Amid worries that loyalty card price cuts could restrict competition and result in price increases for customers who have not signed up for such marketing schemes, the competition watchdog has decided to look into the impact of these discounts on consumers.
When the Co-op also implemented members’ pricing on select products in April, Sainsbury’s started providing exclusive discounts to Nectar card holders. Meanwhile, Tesco has increased the use of its Clubcard discounts this year. Launched in 2020, Lidl’s loyalty program was updated last year to require higher spending from customers in order to receive the highest level of discounts.
While Sainsbury’s offers roughly 6,000 products through its Nectar program, Tesco offers over 8,000 products at discounted prices for Clubcard holders.
More than 20,000 products would be kept in stock by an average large supermarket.
As household budgets become more constrained, shoppers are using the cards more frequently; 90% of customers are enrolled in at least one of these programs.
The Competition and Markets Authority (CMA) stated that because the loyalty card promotions frequently do not display the per-weight price of goods, customers may find it challenging to compare prices across supermarkets as a result of the schemes.
Tesco was selling a pack of Pampers diapers for £6 on Wednesday to Clubcard members who were enrolled in the loyalty program. This is a 40% discount off the £10 regular retail price. Nectar members can purchase a leg of lamb at Sainsbury’s for £13, which is half the price regular shoppers pay.
Additionally, the watchdog will investigate whether the loyalty programs lessen competition by being “difficult or time-consuming.”
“We have seen an increase in supermarkets using loyalty scheme pricing, which means that price promotions are only available to people who sign up for loyalty cards,” stated CMA CEO Sarah Cardell. “The CMA will begin a review in January 2024, as this raises several questions regarding the impact of loyalty scheme pricing on consumers and competition.”
Certain schemes might be less accessible to older and more vulnerable shoppers if they also require an email address or an app. The convenience stores that Sainsbury’s operates are frequented by low-income individuals who lack access to public transportation or a car, and they are not covered by its price-cutting scheme.
“People should feel confident that they’re getting what they pay for and that they are not paying more than they should for the privilege,” stated Danni Hewson, AJ Bell’s head of financial analysis. To ensure they’re getting the best value for their money, they shouldn’t need to visit multiple stores and use multiple loyalty cards.