an automated process sorts them by manufacturer and prepares an invoice for the manufacturer.

7. They are mailed from the clearing house to the manufacturer for reimbursement.

8. The manufacturer receives the coupons and an invoice stating how many are there (think thousands). They then pay the bill. Some will recount to check for clearing house fraud and then pay the bill.

**The stores have on average 6 months past the expiration date to submit a coupon to the manufacturer – while you should not plan to use expired coupons unless allowed do not fret, they will still get their money**

How the stores get their money:
•They can be paid directly by the clearing house – then the clearing house gets reimbursed from the manufacturer
•They can pay a handling fee to the clearinghouse and they get a check from the manufacturer
Reimbursement also includes .08 per coupon to cover handling fees and the manufacturer’s reimburse postage costs!

Now for the details we care about:

If the coupon scans in the store odds are it will also scan in the big clearing house’s automated machine – thus the store should get reimbursed.

If the coupon doesn’t scan, is damaged etc. it is labeled “hard to handle” and is hand processed. If it is the coupons fault (poor design, bad barcode etc.) the grocer can then charge the manufacturer a higher handling fee!

The store does not have to submit any information about what you purchased with the coupon. Therefore if you use a Prego coupon on Pepperidge Farm Toast (because the cashier told you too) the manufacturer will only care/notice if Publix submitted more Prego coupons than the amount of Prego they purchased. Since Publix purchases thousands of jars of Prego per year the odds they would have more coupons than product are pretty slim.

When does the store “lose” money?

Some Manufacturers have poor practices with redemption that has nothing to do with the consumer, claiming falsely that coupons are not eligible for one reason or another.

Copies/fraudulent coupons- After a coupon goes through the clearing house and is sent to the manufacturer the manufacturer can still deny the coupon. Internet printables that have unique numbers (coupons.com or smartsource) make it easy for the manufacturer to spot fraud. If a coupon does not have a unique number or security code then the manufacturer will usually accept the coupon (within reason - bad copies even a cashier should catch). Why? Because the store’s corporate office has a chance to challenge any denial and if the manufacturer cannot prove fraudulent use then the store will win the challenge.

Again remember you are talking about thousands of coupons from each store. Don’t think they are sitting around analyzing them (unless they are one of the bad companies which will falsely deny them anyway).

Store coupons:

These are processed in house. First, most people assume these coupons are the store being nice and just giving you money off an item… let’s think about that. This is a business guys, it’s not about being nice.

Stores are reimbursed for “store coupons” through various options:

•The manufacturer can pay an advertising fee to place their product or coupon in the store flyer
•The manufacturer can work out a discounted deal for X product, the store then decides instead of making the product the discounted price for everyone, to require customers to submit a coupon to get that price. This is the best plan overall, most shoppers would not care or know about the coupon so they only have to sell the product at the discounted price to a small percentage of shoppers. Therefore they make money on the other shoppers.
Fake Example (profit widely inflated): Fresh Express Bagged Salad gives Publix a discounted rate of $1 per bag for 500 bags. Publix decides to sell the bag for $3 and to put a coupon in the flyer for $2 off.
100 customers buy the salad with a coupon
400 customers buy the salad without a coupon ($2 profit per bag for Publix)
In the end: Publix gave 100 customers the salad without making any profit, however overall they made $800 off the deal.

•Lastly the store can have a special reimbursement policy with the manufacturer for the store coupons. So they are handled like actual manufacturer coupons above.
The only time they are not getting reimbursed for these coupons in some way is if it is for a house brand item. Keep in mind those are the items they make the most money on so they still aren’t out anything.

In closing: I hope that gives you some idea of how coupons are handled. The intention of this post is not to encourage improper use of coupons only to make some realize that the use of coupons puts money back in the pockets of grocery store. We are not taking these stores to the cleaners. They are doing just fine. About 10% of American’s shop with coupons (effectively), they get their money back from us through reimbursement programs. 90% of Americans pay through the nose for groceries and they keep the profit always growing for these stores. While profit numbers for 2008 are not out yet, for 2007 Kroger had net profit of $1.18 billion up 15% from 2006, and Publix had a net profit of $1.2 billion for 2007 up 7.9% from 2006.

