Before loyalty cards or discount apps, trading stamps dominated the American retail market. Anyone over the age of 50 either had firsthand experience collecting them or knew someone that did.
This incentive trend—once described simply as “those little pieces of gummed paper”— began in 1891 at Schuster’s Department Store, a famous Milwaukee retail chain. These stores used stamps to reward customers paying for purchases in cash rather than credit (many retailers still give discounts for cash purchases). It was a monumental success across America.
How did trading stamps work?
Spend so much money, get so many stamps. Bring the stamps home. Paste the stamps into small books. Browse the items available in the trading stamp catalog. Mail in or turn in the completed books. Receive your item. Repeat.
If you ever collected these stamps and read that, you can remember the sickly-sweet glue coating your tongue as you pasted sheet-after-sheet into the cardboard booklet’s pages. That taste tattooed itself into several generations’ memories. Horror writer Stephen King’s first “good” short story told of a beloved son trying to buy his mother a new house with trading stamps…and going mad licking the millions of gooey, pink squares to get it.
The popularity of trading stamps exploded with the birth of the gas stations and supermarket chains, giving households the ability to earn the same brand of stamps at different locations. National brands like the S&H Green Stamps could be earned at thousands of locations across the country.
The marginal cost (around 2% of a store’s gross sales) in joining these trading stamp programs didn’t phase retailers or customers. Consumers didn’t want low LOW prices (in a thriving economy). They wanted more stamps. In 1966, stamps had become a $1.1 billion business; our country produced more trading stamps than postage stamps. Exchange rates changed over the decades, but just before their popularity declined in the 1970s, shoppers earned an average of one stamp for every ten cents spent. Each book of S&H Green Stamps, the most popular brand by far, held 1200 stamps.
What Killed the Trading Stamps?
The American consumers’ obsession with trading stamps peaked then plummeted in the 1970s. A nationwide recession and rapid inflation didn’t help, but the 1970s energy crisis marked the beginning of the end for trading stamps. Starting with gas stations and branching out into retail outlets, Americans started preferring lower prices to stamp sheets and full-color catalogs.
Trading stamps also began giving banks—and Uncle Sam—headaches. They were privately-printed money, owned either by the distributing retailer or by the issuer. In fact, these stamps had evolved into a form of scrip, or substitute for legal tender. The Federal Trade Commission witnessed a black market for trading stamps emerge, with redemption locations accepting “payments” in stamps from competitors.
For the FTC, that was the end. The US government sued S&H Green Stamps in 1971, introducing a new term to the American business world: “the unfairness doctrine.” Specifically, S&H’s absolute hold on the stamps, spelled out on the cover of every redemption book, granted the consumer no rights when it came to stamps. S&H’s militant position might be understandable for a smaller business, but by the early 70s, trading stamps were a billion dollar branch of the retail market.
“The only right which you acquire in said stamps is to paste them in books like this and present them to us for redemption. You must not dispose of them or make any further use of them without our consent in writing…If the stamps or the books are transferred without our consent, we reserve the right to restrain their use by, or take them from other parties.”
~Printed inside the cover of each S&H Green Stamp booklet
Trading Stamps are Mostly Dead
While trading stamps have technically disappeared, companies still use abstract versions of them. Buy some gas and a Speedy Freeze at your nearest Speedway, don’t forget your Speedy Rewards card. American Airlines established its popular AAdvantage program in 1981, rewarding frequent flyers for their loyalty by (eventually) offering free flights. Within just eight years, Walgreens, the second largest pharmaceutical chain in the US, implemented two loyalty programs: Balance Reward Points, which they tweaked and rebranded myWalgreens.