New York ? Just swipe the card at the checkout register and get a discount on tomatoes or toothpaste, or whatever the specials are. You save money and the store builds a record that lets it know how to serve its best customers.

Loyalty cards have been around for a few years now, and supermarket and drug store chains like CVS and Winn-Dixie are beginning to reap the benefits.

With a massive amount of data being collected on shoppers, from the types of soda they buy to whether they like to shop late at night, merchants are getting smarter at tracking consumer trends. And they’re changing their merchandise, store layout and advertising accordingly to keep their most loyal customers spending.

A few examples:

l CVS Corp. launched its loyalty card program in February 2001 and discovered that cosmetic buyers are its best customers. So beauty products have been put up front in a third of the stores, instead of being relegated to the back corners.

l Food Lion, a division of Belgian food retailer Delhaize, started offering loyalty cards in 1995 and now is stocking up on peppers, cactus leaves and plantains in its Charlotte, N.C., stores to better serve Hispanic customers from the Caribbean.

l Winn-Dixie Stores Inc., which began rolling out a loyalty card program in March 2002, can now measure the impact of ads on top customers, and knows the 25 items that attract the most loyal shoppers. It expects to make some changes in merchandising, as needed, according to Joanne Gage, senior director of consumer marketing services.

But while stores insist these cards — now embraced by almost half the supermarket chains — only help keep loyal customers satisfied by having the right products at the prices they want, some privacy advocates contend there’s a dark side.

Privacy issues

Every time consumers swipe, they say, they give up their privacy.

“They’re not saving devices, but data collection devices,” argues Katherine Albrecht, director and founder of Consumers Against Supermarket Privacy Invasion and Numbering, a consumer privacy advocacy group.

A cashier scans a Food Lion MVP card at a cash register at Food Lion grocery store in Charlotte, N.C. With massive data being collected on shoppers using the cards, merchants are getting smarter at tracking consumers' shopping behavior.

Larry Ponemon, founder of a Tucson, Ariz.-based privacy research institute bearing his surname, said stores are already selling information to diet centers, manufacturers and marketing companies, though he declined to give names. Company officials from Food Lion, Winn-Dixie, Stop & Shop, CVS and other big chains deny they sell the information to other parties.

The supermarket industry stands to benefit the most from loyalty cards because consumers shop there an average of 2.2 times a week, but convenience and apparel stores are among other retailers that are embracing them.

By swiping these cards at the register, consumers are able to get the weekly discounts advertised on certain products. In many cases, customers can get a card without giving their names or addresses, but they won’t be mailed coupons for extra discounts, customized according to their buying habits. For example, shoppers who buy a lot of baby products may get extra discounts on diapers.

Retailers estimate that 20 percent of their shoppers account for 80 percent of store sales, so finding out what their best customers want is essential. By simply scanning purchases, stores track what’s selling, but when that data is tied to loyalty cards, merchants obtain richer information on who is buying what.

“This is the prized asset of supermarkets’ future,” Ponemon said.

Even services that may seem helpful to consumers could be a way to get them to spend more, he said.

Two years ago, for example, Ahold’s Stop & Shop teamed up with a now-defunct technology company called SmartMouth Technologies in Watertown, Mass., to provide a nutritional profile of customers, based on the types of foods they buy. Customers punched in their card numbers on SmarthMouth.com and were able to retrieve data about their buying history, along with healthier alternatives. The test was short-lived because of SmartMouth’s financial problems.

Ponemon suspects these nutritional programs are just a way to push low-fat foods that actually have a higher sell rate than other versions.

But Kelly O’Connor, a Stop & Shop spokeswoman, said the program was only used for nutritional purposes and “all information was destroyed.”

Mixed views

Despite criticism from privacy groups, Michael Sansolo, senior vice president of the Food Marketing Institute, the supermarket trade association, argues that “the acceptance of loyalty cards among consumers is still there.” He said the cards are particularly popular with working women and that the system is “working well ethically. “

Shoppers like Kathy Posner, a 49-year-old Chicago resident, freely gives stores such as CVS and Walgreen’s her name and home address to get all the extra coupons in the mail.

“I like that my purchases at a supermarket or drugstore are tracked, because that ensures that the store stocks the items I like,” she said.

But Suzanne Grant, a 36-year-old Plano, Texas, resident, said she resents having to “give away personal information in order to get the best deals everywhere.”

In fact, she gives out bogus information, including a false name and address, when filling out an application.

“I may miss out on some offers in the mail, but I’d rather keep my address and phone number private,” she said. “They may have my shopping patterns, but they can’t tie the info to me.”

Stores said they’re seeing increased spending among their top consumers as they learn to better personalize the data, though executives declined to disclose details.

CVS reported “a pronounced” increase in spending among its customers who are active in the loyalty card program, according to company spokesman Todd Andrews. The drug store has about 34 million card holders, roughly half its customer base, and Andrews said more than half of purchases are made using the loyalty card.

These loyalty cards, he said, give CVS an opportunity to pitch related products to consumers and sell more units of some products, based on their buying patterns.

Furthermore, in addition to learning that cosmetics buyers are the best customers, the data mined is helping officials figure out behavior such as whether customers buy vitamins by brand or by the vitamin itself. He declined to comment on the results.

“This really helps you drill it down,” he said.