Last edited by CountryFan; 01-01-2010 at 11:01 AM.
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  #2  
Old 01-01-2010, 10:42 AM

RE: How stores get paid for coupons....

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This is good info, It is nice to know what happens after i hand them the coupon, I always wonder , I wouldnt want my local store to go out of business because of my coupons i use everyday
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Old 01-01-2010, 10:51 AM

RE: How stores get paid for coupons....

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That's true, the stores make money when we use coupons.
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Old 01-01-2010, 10:51 AM

RE: How stores get paid for coupons....

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Wow never thought it was that involved just for a little scrap of paper. Thanks for all the valuable info.
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Old 01-01-2010, 11:58 PM

RE: How stores get paid for coupons....

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In doing some online research I also came across agreements from major manufacturers concerning Q payments and every last one says the 'retailer' (store) will be reimbursed FACE value. When stores adjust down a Q we use they are actually making even more money.
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Old 01-02-2010, 01:21 AM

RE: How stores get paid for coupons....

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Old 01-02-2010, 01:40 AM

RE: How stores get paid for coupons....

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Old 01-02-2010, 01:41 AM

RE: How stores get paid for coupons....

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This is really good information that every couponer should know, and I'm glad I do now! thank you very much
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Old 01-02-2010, 01:47 AM

RE: How stores get paid for coupons....

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Old 01-02-2010, 06:57 AM

RE: How stores get paid for coupons....

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Just a little bit of info to keep in my head.
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Old 01-02-2010, 07:18 AM

RE: How stores get paid for coupons....

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Thanks for posting!

This also blows the theory that a store also "makes money" on the handling fee. Not true; they first have to pay the fee, then get reimbursed for it by the manufacturer. In all, I'd say allowing coupon use is a headache to the retailer, but a necessary process of doing business (because most grocery stores take coupons).
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Old 01-02-2010, 07:47 AM

RE: How stores get paid for coupons....

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Old 01-02-2010, 07:35 PM

RE: How stores get paid for coupons....

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Quote:
Originally Posted by CountryFan View Post
In doing some online research I also came across agreements from major manufacturers concerning Q payments and every last one says the 'retailer' (store) will be reimbursed FACE value. When stores adjust down a Q we use they are actually making even more money.
HAHAHA That's an interesting bit to know. I've been told TONS of times by managers that when they adjust a Q, they actually have to put it in a different pile so they only get back the adjusted amount.

good to know I was right and they were wrong...
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Old 01-02-2010, 11:25 PM

RE: How stores get paid for coupons....

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OMG, thank you so much for posting this. I have half a mind to print this out and take it to one of the managers at my local WAGS who says, "we are paying you to shop here" when I use coupons and RR and walk out paying next to nothing for my order.

Definately gonna keep this thread just in case he gets on my nerves any more in the future. Ya know, come to think of it, I seriously think this shoud be sent to all of the corporate offices to have them add a separate insert into their Managers hand book so that each and every manager will have to read it so they will finally understand just how couponing really works.

Thanks again
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Old 01-03-2010, 12:01 AM

RE: How stores get paid for coupons....

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Love it! I always like learning the little details, and how stuff works. Now I can give hubby details about how what I'm doing is not robbing the stores! (He calls me Robin Hood-stealing from the rich (stores) to give to the poor (us!)
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Old 01-03-2010, 12:11 AM

RE: How stores get paid for coupons....

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Very interesting thank you for posting!!
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Old 01-03-2010, 06:35 PM

RE: How stores get paid for coupons....

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What happens when stores double or triple coupons? I didn't see that in OP, but I'm guessing the "extra" amount comes out of the store's pocket.
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Old 01-03-2010, 06:49 PM

RE: How stores get paid for coupons....

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Old 01-03-2010, 07:11 PM

RE: How stores get paid for coupons....

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Quote:
Originally Posted by swillson76 View Post
Look at all the jobs we are keeping going. So many people would be without work if we stopped couponing. This is my new motto!
That's Right......it creates jobs!!! That are done by a human being!! ( not machines!!!)
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Old 01-03-2010, 07:16 PM

RE: How stores get paid for coupons....

