I tend to follow the tea. If I walk into a supermarket – any supermarket, because my shopping habits are fickle – and spot Twinings at a good price, I’ll pick up a box and then fill up a basket.
As I write, the price of 80 Twinings English Breakfast in supermarkets ranges from £2.95 to £5.50, a discrepancy of some note for a few teabags. How can the price almost double? Who on earth would shell out £5.50 instead of reaching for the £2.95 pack?
There’s a catch. The £2.95 price is a Tesco Clubcard offer, and anyone without the loyalty card will have to fork out £5.50. At Sainsbury’s, the Nectar price is £3, compared with £4.80 if you aren’t signed up. Morrisons has them at £3, down from £5.99. They’re also £3 at Waitrose, down from £5 – at these latter two, the offer is for everyone, not only card holders. Supermarkets say they’re offering the best possible prices in exchange for allegiance, but consumer groups say the higher prices are hiked up.
What’s going on? Loyalty schemes have swept our supermarkets as food retailers battle for our custom. Food price inflation and changing consumer behaviour – including online shopping – has sent customer loyalty haywire, according to Mintel’s 2023 Customer Loyalty in Retailing report. “Highlighting value whilst creating that personal connection is critical for retailers to keep customers from switching, in a time where the focus on value is at its peak,” says Mintel retail analyst, Fiona McDonald.
This is certainly my experience. I always shopped around – going to Waitrose for the free newspaper, Sainsbury’s for big shops and M&S for the things you can only get at M&S. But last year I found myself going to stores I never had before, my head turned by great deals – and my purse is now filled with loyalty cards.
“Retailers have never needed customers to be loyal as much as they do today, and customers have never had so little need to be loyal,” says retail analyst Richard Hyman of Thought Provoking Consultancy. “There’s more choice than ever before, which is better for customers. It intensifies competition, raises standards, and forces retailers to work harder and keep a lid on prices.”
Mintel found that four-fifths of shoppers hold loyalty cards, with Clubcard and Nectar overwhelmingly the most popular schemes – 20 million of us are active Tesco Clubcard users, and 18 million Nectar customers. In its research, almost half – 46 per cent – of those who consider their financial situation to be healthy, would still switch retailers for a better price.
The savings are irresistible – when I went to Sainsbury’s without my Nectar card a few weeks ago, I walked out empty-handed because it felt too wasteful to pay the non-Nectar prices.
However, often it feels like the non-loyalty prices are inflated, just to make the price for card holders seem like a bargain – an issue that consumer groups including Which? and the Competition and Markets Authority (CMA) are now investigating. Which? tracked the pricing history of dozens of member-only offers at Tesco and Sainsbury’s over six months, and found that almost a third were at their so-called “regular” price for less than half that time.
“Our investigation shows that up to a third of loyalty offers at Tesco and Sainsbury’s are not all they’re cracked up to be,” said its head of food policy, Sue Davies. “The sector, its pricing practices, and who is eligible for membership needs to be properly scrutinised.” Both Tesco and Sainsbury’s disputed the Which? claims.
The problem is that now so many retailers have pivoted to dual pricing, we’re being forced to sign up or give up.
I used to hold three loyalty cards. Last year, I encouraged my husband to get all the others, in case he is passing Morrisons or the Co-op when I ask him to stop for something. Both these stores, along with Sainsbury’s, introduced dual pricing in 2023. (Asda, Waitrose and M&S have so far steered clear of the dual pricing strategy, instead focusing on lowering prices on hundreds of staples, and adding bespoke offers, games and competitions through their apps.)
I never used to shop at Tesco, but a pre-Christmas booze offer lured me in – I’ve now added the Clubcard to my growing pile. The dual pricing approach was started by Tesco, the supermarket most lampooned for the ballooning discrepancy, in 2019. The internet is awash with memes joking about the exorbitant cost of everyday items should you not have a Clubcard. Tesco launched Clubcard prices before the pandemic, but the cost of living crisis has sparked the current criticism.
“In banking, it’s quite common to offer new customers a better deal than your existing customers,” Hyman points out. “What does that say about their loyalty? Actually, loyalty is a two-way street. It’s not just about customer loyalty, it’s about the retailers’ loyalty to customers.”
