There is a risk non-loyalty club members are paying a higher price for groceries than they should, Consumer NZ says — although this is denied by supermarkets.
Both major supermarket operators now offer “member pricing” to people who are part of their loyalty programmes. Woolworths has member pricing as part of its Everyday Rewards, and New World has the Clubcard scheme.
People who are not members or who do not present their cards do not receive the advertised discounts, which can sometimes mean paying significantly more.
Consumer NZ spokesperson Gemma Rasmussen said her organisation was dubious about loyalty programmes.
“I think there’s definitely a psychology to it where people get locked into chasing the points and getting that competitive deal because it says ‘special’… it only works within the ecosystem at that store if you consistently shop somewhere.”
She said Consumer research showed that 75% of the time, products subject to a member special at Woolworths or New World could be found cheaper at Pak ‘n Save or The Warehouse.
“If the pricing for members isn’t that competitive, there is a risk that non-members are paying inflated prices.”
A shop this week showed that, of the six Woolworths member specials included, three were available cheaper at Pak ‘n Save.
Bluebird chicken chips were for $2.10 for members and $2.99 for non-members. At Pak ‘n Save they were $1.99.
A 310g pack of Milo was $6 for members and $7.50 for non-members, or $5.79 at Pak ‘n Save.
A tin of Watties spaghetti was $2 for members, $2.80 for non-members and $1.89 at Pak ‘n Save.
Among New World Clubcard specials, a bag of sea salt Proper crisps was $4.99 for members, and $5.59 for non-members.
On a Woolworths member price, it was $4.50.
A packet of Oreos was $1.69 for Clubcard members at New World, $1.99 without the card and $1.49 for shoppers at Pak ‘n Save.
Rasmussen said she did not think it was fair that people had to give up significant amounts of personal data to be able to access the cheaper prices. There was also a digital exclusion element when an email was required to join, she said.
Foodstuffs said Clubcard promotions were funded by New World and the supplier, not non-Clubcard customers.
“We offer Clubcard promotions on a wide range of products and work with our suppliers to ensure we have enough stock. Our promotions are designed to offer great value to customers, and we base them on customer insights.”
Woolworths said it also did not put up other prices to cover the member discounts.
“We also note that personalised value from ‘boosts’ is a growing way for our Everyday Rewards members to get value. Members who activate and redeem their personalised offers are getting seven times more $15 vouchers than members who just scan their card instore.”
Bodo Lang, a marketing expert at Massey University, said there was theoretical support for the idea that people who were not members were paying more because of the member discounts.
“First, charging different groups of consumers different prices for the same good is a much-used tactic called price discrimination. We can see this tactic in play in many sectors in New Zealand, not just grocery retailing.
“For example, economy airline tickets vary dramatically in price, depending on when they are booked. Further theoretical support comes from the cross-subsidisation hypothesis, which states that supermarkets might compensate for the lower prices given to loyalty programme members by charging higher prices to non-members.
“However, this cross-subsidisation effect is difficult to prove directly.”
He said research was done in the UK to see the effect on non-loyalty prices of a scheme.
“Preliminary results suggest they are unlikely to identify widespread evidence of such misleading loyalty promotions. The study is still ongoing and full results will be published in November this year.”
He said the schemes offered value for members.
“However, shoppers are not the only winners from loyalty programmes.
“Some studies have suggested that the real winners are supermarkets because loyalty programmes provide multiple significant benefits to them: First, greater customer loyalty, meaning a greater share of the annual grocery trolley.
“This can be worth a lot, considering the sector is said to be worth $27 billion in 2023… Even moving market share by 1% can make a big difference to a supermarket’s profitability.
“Second, supermarkets get access to consumers’ data, in particular what they respond to in terms of promotions and pricing. This provides supermarkets with greater insights into how to influence consumer behaviour at the point of sale.
“As a result, price promotions may be less generous in the future, if they still achieve a similar effect, or consumers may simply overspend when a promotion is in place.”
Rasmussen said supermarkets were “clipping the ticket twice” on loyalty pricing because suppliers would pay more to be part of the promotion and supermarkets would also know that shoppers were more likely to respond to a special during times when the cost of living was higher.
rnz.co.nz