By Timothy W. Martin
Wall Street Journal

Feb. 25, 2009

Before heading to the grocery store, Miranda Wilcox jumps online, where she scours for coupons on half a dozen Web sites bookmarked on her computer.

Ms. Wilcox, a 32-year-old mother of two from Greenville, N.C., prints out some of the coupons. Others she uploads directly onto her supermarket rewards card. Recently, Ms. Wilcox shaved nearly $50 off a $120 shopping bill with the help of coupons she found on the Internet.

"If you can spend about 15 to 20 minutes online, you can save a lot of money," says Ms. Wilcox, who so far says she has persuaded her friends and aunts -- but not her mother-in-law -- to look for online discounts. "They load it right onto your card, so I don't have to hassle with all the clipping," adds Ms. Wilcox, who started clipping coupons when her first child was born in 2004.

Conditions what they are, more shoppers are using coupons to stretch their grocery budgets. In the past four months, coupon usage has surged about 10%, according to Inmar Inc., a coupon-processing agent. And increasingly, shoppers are skipping the scissors and getting coupons online or having discounts sent to their smart phones and rewards cards.

Currently, online coupons account for 1% of all coupons offered nationwide -- but their use is growing quickly, with redemptions jumping 140% last year, according to Inmar. Manufacturers are attracted to digital-coupon delivery in part because of its 13% redemption rate -- far above the 1% redemption rate for coupons found mostly in newspaper inserts, on the back of sales receipts and on product packaging.

The recent uptick in coupon usage does little to reverse an overall decline that began years ago. In 1992, 7.9 billion coupons were redeemed, according to Inmar estimates. (The company processes about half of the country's coupons but compiles data for coupon usage overall.) In 2008, 2.6 billion coupons were used. Part of that decline can be attributed to a robust economy in the mid- to late-1990s. But coupons also lost some appeal after the emergence of supermarket loyalty programs, whereby shoppers sign up for a card to get discounts at the cash register.

Stores are jumping further into the high-tech end of couponing. Last month, Kroger Co. said it would go national with its free text-messaging coupon program, a service provided by Cellfire Inc.

Dan Keefe, who works for a technology firm in Cincinnati, signed up for Cellfire last fall. Now every Sunday, Mr. Keefe, 46 years old, checks his BlackBerry for deals, such as the 50-cent discount on a package of Kroger-brand cheddar cheese he recently received. Clicking on a link in the text message tells Kroger's computer system to add the discount when Mr. Keefe's loyalty card is scanned at check-out.

"It's a lot better than going through all the mountains of coupons in the Sunday paper," Mr. Keefe says.

In the Northeast, grocers Stop & Shop and Giant Food, both units of Netherlands-based Royal Ahold NV, have begun offering shoppers at 180 stores handheld scanning devices that subtotal the bill and make a "ka-ching" noise when shoppers get offered a discount for an item similar to things they've bought in the past. For example, a customer buying tortilla chips could get an alert about a sale on salsa, or a cereal lover might receive a "buy one, get one free" discount.

The scanner, called Scan It!, clocks more than half a million shopping visits each month and will nearly double its usage at the two grocery-store chains after a 100-store expansion is completed this spring. Developed by Modiv Media Inc. of Quincy, Mass., the Scan It! records the purchasing habits -- though not the name -- of an individual customer from the past 65 weeks. More than 70 consumer-goods manufacturers have signed up to have discounts appear on the handheld device, which shortens shopping trips by 12 to 15 minutes because customers bag items as they go, the company says. Despite the faster check-out time, customers spend 10% more, the company says.

Grocers and packaged-food companies view this pinpoint digital advertising as a way to improve customer loyalty, draw more foot traffic and fuel overall sales. Customers see the marketing as a way to find bargains they might otherwise miss.

Online coupons are also being scoured for untapped discounts. Coupons.com, a site that offers coupons from large food manufacturers and national grocers, says its users printed out online coupons valued at $300 million last year, an increase of 140% from 2007. Based in Mountain View, Calif., the company predicts the total will triple this year, partly because of the recession.

Brian Weisfeld, chief operating officer of Coupons.com, said the company recently closed a deal in which its discounts will run on KMart's Web site.

General Mills Inc. last year accelerated its spending on digital couponing, according to Karl Schmidt, director of promotion marketing. He says the company, which runs its deals on Coupons.com, pays only after a customer prints out a deal. Also, General Mills can have a coupon online in a week, compared to the two months it takes with print media.

For now, the future of grocery coupons -- regardless of how they're delivered -- remains unclear. One factor that may be holding coupons back is that the promotions are weaker than they used to be. In 1990, the average expiration date was 4.9 months. Now the average is 2.5 months, according to Charles Brown, vice president of marketing at NCH Marketing Services Inc., a coupon clearinghouse. Also in 1995, about 13% of coupons required shoppers to buy two or more items; now, it is 27%.

Nonetheless, shoppers are still looking for deals. Loren Sampson, a 31-year-old freelance creative director for food manufacturers, cuts out coupons the old-fashioned way, even though high-tech methods may be more convenient. "I really like clipping coupons," Ms. Sampson says. "It feels like something I'm doing extra that other people aren't doing."

In the end, the work has helped shoppers claim a piece of the $317 billion in coupon savings that were distributed last year, according to Inmar.
"People are looking for every opportunity to save money," says Jim Hertel, managing partner of Willard Bishop LLC, a supermarket consultant. "There are a lot of potential savings that people have not taken advantage of."