Another Consumer Burden — The Darker Side of Web Loyalty Programs

The latest, pervasive consumer burdens spreading widely on the Internet are the so-called Web Loyalty campaigns that have been, until recently, a significant income earner for a shockingly long list of major online shopping sites including 1800Flowers, Buy.com, Classmates, Continental Airlines, Expedia, Fandango, Hertz, Orbitz, Priceline, Redcats USA, Shutterfly, Travelocity, U.S. Airways, VistaPrint and many other ultrahigh volume, online retailers.

Since July 2009, federal investigators in the U.S. have been probing three companies in particular: Affinion, Vertrue and Webloyalty. If you've shopped online, you've likely seen Webloyalty, Affinion, and Vertrue's efforts in the form of a secondary transaction page which pops up asking if you're interested in 'cash-back', coupon or discount offers against future purchases. All you have to do is enter your email address and that's the end of it, or so it appears. The problem is that what you've actually signed up for (merely by entering your email address — no other information) is a regular monthly charge by Affinion, Vertrue and Webloyalty of anywhere from $4-$20 on the credit card you supplied to the original retailer or site from which you made a purchase prior to seeing that pop-up offer. In other words, Affinion, Vertrue and Webloyalty, many online retailers, and the bank which issued your credit or debit card, are all in cahoots.

Check your credit card statements right now for those small recurring charges. All such charges and the associated so-called loyalty programs have fallen under the uncomfortable scrutiny of the U.S. Senate Committee on Commerce, Science and Transportation.

Back in August, Affinion, Vertrue and Webloyalty denied any wrongdoing and argued that their services offer users savings and are valued by many subscribers. In my opinion, the three companies have only offered what sound to me (and, I think, to most members of the Senate committee) like rather vapid responses.

Subsequently, Webloyalty announced late in August that it would henceforth require in all its ads and pop-ups that customers enter the last four digits of the credit or debit card used in the previous/current transaction to confirm their agreement to pay the membership fees. Affinion similarly altered its requirements in November. New, more extensive and clearly worded language is being added to the pop-ups which specifically explain that you're about to sign up for a recurring charge. Visit Webloyalty and Affinion Group to find out more about the so-called loyalty industry of which these companies are a part. If you don't like what you read, complain loudly.

Caveat emptor big time. These companies contribute nothing to the world. They create profits without providing a service, without manufacturing anything, and without actually doing much of anything. They convince you to sign up to pay a recurring monthly fee for something they have determined quite accurately that most of us will forget about the moment we navigate off the web page. Will the 'cash-back', coupon or discount really work at some point in the future if you do remember you've got it? Yes — but only if the server is available, the campaign hasn't ended, and the item or service you've chosen next time actually qualifies. Remember though that as usual, and not unlike the rebate dodge in which retailers rely on the fact that almost 65% of rebate coupons are never sent in, the vast majority of people who willingly or inadvertently sign up for web loyalty programs either forget about the deals, lose their access codes, or never have an opportunity to take advantage of any legitimate deals simply because they don't do the required kind of shopping, all the while still paying a small monthly charge for long periods of time. Don't let down your guard either, because Affinion, Vertrue and Webloyalty aren't giving up this money maker without a fight. Their whole loyalty business model is based in my view on not fully presenting consumers with the reality of recurring monthly charges, as opposed to providing consumers with the sort of fully informed consent that actually reads and feels that way.

As of this writing, Continental Airlines, US Airways, Priceline and VistaPrint have cut ties with Affinion, Webloyalty, and Vertrue. I suspect, more bad press and more consumer pressure will convince other online retailers to get either out of the web loyalty business or devise yet another surreptitious approach.

This latest online headache got caught because a few sharp-eyed consumers started questioning recurring charges appearing on credit and debit card statements. Make no mistake though. In my view, Webloyalty, Affinion, Vertrue and the retailers and banks with which they partnered, never believed for a moment that the income stream (in the tens of millions of dollars) would go on forever. They knew the programs would be questioned eventually, and that the government would slap them all on the wrist, waggle its finger and admonish them to not do it again. No punishment and no penalties. In the meantime they've all made their money, so it's on to the next scam.

Some people will note that almost every Affinion, Vertrue and Webloyalty sign-up page contains informative, consumer language in the fine print. If a few people inadvertently sign up, then complain loudly when they see the recurring charges, caveat emptor and too bad for those people. It is when hundreds upon hundreds of consumers began to complain that the effective visibility and comprehension of the consumer language on the sign-up pages was called into question. To Affinion, Vertrue and Webloyalty I say shame on all of you. Find something better to do with your ideas.

Danger! Buying a Digital Camera from a Private Online Discounter

Horror stories abound, many of them true, about consumers who have been ripped off by private online digital SLR camera discounters. The usual entry point starts with an ad on a private discounter's web site offering a digital SLR for $50 to $100 less than the same model being sold by the big name online digital SLR camera dealers such as B&H Photo-Video, Adorama, Cameta, Henrys, Vistek, Camera Canada and so on.

The major online retailers originate mainly from major brick & mortar dealers. They are entitled to and take advantage of the best volume pricing breaks from the camera distributors. The majors also negotiate shipping deals with carriers such as the postal service, FedEx and UPS. So how is it possible for much smaller online retailers to undersell the big boys? The answer is obvious. Either the discounters are selling everything at a slight loss, or more likely, the discounters are making up the price difference somewhere else. That last part is the key.