The supermarkets boast of their “investments” to keep prices low for us. But it’s hardly goodwill. The loyalty schemes bring in shoppers, along with bottomless pits of shopping data to harvest. How do they profit from this data? In fact, there are plenty of ways to milk this knowledge. They can use it to their own advantage, by tailoring deals and offers. You know this when you receive a printed coupon at the checkout for a product you sometimes or regularly buy. Or when you log in to an online grocery account, and it shows you all the deals related to your favourite foods.
But the benefits of supermarket loyalty wars aren’t accessible to everyone. According to Which?, there are often age and address-based restrictions when you sign up. What’s more, being “loyal” to a range of shops is much easier if you’re attached to a smartphone – both to escape carrying around a clutch of physical cards, and to access the offers more easily. Access also depends on which supermarkets are near you, and whether you can walk or drive to them.
Then there’s the fact we don’t all wish to hand over our shopping data just to bag a few cheap, possibly disingenuous, deals here and there. Claims have emerged that retailers are actually making huge profits from dual pricing, because it has forced so many more shoppers to sign up and share their personal information, handing over data which is far more valuable to the supermarket than any pennies lost from discounting groceries. “Retailers use data as a way to offer more targeted advertising, as well as shape new products coming to market,” explains McDonald. “It’s important for retailers to be transparent with how they use this data. Understandably, shoppers are cautious about their personal information, how much they share, and what retailers do with this.”
A report from media research company GroupM claims that Tesco and Sainsbury’s have together raked in over £300m from marketing insights – also known as retail media. In addition to gathering deep wells of highly specific knowledge about customers, supermarkets can offer advertising space to brands at every step of their shoppers’ journey, from a quick in-store visit to eyes on every moment shoppers spend filling trolleys online.
“The advertising a customer receives will also be more relevant to them because the retailer can see their shopping patterns,” says McDonald. “For example, Tesco owns its retail media and insight division, similar to Amazon’s retail media. They use this to help marketers and brands target ads to Tesco’s customers, and this comes from Clubcard data.” The same goes for Nectar360, Sainsbury’s media business.
And can you blame them? Compared to the physical toil of selling food and drink, where profit margins sit somewhere between 3 or 4 and 20 per cent, the returns from retail media may soar to 80 per cent, according to the Boston Consulting Group (BCG). While media profits are currently small fry for UK supermarkets, the potential for huge wins has already been proven by Amazon. Big food is increasing its spend on retail media as it sees its potential grow.
“Customer data is used to improve the ranges in our stores and the offers that customers receive. It also helps to make digital advertising more relevant for customers,” says a Sainsbury’s spokesperson. Both Sainsbury’s and Tesco point out that customers can opt out of these marketing add-ons – by deselecting the relevant cookies and marketing preferences online – and still use their loyalty cards.
What does this mean for our weekly shops? If you want to keep your shopping habits to yourself, you’ll need to look past the offers, spend a bit more in independents, and stock up when you spot a good price. But the expansion in loyalty schemes overall isn’t confined to supermarkets.
The Boots Advantage card was a forerunner in the points collecting approach when it launched in 1997 – the chemist has recently started offering dual pricing in store. It seems there’s barely a high street store that doesn’t want to sign you up these days, from Savers and Poundland to Pets at Home, Greggs and Pret a Manger, which went viral last year when the price of a cheese baguette was exposed as ranging from £4.76 to £7.15, depending on whether you’re a Pret member, which costs £30 a month. It recently launched a children’s menu offering a 20 per cent discount and free babyccino to Club Pret members.
“I think that shoppers are generally pretty savvy,” says Hyman. “They can see through loyalty schemes that don’t offer very much. If you look at the world we live in, who’s best at managing economic change – governments, corporates, or households? Households manage it best, as they have to. It’s your money, and it concentrates the mind.”
In other words, remember that you’re in charge of how and where you spend, not a clever marketing offer. But to flex this power, you do need to opt out and disengage from apps and vouchers. I go to independent shops as much as possible but they are undoubtedly more expensive, and the more the supermarkets discount, the harder it is for them to compete.
Interestingly, explains McDonald, while brand or retailer loyalty is most often considered to relate to what we buy, younger consumers define it as something more “vocal”, which could mean leaving a positive review or recommending to friends and family. “Loyalty is hard to gain and easy to lose,” she points out. Now’s the time to reconsider what yours might be worth.