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Quote:
Originally Posted by CountryFan View Post
As couponers we should understand how Q's are handled once we hand them to cashiers. Knowing the facts gives you the upper hand when cashiers claim they won't get paid because.............(fill in the lame excuse of the week).
How do store coupons work?
Thanks to Howstuffworks:
The Coupon Process
If you use coupons, you know that when you reach the check out counter, you hand the cashier your coupon(s). The cashier scans them and puts them into the cash drawer. What happens next depends on the store, but here's a typical process. At the end of the day the coupons in each cash drawer are added up as if they were cash, and that amount is added to the cash sum to be sure the overall total for the drawer is accurate. Then all of the manufacturers' coupons (and any coupons issued by the grocer) are sent in plastic bags or pouches to the store's corporate headquarters, typically once a week.

In the big store chains, the value of the coupons can easily total several million dollars per week. There is a person in headquarters in charge of processing the coupons. That person boxes all of the bags of coupons (still separated by the individual stores from which they came) and ships them to a third-party clearinghouse.

This is where the real work starts. The clearinghouse has to sort through millions of coupons, largely by hand. The first goal is to separate the coupons by manufacturer. Another goal is to separate coupons with scannable UPC codes from damaged (torn, smudged, etc.) coupons. This is so much hand work that some clearinghouses pay other clearinghouses -- in Mexico, for example -- to do part of the work. One system places scannable coupons face up on a conveyor belt, where they are moved along under a scanner that reads the UPC codes and tallies the amounts, then adds up the total value of each manufacturers' coupons. Damaged coupons that can't be scanned have to be sorted by hand and added up separately. The other system is to do the whole thing by hand. The clearinghouse then sends all the sorted coupons with an invoice to the manufacturer.

Several things can happen here. The manufacturer might reimburse the clearinghouse for the amount of the invoice, and the clearinghouse will send a check to the store for the amount of the coupons. Or the manufacturer will send a check directly to the store and the store then pays the clearinghouse. The clearinghouse is paid a certain amount per coupon by the store, plus shipping and handling. The whole cycle takes about a month. In many cases, the manufacturer will recount the coupons to avoid fraud -- a process that may send the coupons through another clearinghouse!

This is another great example of how a simple idea -- "let's give people a little scrap of paper that they can redeem for 25 cents off a can of beans" --turns into a whole lot of work for somebody!



Thanks to Jenny @ SS (can't name her site per AFC policy)
I get a lot of comments and questions every week asking if the stores are going to get reimbursed for a certain coupon or if they will lose money on a deal. It is also becoming a peeve of mine to see people say that we should not get free items because we are going make them stop issuing coupons. So, I decided to give us all a crash course in how coupons are redeemed by the store.

The Life Cycle of a coupon:

1. The manufacturer decides to run a coupon program and sends the coupon to a design agency that handles coupons.

2. You acquire the coupon through the paper etc.

3. You use the coupon, the store takes the coupon

4. The cashier adds up her coupons and cash to make sure the drawer balance.

5. The coupons are then bagged by the store and sent to the corporate office where all the coupons from all the stores are put into a bigger bag and sent to a big clearing house. Publix and Kroger use one overseas… (note some stores do this in house)


6. The clearing house puts all the coupons that are in good condition on a big conveyor belt and they are scanned, then an automated process sorts them by manufacturer and prepares an invoice for the manufacturer.

7. They are mailed from the clearing house to the manufacturer for reimbursement.

8. The manufacturer receives the coupons and an invoice stating how many are there (think thousands). They then pay the bill. Some will recount to check for clearing house fraud and then pay the bill.

**The stores have on average 6 months past the expiration date to submit a coupon to the manufacturer – while you should not plan to use expired coupons unless allowed do not fret, they will still get their money**

How the stores get their money:
•They can be paid directly by the clearing house – then the clearing house gets reimbursed from the manufacturer
•They can pay a handling fee to the clearinghouse and they get a check from the manufacturer
Reimbursement also includes .08 per coupon to cover handling fees and the manufacturer’s reimburse postage costs!

Now for the details we care about:

If the coupon scans in the store odds are it will also scan in the big clearing house’s automated machine – thus the store should get reimbursed.

