Blue Chip Stamps
Encyclopedia
Blue Chip Stamps started as a trading stamps company called "Blue Chip Stamp Co." They were a competitor to S&H Green Stamps
. Blue Chip stamps was a loyalty program
for customers, similar to discount cards issued by pharmacies and grocery stores in the digital era. A customer making a purchase at a participating store (typically grocery stores, gasoline stations, and pharmacy chains) would be given stamps in proportion to the size of the purchase. The stamps would be issued by machines next to the cash register
. The customer would paste the stamps (which could be licked or moistened with a sponge, like postage stamps) into books. Pasting a large number of stamps into books could be time consuming. The books could then be taken to a special redemption store and redeemed for merchandise, such as lawn furniture, dining tables, table ware, and many other items. The redemption stores did not keep a full inventory of items, but would order from a catalog on behalf of the customer.
The loyalty program
was paid for through the overall pricing of goods in the participating stores. When the recession of 1980 hit, cost cutting caused the program to lose popularity, and the growth of credit card transactions competed for retail margins. As computerization developed, less cumbersome loyalty programs were developed. These programs required less of a customer's time and also had lower operational costs: they did not require retail outlets for the redemption of stamps, and the discounts often were restricted to the products offered by the participating stores, i.e., the participating stores were discounting merchandise that they would keep in stock even without the reward program.
action against Blue Chip Stamp. In 1967, the parties agreed to a consent decree
which led to the creation of a new company "Blue Chip Stamps".
In 1975, a lawsuit filed by Blue Chip Stamps was decided by the Supreme Court in the opinion Blue Chip Stamps v. Manor Drug Stores
. This ruling helped establish the precedent that only buyers or sellers of securities can file suit for damages due to deceptive practices.
Berkshire Hathaway
, the investment vehicle of Warren Buffett
, began investing in Blue Chip Stamps in 1970. Berkshire's investment in Blue Chip went from 36.5% in 1977, to 60% in 1979, and finally merged in a stock swap in 1983.
According to Buffett's 2006 letter to Berkshire shareholders, Blue Chip had 1970 sales of $126 million as about 60 billion of "stamps were licked by savers, pasted into books, and taken to Blue Chip redemption stores." He also said, "When I was told that even certain brothels and mortuaries gave stamps to their patrons, I felt I had finally found a sure thing." Sales dropped to $19.4 million in 1980 and $1.5 million in 1990. In 2006, revenues came in at $25,920.
. Blue Chip later acquired 100% of See's for an overall price of $25 million.
Wesco Financial Corporation is currently an 80.1% owned subsidiary of Blue Chip Stamps.
S&H Green Stamps
S&H Green Stamps were trading stamps popular in the United States from the 1930s until the late 1980s. They were distributed as part of a rewards program operated by the Sperry and Hutchinson company , founded in 1896 by Thomas Sperry and Shelly Hutchinson...
. Blue Chip stamps was a loyalty program
Loyalty program
Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behavior — behavior which is potentially beneficial to the firm....
for customers, similar to discount cards issued by pharmacies and grocery stores in the digital era. A customer making a purchase at a participating store (typically grocery stores, gasoline stations, and pharmacy chains) would be given stamps in proportion to the size of the purchase. The stamps would be issued by machines next to the cash register
Cash register
A cash register or till is a mechanical or electronic device for calculating and recording sales transactions, and an attached cash drawer for storing cash...
. The customer would paste the stamps (which could be licked or moistened with a sponge, like postage stamps) into books. Pasting a large number of stamps into books could be time consuming. The books could then be taken to a special redemption store and redeemed for merchandise, such as lawn furniture, dining tables, table ware, and many other items. The redemption stores did not keep a full inventory of items, but would order from a catalog on behalf of the customer.
The loyalty program
Loyalty program
Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behavior — behavior which is potentially beneficial to the firm....
was paid for through the overall pricing of goods in the participating stores. When the recession of 1980 hit, cost cutting caused the program to lose popularity, and the growth of credit card transactions competed for retail margins. As computerization developed, less cumbersome loyalty programs were developed. These programs required less of a customer's time and also had lower operational costs: they did not require retail outlets for the redemption of stamps, and the discounts often were restricted to the products offered by the participating stores, i.e., the participating stores were discounting merchandise that they would keep in stock even without the reward program.
History and background
In 1963, the United States government began an antitrustAntitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
action against Blue Chip Stamp. In 1967, the parties agreed to a consent decree
Consent decree
A consent decree is a final, binding judicial decree or judgment memorializing a voluntary agreement between parties to a suit in return for withdrawal of a criminal charge or an end to a civil litigation...
which led to the creation of a new company "Blue Chip Stamps".
In 1975, a lawsuit filed by Blue Chip Stamps was decided by the Supreme Court in the opinion Blue Chip Stamps v. Manor Drug Stores
Blue Chip Stamps v. Manor Drug Stores
Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 , was a decision by the United States Supreme Court, which ruled that only those suffering direct loss from the purchase or sale of stock had standing to sue under federal securities law....
. This ruling helped establish the precedent that only buyers or sellers of securities can file suit for damages due to deceptive practices.
Berkshire Hathaway
Berkshire Hathaway
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years,...
, the investment vehicle of Warren Buffett
Warren Buffett
Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as "legendary investor, Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is...
, began investing in Blue Chip Stamps in 1970. Berkshire's investment in Blue Chip went from 36.5% in 1977, to 60% in 1979, and finally merged in a stock swap in 1983.
According to Buffett's 2006 letter to Berkshire shareholders, Blue Chip had 1970 sales of $126 million as about 60 billion of "stamps were licked by savers, pasted into books, and taken to Blue Chip redemption stores." He also said, "When I was told that even certain brothels and mortuaries gave stamps to their patrons, I felt I had finally found a sure thing." Sales dropped to $19.4 million in 1980 and $1.5 million in 1990. In 2006, revenues came in at $25,920.
Acquisitions
On January 3, 1972, Blue Chip obtained a controlling interest in See's Candy ShopsSee's Candies
See's Candies is a manufacturer and distributor of candy, particularly chocolate, in the western United States. It was founded by Charles See, his wife Florence, and his mother Mary in Los Angeles, California, in 1921. The company is now headquartered in South San Francisco, California...
. Blue Chip later acquired 100% of See's for an overall price of $25 million.
Wesco Financial Corporation is currently an 80.1% owned subsidiary of Blue Chip Stamps.
External links
- William J Kozersky Stamp Company commercial site with pictures of Blue Chip Stamps, and much information