UK Competition Watchdog Affirms Genuine Savings from Supermarket Loyalty Cards, Urges Continued Price Comparison

The UK’s competition watchdog has determined that supermarket loyalty cards indeed provide authentic savings, though it also advised consumers to continue comparing prices. The Competition and Markets Authority (CMA) examined 50,000 products featured in loyalty price promotions at Tesco, Sainsbury’s, Morrisons, Co-op, and Waitrose. Its investigation revealed “very little evidence” suggesting that supermarkets were increasing their “usual” prices to enhance the perceived value of these promotions. Nevertheless, the CMA observed that even with legitimate discounts, numerous shoppers remained unconvinced that the offers genuinely represented lower prices. Furthermore, the CMA stated that its review “has shown that loyalty prices aren’t always the cheapest option, so shopping around is still key.” George Lusty, the CMA’s interim executive director of consumer protection, commented, “We know many people don’t trust loyalty card prices.” He added, “Which is why we did a deep dive to get to the bottom of whether supermarkets were treating shoppers fairly.” Loyalty pricing involves presenting two distinct prices for a product: a “normal” price and a reduced price available to customers possessing a loyalty card or app. Approximately nine out of every ten loyalty promotions examined by the CMA were found to provide authentic savings compared to the standard in-store price. Shoppers achieved average savings ranging from 17% to 25% across the five supermarkets scrutinized by the CMA. The watchdog also conducted a survey of shoppers, reporting that almost 70% of respondents believed loyalty pricing delivered worthwhile savings. Despite this, a considerable level of distrust persists among consumers regarding loyalty promotions. The CMA stated: “A significant proportion – 40% – say they do not trust loyalty prices are a genuine saving on the usual price.” Among younger demographics, a prevalent perception was that prices for non-members during a promotion were elevated beyond their usual levels. The CMA reported that over 70% of individuals aged 18 to 29 believed that the price for customers without a loyalty card or app had been increased. Although the report analyzed other supermarkets, it refrained from drawing conclusions concerning two of the UK’s largest retailers, Asda and Aldi. Asda operates a loyalty points scheme that allows customers to exchange points for vouchers, but it does not provide reduced product prices for loyalty cardholders. The watchdog explained that discounters Aldi and Lidl were excluded from the study because they do not conduct online sales and do not carry a sufficiently broad selection of branded products to enable a direct, like-for-like comparison. Consumer group Which? noted that two-tier pricing has “become a common practice across retailers,” making it “reassuring” that consumers could achieve genuine savings. Nevertheless, Which? has also investigated thousands of products, and, according to Sue Davies, its head of food policy, it has “repeatedly found examples of loyalty price offers that aren’t as good as they seem.” Davies further expressed concerns that “millions of consumers are being excluded from accessing lower prices due to loyalty scheme restrictions” because they have not registered for a card or app. The CMA indicated that shoppers have experienced strain from the rapid increase in food prices over recent years. While inflation has significantly decreased since that period, the CMA noted that food prices remain considerably elevated in relation to people’s earnings. A primary motivation for supermarkets to implement loyalty schemes is to gather customer data. This data constitutes highly valuable information, as analyzing purchasing decisions assists supermarkets in comprehending and influencing consumer behavior. Supermarkets develop highly detailed shopper profiles by examining what individuals purchase and with what frequency. Certain supermarkets sell this data to suppliers, who can then utilize it for targeted advertising campaigns. The sale of data can be highly profitable; Sainsbury’s, for instance, anticipates that Nectar360, the entity overseeing its loyalty program, will generate an additional £100m in profit over the forthcoming three years. The CMA observed that consumer attitudes towards data collection vary, from feeling compelled to exchange personal data for reduced prices to others expressing no concern. However, merely 7% of individuals surveyed by the watchdog indicated that they had refrained from joining a loyalty scheme due to privacy concerns. Annich McIntosh, editor and chief executive of Loyalty Magazine, raised a question regarding the moral appropriateness of requiring individuals to participate in loyalty schemes to access price promotions. Nevertheless, she asserted that these schemes generally benefit shoppers by potentially mitigating the pace of supermarket price increases. McIntosh further commented that a “sci-fi scenario” where customers receive promotions while passing a product was improbable, citing minimal consumer interest. She concluded that leveraging artificial intelligence to personalize offers could, however, prove advantageous for both consumers and supermarkets. Copyright 2024 BBC. 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