When asked whether the cost of living crisis had contributed to the surge in loyalty card registrations, Tesco chief executive Ken Murphy told reporters: “ You'd be crazy to shop without a club card.”
Shoppers were looking for lower prices and at Tesco they could get them by scanning their club cards. Last year, the number of Clubcard members exceeded 20 million.
It's not just Tesco: Sainsbury's added 3 million new Nectar card customers last year, bringing its total membership to 18 million.
More than eight in ten, according to a recent Mintel survey UK residents have at least one loyalty card. A fifth of them said they were part of four or five programs. About 14 computers contained six or more cards.
Loyalty schemes have grown in popularity as supermarkets have followed Tesco's lead and overhauled their promotions, offering members cheaper out-of-the-box prices rather than focusing on points that can be redeemed in the future.
The savings often seem small. significant. According to data compiled for the Telegraph by Assosia, a basket of seven branded essentials at Tesco will cost 19% less when using a club card. This equates to a £5 discount on a £26 in-store purchase.
Sainsbury's has a similar picture. According to the Association, Nectar cardholders can save 18 percent on their cart by swiping their cards on products such as Heinz baked beans, Anchor butter and Andrex toilet paper.
Tesco and Sainsbury's lead the way when it comes to offering the widest range of ready-made member discounts, although other supermarkets are now rushing to back their own loyalty schemes.
Still, although lower prices for members seems like good news for buyers, regulators aren't so sure. Amid a broader push to stamp out any kind of profiteering in the food market, this month's competition & The Markets Authority (CMA) will begin a review of how grocers use loyalty card prices.
Chief executive Sarah Cardell said in November that offering discounts only to loyalty card holders raised a number of questions about competition at the supermarket. sector.
The watchdog is expected to examine whether the schemes make it more difficult for shoppers to compare supermarkets to find the best prices, given the two-tier pricing system for members and non-members.
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Discounters claim that loyalty cards hide prices. Aldi UK boss Giles Hurley told The Telegraph this weekend that customers wanted “clear and transparent prices so they know how much they're spending long before they get to the checkout.”
“We've seen Hundreds of thousands of customers have turned to Aldi for the first time in the last year, not because of a fashion deal or the illusion of saving money, but because our prices are consistently the lowest in the UK.”
At the same time, there is growing concern that that extending loyalty pricing unfairly penalizes shoppers who either choose not to sign up or simply cannot do so.
What consumer group? last year supermarkets were accused of using “sneaky tactics” to push shoppers into the schemes.
The group said both Sainsbury's and Tesco raised food prices ahead of the launch of loyalty card promotions to create the illusion that shoppers were getting a better price. Prices for regular non-member customers will increase by £2 or £3 in the days leading up to the introduction of promotional prices for nectar or club cards. What? claimed.
Sainsbury's then argued that the investigation had failed to acknowledge that underlying prices had risen during the year due to inflation. It said: “Our nectar price promotion guidelines are based on Trading Standards guidelines.”
Tesco responded to the claims by saying: “All our Clubcard pricing promotions follow strict guidelines, including benchmarking them against market prices, to ensure they provide real value and savings for our Clubcard members. These rules have been endorsed by our Trading Standards Authority.”
The CMA is expected to review Which?
It's clear that supermarkets are pushing shoppers to sign up for loyalty programs through pricing.
But who pays for these cheaper deals? Although shoppers can be fooled into thinking that it is the supermarkets themselves that are simply accepting lower profits, shoppers pay the price by handing over their data.
“Data is the new oil,” says Tesco Clubcard architect Tim Mason. “Businesses that generate very good data theoretically have the ability to do things that are more valuable than businesses that don't.”
The data that supermarkets can collect is especially valuable, says Mason. .
“People visit a lot, spend a lot of money and spend it on a wide range of different products, which gives you a detailed understanding of who that person is.”
Better understanding of customers can help help supermarkets squeeze more sales out of them.
“You may think they're spending everything they have with you, but they're far from it,” says Mason. “If you give them value where they need it, talk to them about things they don't even know about, you'll be amazed at the margin you can create through loyal customers.”
Now Mason runs Eagle Eye, a software company specializing in loyalty schemes and data.
He started the business after leaving his role as deputy chief executive of Tesco and has worked with retailers including Waitrose, Morrisons and Asda on their loyalty schemes.
“Given that a supermarket can know who its customers are, it seems it’s almost a dereliction of duty not to know,” says Mason. “Because you can make your business so much better.”
Supermarkets sell the information they get about customers' shopping habits, other companies. Photo: Paul Childs/Reuters
Industry insiders compare this to the way tech companies such as Spotify, Amazon or Netflix use customer data to recommend songs, products or movies to them.
Data is not just important for increasing supermarket sales. This can open up new sources of income.
Supermarkets began selling “information” to other companies. Customer data is anonymized by supermarkets, but is used to create archetypal customers that can give other businesses insight into what the average person might be interested in buying.
Tesco and Sainsbury's alone are estimated to earn 300 million pounds sterling per year. from selling this internal data. Unlike rivals, both control the proprietary technology behind their own data analytics systems.
Shore Capital's Clive Black says: “A quarter of a billion pounds of extra trading profit could come to Tesco in the next two to three years.” data analytics account.”
Sainsbury's is also likely to get a major boost. Black says, “It's becoming more, not less, important.”
Retail expert David Seibles says grocers are essentially engaging in “a kind of bribery by running all their promotions through their cards.” loyalty for data collection.” , sell data and manage your strategy better.”
He quickly adds: “This is all very smart and quite legal.”
As for supermarkets, they hope regulators will decide against interference. Tesco's Murphy is adamant that the loyalty card boom can only be a good thing. Member prices are lower, he said.
“We're trying to offer our customers a more relevant and personalized shopping experience,” he said recently. “We're still in the early stages of what we think is possible.”
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