"Gang-Cut" coupons hurt stores, manufacturers and consumers
What is a "Gang-Cut" coupon?
Whether you're familiar with the term or not, it's a problem that has plagued the coupon industry for decades. However, with coupon usage on the rise, gang-cut coupons are again causing issues for manufacturers and retailers alike.
"Gang-Cutting" refers to the practice of stacking multiple, like insert pages on top of one another, then cutting through the entire stack at the same time, either with a scissors or with a paper cutter. While this would seem like a time-saver to consumers, gang-cutting has a long, darker history as it relates to stores.
Many years ago, manufacturers were having problems with stores gang-cutting coupons from unsold newspapers, then turning them in for reimbursement. It had gotten so bad that one organization estimated that over 108 million coupons were redeemed fraudulently annually -- and that was back in 1977!
In a sting operation almost worthy of its own feature film, the industry fought back. Targeting an area in New York where gang-cutting and fraudulent redemption was suspected to be rampant, a new "manufacturer" offered a new product in the coupon inserts - Breen Laundry Detergent. The trouble was... Breen detergent did not exist. The 25-cent Breen coupon was designed solely to catch organizations that were gang-cutting inserts and submitting all of the coupons for redemption.
And cut them, they did. Over 117,000 coupons for the non-existent Breen detergent were submitted for redemption from that single ad campaign, giving investigators specific information as to which stores, retailers and firms were gang-cutting on a massive scale. (At the ACP conference, presenter Ron Fischer, founder of Redemption Processing Representatives, actually had one of these Breen detergent coupons in his hand while telling this story!)
What does this have to do with today's consumers?
The Breen sting raised awareness that large-scale gang-cutting and misredemption existed. Manufacturers naturally decided that they did not want to redeem gang-cut coupons, as gang-cutting was indicative that the coupons had not been distributed directly to customers in the newspaper. Gang-cutting still exists today, but the spotlight is also on consumer gang-cutting.
Gang-cutting is of concern to manufacturers for several reasons. One, if a number of identically-cut coupons are submitted for redemption, the manufacturer may assume that the coupons have been sold to the consumer, either via a clipping service or via Ebay auctions. Because resale of coupons violates the terms that the manufacturer has set, the manufacturer can (and often does) refuse to reimburse the store that submitted the coupons. Even if one single customer legitimately did buy 42 bottles of ketchup, if their 42 ketchup coupons are gang-cut, each coupon will bear the same cut lines, shape and markings as the one before it. If the coupons are identified as gang-cut, they're flagged, and the manufacturer does not have to reimburse.
How does the redemption agent identify gang-cut coupons, when thousands of loose coupons are processed each day by clearinghouses? Debbie Settle of Inmar, one of the largest redemption agents and clearinghouses in the country, gave a detailed presentation about the "life" of a coupon, from the time it's created until the time it reaches the clearinghouse. Along the way, several automated systems are designed to identify gang-cut coupons and remove them from the mix.
While most coupons are shredded at the end of their "life cycle," gang-cut coupons don't make it that far. They are identified, grouped together, and pulled from the rest of a retailer's particular submission. Again, because their gang-cut appearance indicates that the coupons may have been sold by a third party, the manufacturer does not have to reimburse. These coupons aren't shredded -- instead, they're kept together and filed for one year with the redemption agent as evidence. At that point, if the store wishes to be reimbursed for them, they may enter a back-and-forth process of having to show legitimate sales for that number of product at their store or location. This Proof-of-Purchase Analysis takes time and effort, and understandably, retailers may not wish to spend additional resources on it -- is it worth the store's time to chase the lost revenue on a case-by-case basis, paying one of their own employees to go back, audit and provide evidence for each claim? If they accept the manufacturer's decision, the store does lose money on the coupons that they accepted but will never see revenue from.
How many gang-cut coupons indicate a problem to the redemption agent? During the conference's presentation on misredemption, we were shown numerous slides of gang-cut coupons that had been identified and filed - examples of physical misredmption. The largest like number of gang-cut coupons shown on one slide was 113. The smallest? 12.
