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Here we find the value to the consumer of a book of S. & H. green stamps based on what the same merchandise would cost if bought from a mail-order catalog, in a California department store, and at a California discount house.

Even at discount-house prices, each book of stamps is worth $2.56. Again, it is quite evident that stamps do have value to the consumer.

The number of items he used as the basis of comparison are given in the next column.

You will note on this computation he finds that a value of a book of green stamps ranges from $3.21 in a leading mail-order catalog to $2.56 at discount-house prices, or a range, if you like it in percentage, of 2.67—roughly 2.66—percent savings down to a little over 2 percent savings.

In summary I have tried to establish these points:

First, trading stamps represent a fair and highly effective form of competition. They are a type of promotional activity, and promotion is essential to a competitive economy.

Second, the evidence points to the conclusion that the giving of stamps does not allow a retailer to raise his prices. As a matter of fact, it is my own opinion that the competition of stamps results in lower prices in nonstamp stores, and therefore gives savings even to the consumer who does not save stamps.

Third, the evidence does not support the claim that trading stamps are an important factor in increasing retail failures.

Fourth and last, trading stamps do have value to the consumer. That consumers recognize this fact is amply demonstrated by the way they patronize the stores which give stamps.

In fact, the great growth of trading stamps in this country is but further evidence of the flexibility of a competitive economy. And what a competitive system does for the standard of living of those fortunate to live in such an economy is no longer subject to debate.

I appreciate the opportunity of appearing before you, Mr. Chairman and members of the committee.

If I can answer any questions or be of aid to the committee in any other way

I

am at your service. (The exhibits referred to are as follows:)

EXHIBIT I

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EXHIBIT II

PERCENTAGE COMPARISON OF AVERAGE BLS. FOOD PRICE INDEXES FOR 15 STAND
CITIES AND 5 NON-STAMP CITIES JAN.1950-DEC.1956 (Indexes were comerted to an 1951 hasa)

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1950
1951

1953 1954 1955 1956
SBURG Computed from all head Price Indexes
di lenta, Bottinese Roston Home Park, Priladelphia

, Pitsburgh, Scranton

, Crinati Cleveland, Detroit Houston,
Kansas City
, ilimecoolis St Lossis and Portland

Albert Haring
2 Hashianina

, OC Chicago, Los Angeles Sarfrancisco and Setting

Makica Yoder

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EXHIBIT VI

RETAIL FAILURES IN SELECTED FIELDS

1947-48:49 Compeired with 1954.55-56
NUMBER OF FAILURES

INDEX OF FAILURES
CITIES

ORY GOODS
FOOD DRUGS

EGEN MOSE

FOOD 194745 184.56 407-16 1954.56 1947 19 19A 3 K749 19545k 1991-491954-56 9 13 2. 25 Cities

564 1370 69 164 79 179 100 243 100 239 100 26 Cities with no stamp activity 79 91 24 86 32 85 100 113 100 358 100 266 Chies with little or no

stamp activity in 1947-48-497
but heavy activity in 1954-55-56 88 92 25 36 30 43 100 105 100 144 00 143

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VALUE TO CUSTOMER OF 1200 SEH GREEN STAMPS, 1956

No. of

Value of S&H Coupon Book
Standard of Comparison Identical Items

Compared

in dollars

as % of purchases

(*120 per book) Leading mail order catalog 102

3.21

2.67
Northern California
Department Store

70
3.16

2.63
Northern California
Discount House

63
2.56

2.13

SOURCE : 1956 studies of Dratessor Eugene R. Beem, School of VI Business Administration, University of California.

Mr. ANFUSO. Thank you very much. I am afraid there will not be too much time for questioning if we are going to listen to the other witnesses.

Mr. COOLEY. Suppose you have two drugstores in a rural area. One of them uses stamps, the other does not.

The second store, realizing the competition is too keen, starts using stamps, so both are using stamps.

Where is the value to anybody?

Mr. PHILLIPS. The answer to that, sir, lies in the fact that the pulling power of the stamps varies just as the pulling power of other promotional things vary.

In other words, those two stores could not be offering the same kind of stamps.

Mr. COOLEY. Why?

Mr. PHILLIPS. Because the stamp company would not let them both use the same kind, if they were competitors.

This is just like a newspaper. It cannot sell the same place space to two different rent competitors.

There is only that one space available for sale, and therefore, trading-stamp companies offer their services to people who are in competition. And the whole impact of the trading stamp is that two people who are not directly in competition could not offer exactly the same thing. One would have one kind of stamp; the other would have another kind of stamp.

Mr. COOLEY. What is the real value of the trading stamp in our distribution system in this country?

Mr. PHILLIPS. I think the major advantage of the trading stamp is, as I suggested here, that it is an important way a retailer has, as in many other things, to attract people to his store. That is the key thing which the trading stamp does. If it fails to do that, it is of no value to him.

Just like advertising of any kind, the purpose of it is to attract people to the store.

Mr. AnFuso. In the example given to you by Mr. Cooley, the competitor, in order to meet that competition, also uses stamps. He can use another company's stamps and then it equalizes.

Mr. Phillips. Not if the stamps have different pulling power, which is frequently the case. There are in the United States, I think you mentioned this morning, three to five hundred stamp companies. Those vary widely in their ability to attract people to the store. They vary widely just like motorcars put out by different manufacturers.

Mr. ANFUSO. Your company may offer more in exchange for the stamps than the other.

Mr. PHILLIPS. Exactly.
Mr. Anfuso. That is where the competition lies?

Mr. PHILLIPS. Exactly. There is just as keen competition among stamp companies--just as keen competition—which leads directly, Mr. Chairman, to another point that was made this morning.

About 5 percent, I think it was said, of the stamps were not redeemed. That is a large profit to the stamp companies.

We must remember that these companies are in competition for the sale of their services. If one starts making a lot of money everybody will get into the field and they will reduce the price at which they license their services to the various retail stores.

Nr. ANFUSO. Thank you very much.
Mr. Galub, from Schenectady, N. Y.

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STATEMENT OF WILLIAM GALUB, PRESIDENT OF CENTRAL

MARKETS, INC., SYRACUSE, N. Y. Mr. GALUB. My name is William Galub. I am president of Central Markets, Schenectady, N. Y.

We operate a chain of 18 supermarkets in and around the capital district of your State. .

First I want to thank you gentlemen and ladies for hearing my side of the stamp controversy.

I want to make one thing clear before I read my statement into the record and have you ask questions.

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