If the coupon doesn’t scan, is damaged etc. it is labeled “hard to handle” and is hand processed. If it is the coupons fault (poor design, bad barcode etc.) the grocer can then charge the manufacturer a higher handling fee!

The store does not have to submit any information about what you purchased with the coupon. Therefore if you use a Prego coupon on Pepperidge Farm Toast (because the cashier told you too) the manufacturer will only care/notice if Publix submitted more Prego coupons than the amount of Prego they purchased. Since Publix purchases thousands of jars of Prego per year the odds they would have more coupons than product are pretty slim.

When does the store “lose” money?

Some Manufacturers have poor practices with redemption that has nothing to do with the consumer, claiming falsely that coupons are not eligible for one reason or another.

Copies/fraudulent coupons- After a coupon goes through the clearing house and is sent to the manufacturer the manufacturer can still deny the coupon. Internet printables that have unique numbers (coupons.com or smartsource) make it easy for the manufacturer to spot fraud. If a coupon does not have a unique number or security code then the manufacturer will usually accept the coupon (within reason - bad copies even a cashier should catch). Why? Because the store’s corporate office has a chance to challenge any denial and if the manufacturer cannot prove fraudulent use then the store will win the challenge.

Again remember you are talking about thousands of coupons from each store. Don’t think they are sitting around analyzing them (unless they are one of the bad companies which will falsely deny them anyway).

Store coupons:

These are processed in house. First, most people assume these coupons are the store being nice and just giving you money off an item… let’s think about that. This is a business guys, it’s not about being nice.

Stores are reimbursed for “store coupons” through various options:

•The manufacturer can pay an advertising fee to place their product or coupon in the store flyer
•The manufacturer can work out a discounted deal for X product, the store then decides instead of making the product the discounted price for everyone, to require customers to submit a coupon to get that price. This is the best plan overall, most shoppers would not care or know about the coupon so they only have to sell the product at the discounted price to a small percentage of shoppers. Therefore they make money on the other shoppers.
Fake Example (profit widely inflated): Fresh Express Bagged Salad gives Publix a discounted rate of $1 per bag for 500 bags. Publix decides to sell the bag for $3 and to put a coupon in the flyer for $2 off.
100 customers buy the salad with a coupon
400 customers buy the salad without a coupon ($2 profit per bag for Publix)
In the end: Publix gave 100 customers the salad without making any profit, however overall they made $800 off the deal.

•Lastly the store can have a special reimbursement policy with the manufacturer for the store coupons. So they are handled like actual manufacturer coupons above.
The only time they are not getting reimbursed for these coupons in some way is if it is for a house brand item. Keep in mind those are the items they make the most money on so they still aren’t out anything.

In closing: I hope that gives you some idea of how coupons are handled. The intention of this post is not to encourage improper use of coupons only to make some realize that the use of coupons puts money back in the pockets of grocery store. We are not taking these stores to the cleaners. They are doing just fine. About 10% of American’s shop with coupons (effectively), they get their money back from us through reimbursement programs. 90% of Americans pay through the nose for groceries and they keep the profit always growing for these stores. While profit numbers for 2008 are not out yet, for 2007 Kroger had net profit of $1.18 billion up 15% from 2006, and Publix had a net profit of $1.2 billion for 2007 up 7.9% from 2006.
WOW! It's good to know the process....and what an extensive process for a little slip of paper! But Wheeeee!!! for the fact that it keep's so many people employed! Not only are we saving money for our families, someone has a job! ( In an economy where job's are so hard to come by:-(.......)
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  #21  
Old 01-03-2010, 08:44 PM

RE: How stores get paid for coupons....

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WOW! Thanks for the lesson!!
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  #22  
Old 01-03-2010, 08:52 PM

RE: How stores get paid for coupons....

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Wow thank you, good to know...I pictured the whole process in my mind as I read
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  #23  
Old 01-03-2010, 09:04 PM

RE: How stores get paid for coupons....

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I knew they made money even though they want to make us feel as if we are steeling...(not all, though). Thanks for the great info!!
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Old 01-03-2010, 09:40 PM

RE: How stores get paid for coupons....

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  #25  
Old 01-03-2010, 09:56 PM

RE: How stores get paid for coupons....

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