Why Retailers Won't Let Us Just Buy in Peace

BOSTON (TheStreet) -- You'd think $1.98 worth of shoelaces at a Payless (PSS) shoe store would be too small a purchase to inspire a request for a phone number at the checkout.

Even though a customer at the adjacent line happily gave their digits we, unable to quickly recall a fake phone number from The Rejection Hotline, merely explained that we'd rather not.

No matter where you shop, retailers want to know more about you, with phone numbers and ZIP codes being the least of it. There are reasons they can't just sell you an item and say goodbye.

The moment felt far more awkward than it rationally should have. After all, no good can come from giving our home phone to a shoe store. "Hi, Joe, this is Payless ... look, we're moving next weekend and we were wondering if you could swing by to help? We'll have pizza and beer!"

Is it really too much these days for us to just be able to shop in peace? Why is it so hard to just pay for a purchase and go our merry way without being harangued for personal information that would be more in line with a mortgage application?

Buying a speaker cable at Radio Shack ( RSH) -- the longtime trend setter in customer annoyance -- we had to repeatedly decline an extended warranty, credit card offer and request for home address. At a Borders bookstore, up until hours of that location being shuttered as part of the chain's bankruptcy measures, we were still asked to do ourselves a favor and pay $20 for a preferred customer discount card. Declining the offer elicited the sort of reaction one would get by admitting that they enjoy strangling puppies.

Think of the gauntlet one has to run at Best Buy ( BBY). First a worker tries to upsell you. Then useless Geek Squad add-ons are dangled -- even if one has been computer literate since the fresh-faced teen in a blue vest was no more than a come-hither glint in his daddy's eye.

Then -- after beating back offers for "optimization" and refusing to believe there is nothing stock that hasn't been left unmolested in its box, unsullied by Geek hands -- you get the extended warranty pitch. Translation: "We sell crap and it is gonna break."

Off to the cash register, where there are yet more offers to extend the warranty. Then there is a request to sign up for a preferred customer card. There is also the opportunity to add 18% interest to our purchase by applying on the spot for a credit card. Finally, there comes the "good news" that we can "qualify" for a trial subscription to a variety of magazines.

By the time you make it back to the car, you'll need a bottle of Gatorade and a B-12 shot. When did being a paying customer become so taxing?

The answer is actually obvious. With consumer confidence still shaky, and post-recession spending habits still relatively frugal, stores need to do all they can to maximize their return on every sale and entice you back for more. All the data they collect helps them track your purchases and target future offers. The data could potentially be sold to earn a bit more, and the revenue from credit cards, warranties and magazine partnerships help hedge against revenue drops.

In a recent interview, Michael Norris, a senior analyst for publishing industry-focused Simba Information, explained that it is a smart move for bookstores such as Borders and Barnes & Noble ( BKS) to promote membership fee-based rewards cards. Those who pay tend to become more frequent, loyal customers, he said. To get their full money's worth, they shop and spend more.

The Best Buy annual report released in April offered insight into its often annoying practices.

"The 1.1% comparable store sales decline in the services revenue category was due primarily to a decline in home theater installation, partially offset by modest increases in our sales of extended warranties," it reads. Commissions from the sale of extended warranties represented 2% of revenue in fiscal years 2011, 2010 and 2009.

Various states have laws on the books limiting what information stores can request from their shoppers.

California, for example, enacted laws back in the 1970s prohibiting the demand of "personal identification information" upon making a credit card transaction. The intent, back in the days of carbon copy swipes, was to keep this information from falling into the hands of fraudsters if it was written on transaction slips. In 1991, the law was amended to ban even a nonbinding "request" for this information. In an age of database compilation, the law has been invoked in numerous class-action suits and taken on a role in privacy protection battles.

"It is the strictest in the world, to my knowledge," says Lothar Determann, a Palo Alto-based principal of the firm Baker & McKenzie who practices and teaches international technology, commercial and intellectual property law. "I advise a lot of companies with respect to global data privacy, and often there is this perception that there isn't much in the way of privacy laws in the U.S. and that Europe has much stricter laws. But the reality is that we have some very pinpointed laws, and this one is surprisingly strict."

"There are a few other states, such as New York, that have similar statutes, but they are not as strict because they allow this with consent from the individual consumer, which I think is more reasonable," says Determann, who specializes in data privacy. "In California, it has been worded so broadly, and both the legislative history and court decisions support this really strict reading, which means nobody can answer this stuff. As a result, it is actually not that easy to run loyalty programs here in California."

In February, the California Supreme Court agreed that the retail chain Williams-Sonoma ( WSM) broke state law by asking customers for their ZIP codes, ruling that doing so was in violation of the state's Song-Beverly Credit Card Act of 1971. In response to the ruling, more than 150 lawsuits have been filed against numerous retailers, including Wal-Mart ( WMT) and Target ( TGT).

"In the decade since class-action lawyers have 'discovered' this law, in most of the suits the company's settle. The typical way a settlement goes is that the company pays $1 million-plus to the plaintiffs' attorneys, and then the class gets some coupons or something that is seldom redeemed. The companies then realize that they shouldn't be asking or this information."

In Massachusetts, a class-action lawsuit has also been filed against the craft store chain Michaels Stores for collecting ZIP codes during credit card transactions and using the data for marketing purposes.

Determann says many retailers "don't know what they are doing" when it comes to data collection.

"That's still the case, even though there is so much litigation over this now," he says. "I still get pretty reputable, large retailers who ask me about this."

He recalls how recently, during a presentation, he asked a client about their practices. "Oh, we don't collect this at all," was the answer.

"Then, after the meeting, I went to their flagship store, bought some stuff and they asked for my email address. I asked the cashier whether she did this just for me and she said it's common practice. I immediately emailed the legal department and said, 'Guys, you need to put a stop to this, otherwise you may get sued over it.' It is very prevalent, and its very hard for the companies to get a handle on it."

-- Written by Joe Mont in Boston.

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