Caitríona Redmond: Loyalty or low prices? How supermarket loyalty schemes compare
Caitríona Redmond: People love bagging a bargain and loyalty apps/cards lean into that feeling. Picture: Cathy Dunne
Supermarkets prize customer loyalty. Customers who have faith in the power of a retail brand to deliver savings will return week-on-week to do their shopping. Stores count on this loyalty to allow them to tweak prices in their favour.
Staples will consistently stay the same or similar compared to competitors, but the cost of premium brands can fluctuate and here is where the margins are much more flexible.
Loyalty schemes come at a price. Once customers hand over an email address, often a physical address, full name, and telephone number, they can open the gate to further savings.
Once that barcode or QR code is scanned at the till or attached to an online purchase, you give the retailer insight into your behaviours, preferences, and family composition. On the surface, it appears like a cheap trade-off.
Once an individual starts buying newborn nappies, for example, they may receive marketing emails, including vouchers for new parents. Target, a well-known big-box chain store in the US, can use the data from its loyalty scheme to identify when a customer may be pregnant.
There has been at least one high-profile case where Target's postal voucher scheme disclosed a hidden pregnancy to others in the household. While they may be able to, Irish retailers are emphatic that they do not use the information collated or shopping patterns to this degree.
For good, monitoring the buying patterns in particular stores or communities can enable a supermarket to anticipate and pre-empt demand. This informs the in-house purchasers, and the prices are negotiated based on likely sales. Ultimately, the more customers that use a supermarket loyalty scheme, the more potential for these targeted discounts.
Three bigger supermarket discount schemes are operating in Ireland, with a fourth less-known in place. For all retailers, the schemes have general restrictions, including that vouchers or discounts cannot be used on alcohol, baby milk, tobacco, and lottery products.
Dunnes Stores offers €10 off for every €50 up to three times per transaction. That's potentially €30 saved for every €150 spent on groceries. Customers do not need a loyalty card to participate in this scheme, but if shopping in-store must present vouchers from a previous shop to benefit.
If shopping online, the vouchers are automatically applied, even if they have never shopped with Dunnes before. There is a steady demand for these vouchers online, and one of the largest Facebook groups in Ireland is dedicated to sharing and swapping Dunnes vouchers. Dunnes Stores also operates the ValueClub system, which allows customers to earn "extra points and savings".
Tesco regulars know that nowadays, a yellow band on the shelf displays two prices; one for general customers and one for Clubcard customers. The Clubcard scheme returns one point for every €1 spent in-store, and a point is equivalent to 1c.
This can be used to save up towards Christmas or cashed in to put towards boost vouchers for days out. Clubcard shop prices are significantly lower than the general prices available to non-members.
Tesco UK recently launched the 'Clubcard Plus' membership costing £7.99 per month, which offers customers 10% off their groceries twice a month. It remains to be seen whether this will be rolled out here, but it suggests there may be more wriggle room in Clubcard pricing.
Real Rewards is the scheme run by SuperValu, which also gatekeeps specific discounts to members only. Like many other retailers, it has mainly done away with a physical card that can be scanned and instead encourages customers to download and install an app and then log in to make the most of what is on offer.
By shopping regularly, you will earn vouchers off your shopping every week, special discounts released every Thursday, flash deals, earn tokens to buy special offers (storage boxes at the moment) and entry into attractive competitions.
Lidl Ireland does not offer money off shopping as a rule, although customers may earn €1 off their shopping via their scratchcard system. It is redeemed after you make a minimum purchase, but customers can also earn free products this way. Likewise, it offers percentage discounts off products in-store, provided you have activated the discount on the app before going to the till.
Common sense might say we would prefer a lower price at the till without having to hand over our personal data and shopping patterns and muck about with retailer-specific apps to get the best deal.
Aldi Ireland seems to think so — it declared it keep matters lean by not operating a loyalty scheme. It says this enables it to keep prices low for all customers without gatekeeping.
But people love bagging a bargain and loyalty apps/cards lean into that feeling. Of course, quality and availability are also part of that equation, but an unhappy customer may avoid returning.
As a food writer, my weekly shop contains fruit, vegetables, meat, and general ingredients. I can conjure up many a meal without reaching for a brand name — historically, big-name items tend to be far more expensive than 'own' or supermarket brands.
On filling my trolley this week with own-brand products, the difference between supermarket prices was tiny, provided I used the relevant loyalty scheme from four supermarkets. Of course, there was no need in Aldi.
Those customers who do not subscribe to supermarket loyalty schemes or cards where they are in place are paying a premium. An Oral B electric toothbrush is €121 to a regular customer in Tesco this week, but €60.50 to Clubcard holders. Lidl Plus Card holders can buy two packs of crackers for €2; they would pay €2.78 without.
Retailers chase the sweet spot of profit margin and what their consumers will tolerate regarding prices. Since the retailers' meeting with Retail Minister Neale Richmond this week, prices have begun to drop.
With less disposable income every week, retailers have lost that sweet spot. Their margins may be dropping. But we do not know for sure, because nobody knows what level of profit all the retailers are making in the Irish market, making it impossible to impose windfall taxes or penalties.
Struggling shoppers countrywide can only hope that prices continue to ease. Bear in mind, though, that dropping the price of bread by 10c per loaf is only a small drop in the cost-of-living increases consumers have to bear.
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