Oh My! The UK grocery business has woken from its complacency to view the cuckoos in the nest.
All had been quiet on the UK loyalty front for longer than is seemly. Until that is, Lidl decided to expand its loyalty trial and enter the den of wolves. And Amazon decided to offer free delivery.
The thing is, for the last couple of decades, Sainsbury’s Nectar and Tesco Clubcard have had the UK loyalty business firmly under control. Yes, Morrisons has a programme of sorts, and so does the Co-Op, but nothing to compare with the advanced analytics and reach of the two giants, which claim around 15 million cardholding families each.
Now all this is about to change because not only has discount retailer Lidl entered the fray, but Amazon is widening its offer of food items delivered to the door. Tesco is reportedly adding free delivery to its Clubcard Plus loyalty scheme as the competition against online giant Amazon heats up.
Amazon’s Jeff Bezos said last month that customers can buy cheese, baked goods, fresh meat, fruit and vegetables with no delivery fee if they subscribe to its £7.99 a month Prime service. This is likely to prove a costly proposition that reflects the determination of Amazon to corner the UK food market. While all the supermarkets experienced unprecedented increases in home deliveries during the lockdown, none of them made any money from the increased home business.
Tesco chief executive Dave Lewis said now that Amazon has announced a similar service to its 15 million UK members, Tesco will have to “think about how it puts delivery into Clubcard Plus,” The Sunday Telegraph reported.
Amazon against Tesco and Sainsbury’s will be a mammoth fight possibly to the last person standing, but in the meantime, how important will the Lidl interloper be?
The Lidl Plus app is interesting on a number of levels. It is fully mobile enabled and doesn’t rely on plastic cards or paper. ( Tesco Clubcard, Nectar and Boots offer a choice of card, key fob or mobile). It has integrated targeted offers sent to customers via the app giving reasonable discounts on prices that are already low. These discounts are applied at the POS via a single scan of the phone to give money off which is a more immediate reward than Tesco or Nectar offer, but similar to the points collection of Boots.
Next, they have included partner offers (first ones from Sky, Readly and Chili). Direct to Consumer (FMCG) loyalty is another big giant ready to escape the cage, and is such an easy win that creates value for all parties, but which few of the UK supermarkets have been able to pull off.
Most surprising of all is that Lidl has bothered. It is gaining market share from the traditional supermarkets and is increasingly visited by upmarket shoppers who appreciate their range of wines and other premium goods. Commentators are questioning the timing. While it may reasonably expect to increase short term profits, this loyalty programme could be expensive, if we enter a recession, as forecast. Kwiksave, an earlier discounter that did a similar loyalty launch, didn’t survive a recession in the 90s, when Aldi and Lidl entered the UK market.
The big question now is what will Aldi do? Stay true to its roots, follow Aldi, or something completely different? But with Amazon determined to make inroads into the UK grocery market, and the next generation of discounters, such as Kaufland growing stronger, there will be plenty to write about in the next few months.