Loyalty cards offer genuine savings, watchdog says
· BBC NewsTom Espiner
BBC business reporter
Supermarket loyalty cards do offer genuine savings, the UK's competition watchdog has found, but it said people should still shop around.
The Competition and Markets Authority (CMA) looked at 50,000 products on loyalty price promotions across Tesco, Sainsbury's, Morrisons, Co-op and Waitrose.
It found "very little evidence" that supermarkets were inflating their "usual" prices to make promotions look like a better deal.
However, it found that despite discounts being legitimate many shoppers still did not trust that the offers were cheaper.
While the CMA also said its review "has shown that loyalty prices aren’t always the cheapest option, so shopping around is still key".
"We know many people don’t trust loyalty card prices," said George Lusty, the CMA's interim executive director of consumer protection. "Which is why we did a deep dive to get to the bottom of whether supermarkets were treating shoppers fairly."
Loyalty pricing is where there are two prices on a product - a "normal" one and a lower price for customers who have a loyalty card or app.
It said about nine out of 10 loyalty promotions it looked at offered genuine savings against the usual in-store price.
Customers made an average saving of between 17% and 25% across the five supermarkets the CMA examined.
The watchdog also surveyed shoppers and said that nearly 70% of those it spoke to think loyalty pricing offers decent savings.
However, there remains a significant amount of mistrust among consumers towards loyalty promotions.
The CMA said: "A significant proportion - 40% - say they do not trust loyalty prices are a genuine saving on the usual price."
A common view among younger people was that non-member prices in a promotion were higher than normal.
More than 70% of 18 to 29-year-olds thought that the price for those without a loyalty card or app had been bumped up, said the CMA.
While the report examined other supermarkets, it did not draw any conclusions about two of the UK's largest - Asda and Aldi.
Asda has a loyalty points scheme which customers can redeem for vouchers but it does not offer lower prices on a product for those with a loyalty card.
Discounters Aldi and Lidl were not included as they don't sell online, and don't stock a wide enough range of branded products to do a like-for-like comparison, the watchdog said.
Consumer group Which? said two-tier pricing had "become a common practice across retailers" so it was "reassuring" that people could make genuine savings.
However, it has also studied thousands of products, "and repeatedly found examples of loyalty price offers that aren't as good as they seem" according to Sue Davies, Which? head of food policy.
She also said there are concerns that "millions of consumers are being excluded from accessing lower prices due to loyalty scheme restrictions" because they have not signed up to a card or app.
Shoppers have been under pressure from the pace of food price rises in recent years, the CMA said.
Although inflation has fallen considerably since then, it said the price of food is still substantially higher relative to how much money people earn.
Customer data
One of the main reasons supermarkets offer loyalty schemes is so they can collect data on customers.
This is very valuable information - studying buying decisions can help supermarkets understand and influence shoppers.
They create highly detailed shopper profiles looking at what people bought and how often.
Some supermarkets sell data to suppliers which can then be used to deliver targeted advertising.
Selling data can be lucrative. Sainsbury's has said it expects Nectar360, the group which manages the supermarket's loyalty scheme, to make an additional £100m in profit over the next three years.
The CMA said shopper attitudes to data collection range from feeling pressure to trade their personal data for lower prices, to others not feeling concerned.
But only 7% of people surveyed by the watchdog said they hadn't signed up to a loyalty scheme due to privacy concerns.
Annich McIntosh, editor and chief executive of Loyalty Magazine, said there was a question mark over whether it was morally right to force people to participate in loyalty schemes to get price promotions.
But she said these schemes in general benefit shoppers because they can help slow down supermarket price increases.
She added that a "sci-fi scenario" of customers being offered promotions as they walk past a product was unlikely, as there was little customer appetite.
However, using artificial intelligence to personalise offers could benefit both shoppers and supermarkets, she added.