Supermarket loyalty cards might get you big discounts – but it’s at the expense of your privacy

When Tesco launched its Clubcard loyalty program in 1995, it created a new way for retailers to understand their customers’ behaviour.

Since then, most major supermarkets have followed suit. There are now over 20 million Clubcard members, while Sainsbury’s Nectar has 18 million.

Despite their popularity, there is increasing criticism of the privacy implications of handing over large amounts of data about who you are and what you buy to supermarkets.

For years, willing shoppers have given major retailers a glimpse into their lives in exchange for points.

But in the cost-of-living crisis, the cards have become harder to avoid, as supermarkets now offer not only points but also deep discounts on certain products to loyalty card holders.

If you’re not comfortable with your supermarket linking your personal information to what you buy, where and when, and allowing it and possibly other retailers to market products to you accordingly, then you’re likely to spend more at the checkout.

We decided to investigate what data supermarkets collect about customers and what they do with it.

Why do supermarkets offer loyalty cards?

Loyalty card programs can give retailers important insight into consumer habits by tracking their purchases, which can help customers make more personalized offers.

Retail expert Richard Hyman tells This Is Money: ‘They are able to connect really potentially valuable buying and behavioral data.

“They’re offering a better deal, and that’s meant to get people to spend more of their money to allocate a larger portion of their grocery spending to that particular grocery store than to others.”

“They build a virtuous circle, so they give a bigger discount, a better deal to people who spend more with them, which I think is fair enough.”

In addition to benefits for customers, loyalty cards can also help stock management for larger retailers such as Tesco and Sainsbury’s, says Hyman.

‘The more data supermarkets have, the better they can predict demand based on past behavior and the better they can manage their stock.

“It should mean that the supermarket of your choice has more of what you like and less of what you don’t like.”

‘It makes or breaks these retailers, because they only have 3-4 percent room for maneuver in the net margin.

Strangely, however, discounter Aldi does not offer a loyalty card scheme and still manages to keep costs down.

Hyman suggests this is because it offers a much smaller product range – about a tenth of the variety offered by the likes of Tesco and Sainsbury’s, so there’s less room to rotate stock depending on customer tastes.

Running a loyalty card system also costs money and can be detrimental to the company’s bottom line.

“There’s not really an incentive to launch a loyalty program,” he says.

But despite their relatively limited range, the pandemic caused many customers to switch to Lidl and Aldi, a trend that continued during the cost-of-living crisis.

This prompted rival supermarkets to offer even more discounts and rewards in hopes of luring them back.

Hyman says, “During the 2008 downturn, the big four supermarkets protected their margins by raising prices. It was a strategically stupid thing to do [and] it cost them billions and billions of market share.

“This time, with the cost of living crisis, they have avoided making that mistake again.

“We’ve learned from history that they need to protect their market share and the best way to achieve some semblance of loyalty is to offer customers a good deal.”

> When can the cost of a weekly shop start to drop?

How much do customers save?

Consumers have been hit by massive price increases over the past year. Kantar’s latest food inflation figures show that food costs have risen by 17.2 percent.

While people try to reduce the cost of their weekly groceries, the big supermarkets offer better discounts for loyal customers. For example, Tesco says that customers can save up to £351 a year with a Clubcard.

Critics say it’s a cynical trick to entice customers, as people with loyalty cards get better deals than people without.

But Hyman suggests that the success of loyalty card programs over the years has helped drive costs down: “Good inventory management definitely plays a role in pricing,” he adds.

It still doesn’t explain why customers who use loyalty cards get preferential treatment, while those who choose not pay significantly more.

For example, Tesco currently sells Cathedral City cheddar cheese for £5.40, but for Clubcard customers it’s £1.40 cheaper.

At Sainsbury’s, 80 Yorkshire Tea bags cost £2.50 for those with Nectar cards, a whole 80p cheaper than the usual price.

A spokesperson for Sainsbury’s said: “Initiatives such as our Nectar loyalty program enable us to offer customers great deals and personalized offers based on their shopping habits, meaning they can get even lower prices on the products they buy most. .”

Tesco did not respond to a request for comment.

What are YOU sacrificing to score a bargain?

Most consumers are probably all too aware that they are giving up personal information in order to receive discounts, but there are some surprising things that customers agree to when they blindly check the opt-in box.

For most supermarkets, purchase information is used for marketing purposes, but some loyalty programs also track movements and share information with third parties.

Big Brother Watch, a privacy campaign group, recently analyzed the privacy policies of the schemes and found that Sainsbury’s and Tesco sell the information to other companies who use it for advertising.

This includes Sky, which creates targeted ads for the supermarket’s customers who watch their shows.

Jake Hurfurt, head of research and investigation at Big Brother Watch, tells This Is Money: “It is alarming that a growing number of retailers are taking advantage of a cost-of-living crisis by encouraging customers to trade their personal information for discounts. which used to be available to everyone.

There is a serious risk of customers being forced to give up their data if the trend of linking access to special offers to loyalty card ownership continues, making privacy a luxury available only to those who can afford it. to afford.’

It is understandable that shoppers use loyalty programs to save money, but most people would have no idea that Tesco, Sainsbury’s and other retailers are selling data from their weekly store to third parties on an industrial scale.

“They should be told clearly and upfront how the information may be used, and retailers should not bury the details deep in complicated privacy policies.”

Unsurprisingly, these terms aren’t displayed in-store and are instead buried in long, confusing policies online.

How do supermarkets protect customer data?

As more consumers become aware of the dangers of handing over too much personal information, some may wonder what supermarkets are doing to protect it.

A spokesperson for Sainsbury’s told This Is Money: “To protect Nectar accounts, combat fraud and protect our business, we will use personal data to implement security measures, such as multi-factor authentication, and to investigate suspected fraudulent activity at Nectar and to prevent. ‘

Waitrose, which does not sell customer data to third parties, said: ‘Our team of specialists ensure that all customer data is carefully managed, in a manner that fully complies with legislation and industry best practice.’

Even with this in mind, Jake Moore, global security advisor at cybersecurity firm ESET, advises consumers to think twice before blindly signing up for loyalty programs.

“As with limiting personal data retention online, it’s a good idea to limit the amount of information you give away to businesses in the form of a loyalty card,” he says.

“These cards are often marketed to suggest that you might be able to save money, but the reality is that they earn much more by analyzing your shopping habits.

‘The information handed over when signing up to these loyalist services is also often quite personal, such as home address, phone number and email address – so it’s important to think about limiting the data where possible in case this information is ever in is compromised.’