The UK’s competition watchdog, the Competition and Markets Authority (CMA), has confirmed that supermarket loyalty cards can offer real savings, but advises consumers to compare prices before making purchases. While loyalty programs often provide discounts to regular customers, the CMA emphasizes that shoppers should not rely solely on loyalty schemes to secure the best deal.

Genuine Savings with Loyalty Cards

Loyalty pricing involves offering two price points for the same product: one for regular customers and a lower price for loyalty cardholders. According to the CMA’s latest review, which analyzed 50,000 products from major UK supermarkets, around 90% of loyalty card promotions provide genuine savings compared to standard in-store prices. On average, shoppers saved between 17% and 25% on items with loyalty discounts.

The CMA focused on the loyalty programs of major retailers including Tesco, Sainsbury’s, Morrisons, Co-op, and Waitrose. Notably, Asda, Aldi, and Lidl were excluded from the review. Asda, although offering loyalty points, does not provide product discounts for cardholders, while Aldi and Lidl were excluded due to their limited product range and lack of online sales.

Little Evidence of Price Inflation

The CMA’s investigation found very little evidence that supermarkets were inflating regular prices to make loyalty discounts appear more significant. However, the report also highlighted that many consumers still harbor skepticism about loyalty schemes. Nearly 40% of shoppers surveyed expressed doubts, believing that loyalty prices do not offer real savings, with young shoppers being particularly skeptical. In fact, over 70% of people aged 18-29 believed that non-cardholders were being charged inflated prices.

Despite the skepticism, the CMA's review concluded that loyalty pricing does offer legitimate savings, but urged customers to compare prices before purchasing. George Lusty, CMA’s interim executive director of consumer protection, stated, "We conducted a thorough investigation to ensure supermarkets are treating shoppers fairly. It’s important for consumers to make informed choices and shop around."

Consumer Concerns and Data Privacy

While the CMA’s findings were positive for loyalty cardholders, consumer group Which? highlighted some ongoing concerns. Sue Davies, head of food policy at Which?, pointed out that loyalty schemes might not always offer the best value and could exclude millions of consumers who prefer not to sign up for cards or apps.

A key reason supermarkets offer loyalty programs is to gather valuable customer data. This data helps retailers track buying habits and can be sold to suppliers for targeted advertising. For example, Sainsbury’s Nectar360 loyalty program is expected to generate an additional £100 million in profit over the next three years by leveraging this data.

While only 7% of consumers said they avoid loyalty schemes for privacy reasons, concerns about data collection remain. Some shoppers feel uncomfortable trading personal information for discounts, and there are calls for more transparency regarding how this data is used.

The Future of Loyalty Programs

Annich McIntosh, editor of Loyalty Magazine, questioned whether it is fair to make loyalty cards a requirement for accessing discounts. However, she acknowledged that loyalty schemes can benefit consumers by helping to slow down price increases at supermarkets. She also suggested that personalized offers, powered by artificial intelligence, could create mutual benefits for both consumers and retailers.

Conclusion: Shoppers Should Stay Informed

While loyalty cards from major supermarkets can indeed provide significant savings, the CMA encourages consumers to remain cautious and shop around for the best deals. By comparing prices across different retailers, shoppers can ensure they are truly getting the best value for their money.

Loyalty programs offer more than just discounts—they help retailers gather valuable data and personalize offers, but consumers should always weigh the pros and cons, particularly when it comes to privacy concerns. The future of loyalty programs may continue to evolve, with new technologies offering even more personalized shopping experiences.

Source: bbc.co.uk