Recently on the DPReview discussion forums poster named PixelDave asked "Have any of you ever used these guys [CentralDigital.com]? Seems like they have an OK rating on reseller ratings and are selling the D300 for $1629 - 4%. Just wondering if they are safe." I responded to Dave with the following (edited slightly here for context).

"You've really got to read their D300 info page carefully. Note that the so-called Starter accessory package includes the camera battery . . . for an additional $90. The Starter accessory package does not supply an extra battery — just the one that is supposed to be in the camera box. That means the camera box itself does NOT contain the standard (excellent) battery that is supposed to be there. CentralDigital is a complete ripoff in my opinion. The other items in the Starter accessory kit seem to be all garbage including what I'll bet is a useless/glacially slow no-name 4GB CF card.

$1629 + $90 (you NEED a battery for the camera) works out to $1739, but OOPS — B&H Photo is selling a real D300 package (complete with the proper battery, charger and cables as supplied by Nikon) for only $1699. I wonder if CentralDigital will also try to sell you the stock cables and the charger as 'extras' too?

Who knows what other additional charges CentralDigital might try to add to your credit card for packing, handling and shipping."

In the same thread, DavidH wrote to point out that "Amazon reseller, Ray M. supervisor $1650, have over 50 D300s in stock. (orig over 100 a few days back-all USA). We were leary of NY [discount online] camera stores, but trusted Amazon. Fast extra courteous service, no lip or hard sell. These guys want business and good reputation."

Okay . . . maybe. But if these units are grey market items without a Nikon USA warranty, it's not a deal for the US-based customer. If the units are in fact domestic market inventory and supplied with the full Nikon USA warranty then it's a good deal. The original poster has to compare warranty, shipping & handling, all the items supplied in the box, the total retail price and the return policy (in case he receives a defective unit) in order to do an accurate comparison. The major US and Canadian online retailers make it easy to sort this stuff out. The discount guys don't. Neither do Amazon and eBay with their rather limited amount of space for resellers, retailers and private sellers to list product details. On eBay, half or more of almost every listing is composed of endless disclaimers and threats to potential false or flaky bidders.

Adorama (on Amazon) currently shows what looks like a great Nikon D300 package which includes all the usual stuff in the box (camera, battery, charger, USB cable, A/V cable, manual, LCD shield) plus a value pack containing a 2GB CF memory card, a spare EN-EL3e Lithium-Ion battery, Lowepro holster-style case, Mack 3 year extended warranty, digital remote shutter release, and Nikon Understanding Digital Photography with Nikon SLRs DVD, all for $1829.

There's lots to compare, but it's clearly a better deal than anything offered by the private online discounters.

I don't blame or fault small businesses in any way — guys who are flogging excess inventories at low prices, legitimate small camera dealers who are cutting margins razor thin to try to build some market share and so on. But if any problems arise, I think consumers are often not as well served by the private online discounters because the discounters can't (and often won't) handle two-way traffic of any kind (returns, refunds, missing items). The hard sell you may receive from a private online discounter trying to force you to purchase a battery (sometimes at an inflated price!) that is supposed to be included with the camera, service delays or non-existent service (in the event of delivery problems or receipt of a defective camera) can end up turning what initially appeared to be a $50 or $100 'saving' into an aggravating mess.

If consumers insist on saving every possible dollar, good for them. But when dealing with private discounters, deal locally — or at least some place close enough to where you live so that in the event of problems you can reach out and touch someone.

Check every online digital SLR camera deal carefully. Use the well-established online retailers as a baseline.

1. Go to the camera manufacturer's web site to find out exactly what is supposed to be included in the package
2. Go to B&H, Adorama, Cameta, Henrys, Vistek and Camera Canada to find out how the big guys are competing on price.
   
3. Check the package contents list on each of the major sites you're using for comparison.
   
4. Check the shipping fee to your address. Note that the major online retailers don't charge any sort of handling or packaging fee.
   
5. Armed with all of the foregoing start comparing prices at the private discounter sites. Add any and all the 'extras' to the listed price to get to the real item cost. Then add the private discounters' typical packaging (that's right - some private discounters want to charge you for the shipping box), handling (again - some private discounters try to charge you a fee to actually pack the camera for shipment), and shipping fees.
   
6. Last, if you ever find a private discounter or a smaller corporate online retailer who can legitimately beat the big guys, visit reseller ratings and the BBB web sites (among others) to see if there have been any serious complaints.
   
7. When reading complaints about retailers, try to filter out the complaints which are obviously made by uninformed consumers or outright liars who tried to con a retailer but couldn't get away with it.

BIG IMPORTANT NOTE: A major digital SLR camera purchase can cost upwards of $2,000. That's a lotta dough. If you're going to spend 8-10 hours or more trying to sort out the best price online, ask yourself if the time will be better spent driving/traveling to the nearest major shopping city in order to personally visit a bunch of camera stores. Armed with your best legitimate online price, you may be able to get the retailer to meet or beat the deal. If so, you'll also be able to try out in-store the camera you're actually taking home.

The best way to set up a personal comparison shopping tour of local or regional camera stores is to get on the telephone and ask each store if the product you want is in stock. Check the store hours of operation, then use a map to set up the most logical route from store to store. Set aside some time for lunch. Smart consumers do everything possible to put their hands on the expensive item they're considering buying. In the process, talking to as many retailers face-to-face as possible and previously interacting online in some of the great discussion forums at DPReview and Nikonians (there are many others), you'll be able to make an informed confident, affordable purchasing decision.

Buyer Beware!