One of the main reasons supermarkets offer loyalty schemes is so they can collect data on customers.
This is very valuable information – studying buying decisions can help supermarkets understand and influence shoppers.
They create highly detailed shopper profiles looking at what people bought and how often.
Some supermarkets sell data to suppliers which can then be used to deliver targeted advertising.
Selling data can be lucrative. Sainsbury’s has said it expects Nectar360, the group which manages the supermarket’s loyalty scheme, to make an additional £100m in profit over the next three years.
The CMA said shopper attitudes to data collection range from feeling pressure to trade their personal data for lower prices, to others not feeling concerned.
But only 7% of people surveyed by the watchdog said they hadn’t signed up to a loyalty scheme due to privacy concerns.
Annich McIntosh, editor and chief executive of Loyalty Magazine, said there was a question mark over whether it was morally right to force people to participate in loyalty schemes to get price promotions.
But she said these schemes in general benefit shoppers because they can help slow down supermarket price increases.
She added that a “sci-fi scenario” of customers being offered promotions as they walk past a product was unlikely, as there was little customer appetite.
However, using artificial intelligence to personalise offers could benefit both shoppers and supermarkets, she added.