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U.S. Merchants Know Their Customers - Too Well, Critics Charge

By Tilman Streif     May 21, 2001 in Technology
SEATTLE (dpa) - Imagine this: a database that knows all your buying habits, including whether you purchase more beer than milk and more chips than potatoes. This frightening vision of an all-too-well informed Big Brother, seemingly straight out of Orwell's "1984", has become a reality for many U.S. shoppers already.

"You can save money right now, just fill out the form," says James, the friendly clerk at a Seattle, Washington store of the national Safeway chain. The form records the applicant's name, address, birthday and telephone number, and in return for filling it out, the store customer instantly receives a generic card.

Cashiers recently started handing out these plastic cards, which ake their owners official members of the "Safeway Club". The grocery store offers discounts on many products for cardholders - "all without cutting coupons", a brochure says, as if the time-honoured ritual of U.S. bargain hunters were a dreadful chore.

Only the tiniest print on the brochure reveals the true reasons for the generous offering of an instant and free club membership: "Purchases made using the Safeway Club Card will be automatically recorded."

The grocery store chain thus has joined a growing group of U.S. merchants, who accumulate data about the buying habits of millions of shoppers. The reason: providing customers with "information that may be of interest to you", as the Safeway brochure politely states.

Knowing a customer's address as well as his phone number, together with his or her buying habits, is every advertiser's dream.

It is now possible to target the customer with specific ads for products he or she might be interested in. A long list of vegetable purchases thus would result in the customer receiving a special offer to try a new meatless pizza, for example.

This type of customized advertising increases the amount of annoying "junk mail" U.S. households receive on a daily basis, on top of the usual phone calls by phone solicitors marketing credit cards or magazine subscriptions.

Also, weak U.S. privacy laws do not forbid trading the customer information for money. In a recent case, it became known that the grocery store chain Giant Food was giving away information about its customer's purchases at the in-store pharmacy to marketers. The chain stopped this practice only after newspaper reports.

While store chains like Safeway insist that they will not share the information about their customers with third parties, privacy advocates point out that this decision could theoretically be reversed immediately without legal consequences.

The fact alone that digital databases are recording the brand names of every toothpaste, cereal and battery a customer buys is a troubling thought. After all, hackers in the past have gained access to far more secure networks than those of grocery stores.

Data thieves who got access to top-secret Pentagon files probably will not have much trouble finding out which health problems you treat with over-the-counter medications purchased at your local chain store.

The international Wal-Mart chain, based in Bentonville, Arkansas, has pioneered a network of computer systems that are the envy of the retail world. The company's systems record sales, inventory, and are also full of information about customers' buying habits.

With its system, Wal-Mart can fill an individual store's shelves with just the right merchandise for the clientele of that specific store. The chain's systems also keep track of the entire contents of individual customer's shopping carts.

There is intense competition among other merchants to learn as much as possible about Wal-Mart's closely guarded system.

The Arkansas retail giant recently sued companies like the Seattle, Washington Internet bookseller Amazon.com and accused them of poaching some of its key technology workers.

Wal-Mart was seeking unspecified damages from the accused merchants, who allegedly hired 15 former Wal-Mart employees because of their intimate knowledge of the retailer's legendary computer systems.

Amazon.com defended itself in an interview with the Seattle Times newspaper against the charges, insisting the company was "not interested in other people's trade secrets".

But observers have noted that with its recent expansion into other retail areas apart from just books, including music, videos and holiday gifts, Amazon.com has demonstrated a will to be the "Wal-Mart of the Internet".

Having an already well-tested computer system in place that helps learn all about one's customers certainly helps in such an endeavour.

Privacy advocates are fighting a loosing battle on the Internet, where anonymous shopping is impossible, since the merchant only sells to customers who have revealed their names with their credit card information.

But at least in the non-virtual world, there are still ways to dodge the system.

For those U.S. grocery customers who wish to get the club-card- based discounts and still want privacy, a simple lie does the job - why not fill out the application, receive the club card instantly and then go shopping as "A. Smith"?
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