Will 2015 signal the death of the supermarket loyalty card?

2014 delivered a seismic shock to the system for the UK’s leading supermarket chains, with the rise of low-cost shops such as Aldi and Lidl eating into the big fours’ market share and Tesco involved in an accounting scandal that led to more than £2.5 billion being wiped off its market value.   

As a result of Aldi and Lidl’s success, supermarkets were driven into a race-to-the-bottom price war in the second half of 2014, however, a number of industry experts have warned of the dangers of maintaining the low-cost business model into 2015.  

The Institute of Customer Service’s (ICS) CEO, Jo Causon suggested in October that major supermarkets Tesco, Sainsbury’s, Asda and Morrisons may be better served focusing down on how to improve customer loyalty, in the face of a number of surveys and polls stating that current supermarket loyalty schemes no longer served the needs of the modern consumer.   

And now Planet Retail’s global research director, Natalie Berg has stated in her 2015 predictions for the sector that this could spell bad news for loyalty schemes, as supermarkets look to other means of customer retention:

“The notion of rewarding loyalty will never go away. However, we believe loyalty cards are losing relevance with today’s shopper. Customers want instant value without having to jump through hoops and - let’s face it - shoppers are no longer loyal to one particular supermarket.

“They are promiscuous, they shop around and buy little and often. From a retailer perspective, loyalty schemes are expensive to run and add an unnecessary layer of complexity to the business. In 2014, Sainsbury’s halved its Nectar reward points, while there is talk of possible changes to Tesco’s Clubcard scheme. We expect more changes in 2015.”

Berg predicts, among other things, that leading supermarkets will look to new technology as a way to improve loyalty, including home-scanning systems and mobile app barcode scanning in order to improve the complexity of the shopping experience.  

“Whereas 2014 was largely focused on price, we are expecting 2015 to be the year of differentiation. The Big Four supermarkets are now looking dangerously homogenous with their various price-cutting and brand-matching schemes.

“To survive this period of unprecedented change for the sector, retailer brands must be strikingly clear, targeted and, most of all, consistent. Therefore, we expect to see greater bids for differentiation next year.

“The digital war will overtake the price war. Next year will bring some very real progress with mobile technology that will entirely change the way shoppers behave both in and out of stores. From home-scanning devices to personalised promotions pinged to shoppers’ smartphones, grocery shopping will become a whole lot easier in 2015. Even the less tech-savvy shoppers will enjoy the ability to skip queues by paying by phone.

 “Click & collect will certainly gain momentum in 2015, building on the fantastic progress made this year. Asda and Waitrose are really leading the way here and we are excited to see new alternative collection points being added for 2015, giving consumers even more choice.”