The Competition and Markets Authority (CMA) has today revealed its initial findings from its ongoing review of loyalty pricing, which several major supermarkets have adopted over the last few years.
Having begun its probe in January, the regulator has been looking at whether any aspect of the schemes trumpeted by the likes of Tesco, Sainsbury’s and Morrisons mislead shoppers and if they offer genuine savings.
The CMA noted that it had considered whether there are pricing practices that indicate that the non-loyalty (or non-member) price may have been artificially inflated to make the loyalty price appear “misleadingly attractive”. To do this, it has gathered information from grocery retailers that offer loyalty pricing, analysing what happens to prices before, during, and after a product goes onto a loyalty price promotion.
The CMA revealed that its ongoing probe has already involved tens of thousands of loyalty price promotions. In a brief statement today, the regulator said that the results to date suggest it is “unlikely to identify widespread evidence of loyalty promotions that mislead shoppers in this way”.
However, it noted that its analysis had found examples of retailers alternating between ‘was/now’ promotions available to all shoppers and loyalty price promotions. The CMA said: “This raises questions as to what the ‘regular’ price is for the product and therefore whether the claim saving for the ‘was /now’ promotion is genuine. We are looking further into this issue.”
The competition watchdog also revealed that it is comparing a sample of supermarkets’ loyalty prices to those prices charged by other supermarkets at the same time. “Particularly given concerns raised by stakeholders, it is valuable for shoppers to have insight into how loyalty prices can compare with prices available elsewhere, including when they are on promotion at other retailers,” it said.
Meanwhile, the CMA has commissioned a consumer survey to understand the impact of loyalty pricing on how people shop, including how much they shop around and compare prices. The survey will also explore issues such as whether loyalty pricing is affecting shoppers’ engagement with supermarket loyalty schemes, shoppers’ trust that the price savings for members are genuine, and whether shoppers have concerns about supermarkets’ use of their personal data.
The CMA is due to publish a full report of its findings in November.
Tesco currently offers over 8,000 Clubcard Prices deals each week, while Sainsbury’s has rolled out Nectar Prices to about 7,000 products. The schemes have helped both chains gain market share and halt the exodus of shoppers to the discounters.
Helen Dickinson, Chief Executive of the British Retail Consortium, commented: “We welcome the CMA’s update that they have not found widespread evidence of misleading loyalty promotions. Whether it’s everyday value, or loyalty schemes discounts, retailers know they have to demonstrate clear value to attract and retain customers.”
Meanwhile, in an update on its initial analysis of supermarket profitability that was published in July last year, the CMA confirmed today that it had found no evidence of weak competition being a factor in the recent surge in grocery inflation.
In its ‘Competition and profitability in the groceries sector’ report, the regulator noted that while this should provide consumers with “reassurance” that pressure is still being applied to retailers to ensure effective competition, it recognises that the prices of groceries for shoppers have still increased regardless and are “likely to remain elevated”.
It also highlighted that “not everyone benefits in the same way from competition between retailers”, pointing to examples such as discounters like Aldi and Lidl not offering online shopping, or prices being traditionally lower in larger stores than convenience branches, restricting accessibility for some consumers.
Dickinson said: “The CMA notes the sharp decline in food inflation, which has fallen significantly to just 1.5% in June 2024, below the level of headline inflation. While operating profits have recovered slightly from the historically low levels seen in 2022/23, they remain in line, or below levels seen before the cost of living crisis.
“The CMA recognises the ‘effective competition’ between retailers is keeping prices as low as possible for customers and ensuring that where retailers can make cost savings, these are passed on to customers. This competition is one of the key reasons why the UK continues to deliver some of the cheapest groceries in Europe.”
NAM Implications:
- Loyalty-shoppers are savvy, and understand and study deals.
- Loyalty-shoppers are in an (implied) agreement with the retailer…
- …to sell their buying behaviour data in return for the loyalty discount.
- It follows that as Retail Media Networks evolve…
- …this first-party data will become more valuable…
- …and perhaps the CMA should check the extent to which this incremental value of the data is shared with the loyalty-shopper?
