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Why do stores honor competitor coupons?

Couponing seems simple enough - until you take a closer look. Shoppers learning to Super-Coupon come up with all kinds of questions. Here's a good one:

Q: "Your column explaining how stores are reimbursed for coupons made me think about whether or not I should use one store's coupon at a competing store down the street. For example, I received a coupon good for a $5 discount on a $30 grocery purchase at Store A in my area, but I used it at Store B, since they will honor it. But don't both stores lose in this case? I can't see Store A reimbursing Store B for this coupon. And I can't see Store B even bothering to submit the coupon to Store A. How does this work?"

A: Many store coupon policies contain provisions for handling a competitor's coupons. You're certainly not the only one to wonder exactly what happens when you redeem one store's coupon at another store.

Your store-issued "$5 off $30" coupon is different from a manufacturer's coupon. Coupons are always labeled at the top, either "Store Coupon" or "Manufacturer Coupon." When shoppers use a manufacturer coupon, the manufacturer of that particular product reimburses the store for the full face value of the coupon plus a few additional cents to cover the coupon-processing costs.

Stores cover the cost of their store-issued coupons. Whether the store issues its own coupon for $1 off an item or $5 off your entire shopping purchase, no one reimburses the store when that coupon is used. The store eats the cost, absorbing the coupon's discount as an incentive to draw in customers. Coupons like these are considered a cost of doing business and the stores budget accordingly, just as they do for advertising or other expenses.

Many stores will honor a competitor's coupon even when they receive no reimbursement. Why? They want to keep our business. Rather than lose a sale to a competitor across town, they honor the other store's coupon. They may "lose" $5 on a single transaction but they also ensured that you purchased quite a few of your groceries at their store, which the store made a profit on. They lost a little to retain your business today and possibly in the future. Shopper loyalty is very important to any store.

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