Why Stores Don’t Lose Money on Coupons


This post may contain affiliate links. Please see Full Disclosure Policy for more information.
Coupons vs. Stores

Coupons - Why Stores Don't Lose Money on Them

A lot of people that are new to couponing and don’t know the ropes email me asking how the stores are “able to stay in business.”  I think that there is a common misconception that the stores are losing money like crazy due to the use of manufacturers’ coupons.  The truth of the matter is that this couponing craze should have store revenues at an all time high!

Why Stores are NOT Losing Money

To understand how the stores aren’t losing money, you have to understand that coupons are really another form of payment.  When you pay with cash, check or charge and walk out of the store, are you concerned about the profitability of the operation as you pack your groceries into your car?  I think not.  If that’s the case, why would a coupon be any different?  When cash and checks are deposited into the store’s operating account, the account is credited with the amount of the deposit.  When credit cards and debit cards are run, the total volume of sales is dumped into the store’s account nightly as well.  With coupons, the reimbursement is a little more prolonged, but the store is rewarded.  The stores are reimbursed by the manufacturer for all of the coupons that are tendered.  In addition to the face amount of the coupon, the store is given a flat .08 handling fee in most cases.  That equals 8% on a $1 coupon, 16% on a .50 coupon and 32% on a .25 coupon.

How much effort is there involved with a store taking coupons that they deserve that type of reimbursement?  The real answer is, not much.  Cashiers will handle cash and checks more times than they will a coupon and yet there is no “handling fee” associated with either.  Stores actually have to pay a fee to run credit cards and debit cards, which reduces the gross profit on each credit/debit sale by a specified percentage of the total.  With coupons, however, the store is actually given the face value of the coupons PLUS a handling fee.

So Do Stores Ever Lose Money?

Coupons - Why Stores Don't Lose Money on Them Fire PhotoA store makes/loses their money in the buying process, not the selling process.  Stores negotiate volume deals at discounted rates with the manufacturers that supply them.  Their goal is to run some of the merchandise on sale, while holding some of the stock for after the sale in an effort to generate an enhanced profit margin when the product returns to retail price.  As long as the store has solid buying/ordering practices, they will make money when the merchandise is sold, regardless of the medium the customers use to pay for their items.

With more and more coupons being redeemed, the stores are selling more and more goods.  Further, they are getting more and more handling fees, which is nothing more than “extra padding” in a sale they would have been happy to make for cash.  If you follow this explanation, you will begin to understand why it is frustrating that some stores will not allow you to use your coupons on clearance items.  Also, why would stores limit the number you use in a transaction?  Aren’t they really just limiting the top line revenue that they would be able to achieve if they embraced couponers?  The stores that have firm policies that are built around the correct way to use coupons are making money hand over fist in this economy.  They are able to plan ahead and make sure that demand will be met with ample supply.  After all, the grocery business is not a business that makes its money on high margins.  Sales volume is the cure-all for any issues with their operations which would otherwise be sticking points.

I Never Would Have Turned Down Coupons

I remember my days of running stores.  If I wanted more payroll hours, I had to “sell more.”  If I wanted to do store improvements, I had to “sell more.” If I wanted to add a grocery delivery to assure that perceived demand could be met, I had to “sell more.” How did I sell more?  I encouraged people to shop in my store.  Not just people that paid with cash, check and charge.  I embraced those customers that shopped with coupons because I knew that they were in my store to do some serious shopping.  I wanted to help them, but for selfish reasons.  I wanted the extra money I got for taking their coupons.  The truth is, I knew that stores don’t lose money on coupons and now you know too!

~David




Comments

  1. Recently I have noticed that the people at CVS are uber stressed. No one knows the policies, no one seems they enjoy working there. They are shutting down the registers at 8 when they close at 10..which puts shoppers in a difficult position…I actually walked out and left my purchases on the counter due to another change in random policy making last week. WE SIMPLY WANT TO KNOW THE RULES.. Many times CVS will run out of their ad items within a day. We are allowed to get a raincheck on that item and if the coupon we have expires during that run of the sale until we can purchase the item, usually a couple of weeks..they will still take the coupon. I have had 3 stores work with me on this and then all of a sudden one of the managers at one of the stores decided this was not ok for a relative of mine to do. The same manager made cracks about how CVS was going to crack down on coupon use & the shows on tv were not helping & basically..we are a hassle. I was told by one of the cashiers that if they take a coupon they aren’t supposed to take..the “system” kicks it back and they have to take a loss. Is this true? How on earth would they be able to track every single coupon? I used a correct coupon..it was their computer that beeps..and it beeps often for many people..we see it on how to videos all the time. So it wasn’t the coupon and it was not a customer friendly statement to make. Can you please clarify some of these issues since you have experience working in the industry? Thanks

    • The Wizard says

      They can’t track every single coupon. The only way that they would run into an issue is if there were a coupon audit. The chances of that used to be slim and none but now, they are probably increasing. As for your experience at CVS, that sounds more like poor leadership. The store manager is the one that sets the tone for the whole store. If they have a negative attitude toward couponing, it will extend to the whole staff. Sad, but true.

  2. Sarah Fletcher says

    What about stores that double coupons? Don’t they lose money that way? According to an insider a few stores in my area may stop doubling coupons.

    • The Wizard says

      Stores that double coupons don’t necessarily lose money, they just don’t make as much. When they develop their bi-annual budgets, they project a certain amount of money for coupon doubling. That is one of the reasons that you see stores limiting doubling to a certain number of coupons. I can assure you that store’s policies are not allowing them to lose money. While it is a little more difficult to project, you have to remember that 7-8 out of every 10 shoppers use no coupons at all and pay full price. There is enough margin in their orders to cover the spread. In addition, some chains have cooperative marketing money from manufacturers that they can tap into.

Speak Your Mind

*

92d3fe425d250a07f0690e7b9446fd75d36d34df8c1539a41f 92d3fe425d250a07f0690e7b9446fd75d36d34df8c1539a41f