What Kroger is doing with data about customers in its loyalty program

ARI SHAPIRO, HOST:

Nearly every major grocery store chain has a loyalty program. You get discounts and rewards. The store gets information about what you buy. So what exactly happens to that information? Reporter Jon Keegan of The Markup investigated the Kroger grocery chain, and he found that customer data is worth a lot of money. And the information collected goes way beyond what you buy. Jon Keegan, welcome to ALL THINGS CONSIDERED.

JON KEEGAN: Thanks for having me.

SHAPIRO: Start by explaining what kind of data Kroger collects and how they gather it.

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KEEGAN: Sure. So the kinds of information - what they do is - you know, you have to sign up for a loyalty program card, right? And when you do that, you are sharing some personal information with the company. You're giving them your name, your phone number, your email address, probably your mailing address. That information is then taken and enriched. What they do is they go out to third-party data brokers, and they will take that information you gave them and kind of use it as a key to create a broader profile of who you are as a shopper. This can include demographic information about your race and ethnicity, your financial information, your employment status and even some of your online browsing activity. So it's quite a bit of information that they're collecting. And I think most people, you know, again, they're expecting it's just what types of chips you're buying, but it's actually quite a bit more information.

SHAPIRO: So the grocery store chain gathers all this info, and then what do they do with it?

KEEGAN: So they take all this information, and they sell insights that they derive from analysis back to the brands that sell things in supermarkets. This is extremely valuable information that the brands kind of need to understand not only what items are selling but why.

SHAPIRO: How much money is Kroger making off of something like this?

KEEGAN: Kroger is making quite a bit of money on this right now. So Kroger has its own data sciences company within its corporate structure called 84.51. And this company is part of a group of alternative profit businesses under their umbrella that they expect will make a billion dollars in profit for them per year. So it's quite a bit of money.

SHAPIRO: Should we as consumers view this as harmful, or could it actually be helpful for stores to understand us better so that they can give us more of what we want and less of what we don't?

KEEGAN: Kroger would say that all of the data that they're collecting is helping making your shopping experience better for you. But it comes down to a couple of things. No. 1 - Kroger is taking this information and sharing it with an unknown number of partners. The other thing is that I don't think most people would consider their shopping items to be sensitive information, but you can look in someone's shopping cart and see if they're expecting a child, whether they're buying kosher foods, or you could get hints about their ethnicity or other things about what's happening in someone's household. So this is more sensitive information than I think most people expect.

SHAPIRO: What did Kroger say to you about all this?

KEEGAN: We reached out multiple times to Kroger, and we did not get any response. We reached out to Albertsons. Albertsons is included in this because Kroger and Albertsons recently announced a $24.6 billion merger, which would create the - take the No. 1 and No. 2 supermarket chains in the United States and create this new - you know, the largest supermarket chain in America, which would include half of American households as customers. So Albertsons gave us some information about how they use this stuff. Also, in Kroger's privacy policy and both with Albertsons as well, they say that all the information that they share with third-party companies is anonymized and aggregated, and they take privacy very seriously.

SHAPIRO: So what's your bottom-line guidance for consumers?

KEEGAN: I would say that most people, when - they have to make a decision. When you're entering into this value exchange with a supermarket, it's important to know exactly what you're giving up. And I think the less you know about exactly the extent of that data collection, it may be a less fair value that you're getting. If you're a California or a Nevada or a Virginia resident, you have the ability to opt out of these programs and still use the rewards program. And then if you're in California or Virginia, you can request a copy of your data to see exactly what information is being collected. And if you're worried about being tracked, we talked to some experts, and they said the best thing to do is not sign up for the rewards program and pay with cash.

SHAPIRO: Is that what you do when you go grocery shopping?

KEEGAN: Well, I don't pay with cash. But I do not give my number to the - for a rewards program, although my wife and I have a disagreement about that.

SHAPIRO: That's Jon Keegan of The Markup. Thanks for your reporting.

KEEGAN: Thank you very much. Transcript provided by NPR, Copyright NPR.