CPGmatters: Counterfeit Surge Could Tip Redemption Imbalance to Larger Chains
Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
Two different worlds in coupon redemption widen the competitive imbalance between larger and smaller retailers - and add to the ongoing fiscal pressures on CPG manufacturers.
On one hand, large retailers have the muscle to be paid within 15 days and gain leeway with payers on questionable coupons submitted. They also have the nerve to take invoice deductions off of CPG supplier invoices if agents don't pay them quickly enough.
On the other hand, independents and smaller chains get relatively shabby treatment even if they are ethical and comply with payer requirements. One example: it takes 30 days for them to either be paid on redeemed coupons, or at least notified of a discrepancy that prevents such payment. Then the real fun of proving legitimacy begins. That could draw out over months or years because the reason for refusal to pay isn't called out, so it requires investigation before an appropriate challenge can get underway.
Similarly, CPG suppliers are hurt by unannounced invoice deductions taken by large retailers that are supposed to equate to the value of coupons redeemed that remain unpaid. Retailers that do this don't often articulate the reason, which leaves the CPG challenged to identify it as a coupon deduction. The CPG then has to go to the retailer's portal, look up the debit memo number and find the retailer's 'support' of the deduction. However, that only gives the dollar amount and invoices involved, not the reason, such as counterfeit or otherwise illegitimate coupons. The CPG then has to investigate within its own systems or the payment agent's system.
So explains Ron Fischer, president and founder, RPR Redemption Processing Representatives, which recently settled a claim on behalf of a retailer that began in 2006. That time stretch is unusual, but it signifies the cash flow impact such disputes could have on smaller store operators, or conversely on CPGs.
A sudden rise in counterfeit coupons could tip industry imbalances even further in favor of larger chains, suggests Mr. Fischer, because the unregulated industry operates largely on voluntary guidelines. Trading partners that don't want to take losses will pick on whomever they can. That would mean smaller retailers and smaller CPG manufacturers that lack the resources and the will to fight back.
The non-profit Coupon Information Corporation (CIC), Alexandria, Va., posted images on its website (www.cents-off.com) of approximately 100 new counterfeit coupons in January 2010. This compares with an average of six per month throughout 2009, observed Mr. Fischer.
"Some manufacturers will pay a retailer if counterfeits are in small quantity because they realize stores accept them in good faith and there aren't any instant cashier-level alerts that exist today," he explained. "RPR (www.rpr-coupons.com) issues e-mail alerts to member retailers with images of counterfeits. But the problem is getting the notification down to floor supervisors and cashiers to keep them from accepting coupons that look good to the naked eye."
Discussion Questions: Do you see possible industry-wide solutions to issues surrounding coupon redemption? Do you agree that it is tougher for smaller stores versus larger ones? What particular problems have you seen on the vendor side?