For consumers using coupons, many of whom purchase multiple newspapers to maximize their savings, the issue of gang cutting is important to understand. It is entirely plausible, feasible, and likely that one person choosing to buy ten newspapers, then stacking the pages together to cut them all at once, believes that their coupons will be accepted and redeemed by the store. But, that same store may ultimately never see the revenue from those coupons, simply because of the way that they were stacked and gang-cut.
While manufacturers are concerned with gang-cutting, stores are too. During the ACP conference, a panel of retailers held an open question-and-answer session with the industry audience. Representatives from Shop-Rite, Winn-Dixie and other large supermarket chains stated that the interest in "Extreme Couponing" has also resulted in an increase in gang-cut coupons appearing at their stores -- and they're not being reimbursed for many of them.
One retailer representative stated that they have tried to discourage "extreme couponers" from patronizing their stores, because they are also a chain that doubles coupons. When someone comes in with a large amount of gang-cut coupons, which are then doubled, the store is both losing money on the doubling (which the store "eats" and is not reimbursed for) but they then lose again when the shopper's gang-cut coupons are denied for reimbursement.
Another retailer said that they have tracked their "extreme couponers'" shopping habits throughout various store locations within their chain. He said that the store's closed-circuit television system has the ability to zoom to "fingernail level" and see what coupons are being redeemed at the register by calling up the date of a transaction on a computer screen and clicking that day and time's video. He said that they can also "follow" the same shoppers' path, again via in-store video, as the shopper goes from store to store to store, using up more multiples of the same coupon, often clearing the shelves in the process.
Rite Aid made some waves within the coupon community in March of this year, when it added this line to its revised coupon policy: "Rite Aid reserves the right to deny redemption for coupons that exhibit signs of misrepresentation, including, but not limited to: “gang cut”(coupons presented in bulk that appear to have been cut by machine – a form of coupon fraud), similar cuts and tears..."
Additionally, Kroger rattled Texas coupon shoppers when they recently announced that they were discontinuing coupon doubling in their Houston-area stores. While their press release did not explicitly state the reason for ceasing doubling, numerous consumer coupon boards voiced extreme couponing as a contributing factor. And, considering the retailers' statements made at the conference, stores are indeed feeling the sting of not being reimbursed for gang-cut coupons. It's a double blow if they're losing on the doubling as well.
Over the past month, shoppers from around the country have emailed to state that some of their local stores have begun limiting shoppers to the number of like coupons per transaction -- and the limits are small, 2 or 4 like coupons per transaction per day. This trend was first noted in late 2010 on the manufacturers' side, when Procter & Gamble added the "Limit 4 like coupons per transaction" text to its manufacturer coupons.
Where does this leave consumers?
It's important to understand how strongly the manufacturers and industry want to see the resale of coupons ended. During the Coupon Information Council's presentation, gang-cutting and coupon resale were also discussed, and retailers were advised to deny any coupons at the register that appeared to have been gang cut. Retailers were even told to deny coupons if shoppers casually mentioned that the coupons "came from Ebay." (Again, if the manufacturer ultimately denies them at the clearinghouse, they're not going to see credit for them anyway.)
It does leave consumers in an odd situation though. If I want to buy 10 of an item during a "10-for-$10" sale, and I have legitimately obtained 10 coupons from buying 10 newspapers, I don't want to hurt the store I'm shopping at by giving them coupons that they might not be reimbursed for. I've also never been a gang-cutter. I stack my inserts together in the same file folder pocket, then flip through individually -- but again, I usually have 2-4 sets of inserts most weeks, depending on whether I got a couple of extra papers or stuck to the copies I subscribe to. I'm an avid coupon user, but certainly not an extreme one.
The "best-practices" approach to help ensure that your store will receive redemption for the coupons you're submitting is to simply cut the coupons you use, individually, with scissors.
I realize this article's bound to rattle some heavy coupon users who've become accustomed to using scrapbook slicers or single-blade paper cutters to gang-cut their coupons -- certainly, many coupon sites around the web advocate these practices to save time and labor. Others go a step further, encouraging users to staple the inserts together in the middle of the coupon, then cut around it - resulting in a stapled stack of identical coupons. Unfortunately this practice provides the clearinghouse and the manufacturer with even more evidence that a group of identical coupons were cut by the same person -- and further raise the likelihood that the store will not be reimbursed for them.