Retail Giants Fall out over Price of Loyalty; If a Supermarket Cut the Price of Biscuits from [Pounds Sterling]1 to 99p, It Would Not Raise a Murmur. Loyalty Card Discounts Are No Better Than This

The Mail on Sunday (London, England), August 22, 1999 | Go to article overview

Retail Giants Fall out over Price of Loyalty; If a Supermarket Cut the Price of Biscuits from [Pounds Sterling]1 to 99p, It Would Not Raise a Murmur. Loyalty Card Discounts Are No Better Than This


Byline: TEENA LYONS

SUPERMARKETS are locked in a war of words over loyalty cards amid accusations that they cost shoppers much more than they could ever save.

While Asda is scrapping plans to launch a card nationwide, claiming it is a waste of money, Tesco is expanding its scheme with a bas-ketload of new benefits from tomorrow.

Sainsbury, Boots and other chains are also expected to boost their card schemes in an attempt to keep customers in an increasingly competitive retail market.

The jostling for position comes as giant US cut-price retail chain Wal-Mart begins to reshape Asda, which it bought for [pounds sterling]6.7 billion.

Two weeks ago, Asda tore up its loyalty card, which it had been testing in 17 stores for a year. Retail director Paul Mason said the costs associated with rival companies' cards were being passed to shoppers in higher prices.

'There is no such thing as a free lunch,' he said. 'If we rolled out our loyalty card nationally, we would have to increase prices in our stores by between 5% and 10%.' Loyalty cards were introduced by Tesco four years ago, but Sains-bury and Safeway quickly followed.

Today, about 35 million people use loyalty cards offered by the likes of Boots, W. H. Smith, Shell and Bhs.

The schemes, which usually reward shoppers with [pounds sterling]1 back for every [pounds sterling]100 spent, are expensive to set up.

Tesco's Clubcard cost [pounds sterling]25 million to launch in 1995 while Boots spent [pounds sterling]52 million introducing its Advantage scheme.

And the expense does not finish there. It can cost another [pounds sterling]7 million a year to run the complex databases.

But the biggest cost is the cash paid to customers when they redeem points.

This can cost individual retailers more than [pounds sterling]100 million a year.

Waitrose, which like Asda has shunned loyalty schemes, said its prices are now cheaper than rivals because it does not have cards.

THE supermarket, which has a reputation for high prices, claims it is now up to [pounds sterling]20 cheaper on a trolley of 300 everyday items than stores offering loyalty schemes.

Marketing director Mark Price has criticised rivals for using information from loyalty cards to compile a 'sinister database' on their customers. …

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