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Supermarket loyalty cards might seem like the best way to get a bargain, but Consumer NZ is warning they might ultimately lead to higher prices at the checkout.

Supermarket loyalty cards might seem like the best way to get a bargain, but Consumer NZ is warning they might ultimately lead to higher prices at the checkout.

Loyalty programmes like Foodstuffs’ Club+ and Woolworths’ Everyday Rewards allow supermarkets to gather data about individual shopping habits – including clues as to how much each person is willing to pay for a particular product.

This data could allow supermarkets to use increasingly targeted “dynamic pricing”, where prices are changed based on different variables, rather than remaining fixed.

Pricing discrepancies already exist in that different regions can pay different prices for the same item, says Gemma Rasmussen, Consumer NZ’s head of research and advocacy.

“Customers across the country can walk into a store and pay very different prices for the same item. As an example, we found the same tub of ice cream from New World cost $5.99 in Orewa and $8.79 in Queenstown, while Turkish apricots varied between $48.50 per kg and $56 depending on whether you were purchasing at Alexandra or Thorndon.”  

And there’s potential for supermarkets to take this much further, changing prices as often as they like based on market demand and customer behaviour.

This type of dynamic pricing is gaining traction in Europe, where some supermarkets change their prices multiple times throughout the day to discount items that are close to expiry or, in the case of Norway’s REMA 1000, to beat competitors’ pricing.

To do this, they rely on electronic shelf labels – technology that has already been rolled out in many New Zealand supermarkets.

The most extreme and controversial version of dynamic pricing is when items are priced differently for each shopper, based on an algorithmic calculation of how much each individual will be willing to pay.

Last year, an investigation by Consumer Reports found that shoppers buying groceries from several US retailers through Instacart, an online shopping platform, were shown different prices, with some shoppers paying up to 23% more than others.

There’s no evidence of this in practice in New Zealand, but Consumer NZ is concerned that customer data could still be used to drive prices up.

“While some shoppers may love getting a ‘deal’ at the supermarket through loyalty programmes, there is concern that our already highly concentrated supermarket sector could grow more powerful as they push harder to collect increasing amounts of customer data,” Rasmussen says.

“The widespread collection of personalised shopping data could end up being detrimental to customers, as it greatly increases supermarkets’ understanding of how aggressively items can be priced to individuals. Customers could end up paying more.

“Meanwhile, it’s getting harder and harder to access supermarket services without signing up to a loyalty programme. This month, Foodstuffs has followed Woolworths’ lead and made online shopping available to loyalty programme members only.

“New Zealanders need a grocery market that works in their interests. That includes confidence that personal data is not being used in ways that disadvantage shoppers.”

Foodstuffs, which owns New World, Pak’nSave and Four Square, employs UK company Dunnhumby to help it make decisions around pricing.

Dunnhumby’s chief executive has gone on the record saying, “The company [will] help Foodstuffs analyse sales and customer data to make decisions about store locations, product range, pricing, promotions and loyalty programs.

“We have a track record of helping companies in retail, in particular, do this and they typically outperform their peers – in the case of Foodstuffs that’s the goal as well.”

Vulnerable people paying more at the checkout

It’s not just dynamic pricing that has Consumer NZ worried – we’re also concerned that people who don’t have phone or internet access are paying more for groceries, since they aren’t able to access member-only specials.

“We have received several complaints about high prices for non-members unable to access discounts. Some of New Zealand’s most vulnerable are digitally excluded and may be forced to pay higher prices for their groceries,” Rasmussen says.

In response to a query from Consumer NZ on loyalty cards, a Woolworths spokesperson said keeping its services accessible to everyone was “incredibly important”.

“If a customer is facing accessibility barriers or challenges to shopping online, or does not have an email address or mobile phone, we encourage them to contact our Customer Care team. We are committed to working with individual customers to provide support and help them access the benefits of the Everyday Rewards programme.”

However, when Consumer NZ called the Customer Care team and asked if an elderly shopper with no email address could get access to a member card, the customer service representative told us an email address was mandatory. The elderly person could try to get a card at their local store, we were told, but there were “no guarantees”.

Foodstuffs was asked for comment but did not meet the deadline.

About Consumer

Consumer NZ is an independent, non-profit organisation dedicated to championing and empowering consumers in Aotearoa. Consumer NZ has a reputation for being fair, impartial and providing comprehensive consumer information and advice.

The Guardians of New Zealand Superannuation, manager of the $93 billion NZ Super Fund, has appointed William Fletcher to the role of Head of Private Equity & Alternative Investments.

Fletcher joins the Guardians from Fisher Funds, where he managed the global private equity and alternatives portfolio. His previous roles include Goldman Sachs in New Zealand, J.P.Morgan in the UK and Carlyle AlpInvest in The Netherlands.

Prior to that, he spent eight years as an Executive Director in Investment Banking at Goldman Sachs' Auckland office, having previously held a range of banking and investment roles in Europe and the UK.

In his new role, Fletcher will have overall responsibility for the Super Fund’s direct private equity investments and its relationships with external investment managers who hold investment mandates covering a broad range of listed and unlisted securities.

Fletcher said the Guardians had a well-deserved reputation for excellence, and he was very much looking forward to joining the investment team.

“I am excited to be joining an organisation of the Super Fund’s calibre and helping to realise what is a really important objective for all New Zealanders,” Fletcher said.

Fletcher’s appointment follows the Super Fund’s announcement last week that it would commit $35 million to local technology investor Movac’s latest fund.

Investments in private equity and alternatives currently account for some 13 percent of the Super Fund’s total assets under management.

Guardians co-Chief Investment Officer Will Goodwin said Fletcher’s international experience matched the Super Fund’s global investment focus and would help the Super Fund further develop its broad network of asset managers and investment partners.

Earlier this year, Private Equity International magazine named the Super Fund its Asia-Pacific Limited Partner of the Year.