Supermarket wars: Aldi’s new ad campaign blasting rivals
SUPERMARKET loyalty programs "manipulate" shoppers potentially costing Australians up to $1500 each a year as they desperately try to accrue enough points for a toaster while forgoing actual savings at the checkout.
That's the view of Aldi which has gone on an extraordinary attack, blasting Coles and Woolworths, claiming they leave loyal customers waiting for years in points purgatory in a quest for flights, money off vouchers and appliances.
The German discounter, which compared loyalty programs to deals from car salesmen, has today launched its first Australian advertising campaign that directly targets Coles' Flybuys and Woolworths' Rewards programs.
But the supermarkets have said Aldi's calculations aren't a true reflection of how customers accrue points and rewards can be earned far quicker. They also pointed out loyalty programs reward customers for simply doing their everyday shop.
Aldi head of customer service Adrian Christie told news.com.au an average family would have to spend $15,000 at the Coles checkout and patiently wait one year and seven months to get enough points for a Tefal frying pan.
The same pan costs just $60 to buy outright, the same amount the family could save on their shopping bill in just over two weeks, he claimed.
Want a 13-inch laptop through Flybuys? You'll have to spend $382,000 on shopping and wait 42 years before you've accrued enough points, according to Aldi. By which time Flybuys may no longer even exist.
"It's not a mistake that the words 'loyalty' and 'scheme' are used together as they are a scheme; there is some sort of manipulation going on," Mr Christie said.
Loyalty programs are big business. Investment bank Goldman Sachs has estimated Qantas Frequent Flyer is worth $4.5 billion, or around half the total value of the airline. When Wesfarmers floats Coles next month it will hold onto 50 per cent of Flybuys so it can still get juicy data on customers.
Research by comparison website Finder.com.au stated that nine out of 10 Australians are in a program with Flybuys, Woolworths Rewards, Myer One, Qantas and the Priceline Sisterhood the most popular.
And we seem to like them, with 60 per cent of Australians saying it influences where they shop and 36 per cent of people admitting they spend more because of the schemes.
VALUE FOR CUSTOMERS OR SHAREHOLDERS?
Mr Christie asked who really benefited from loyalty programs?
"A loyalty program is great for insights that can manipulate and can help shape the market. But in terms of value, is that value for the customer or for the shareholder?" he said.
Alongside its new, and reliably odd, ad Aldi has launched a "loyalty calculator" that it said can work out exactly how long it will take to get a reward, and how many dollars customers will have to spend on groceries to get it.
On an average weekly spend of $175, Aldi calculates a $10 money off voucher at either Coles or Woolworths would take two months and 19 days and $2000 to earn. That's a return of about 0.5 per cent.
Based on the methodology of one point per dollar spent, a one-way Qantas ticket between Sydney and Brisbane through Woolworths Rewards would take two years and $18,400 to earn. Simply buying the ticket would set you back only $135.
"Loyalty schemes entice you to spend more, so customers need to realise what they are giving up for the rewards," Mr Christie said.
"If you spend $20,000, that might get a new toaster but if you were buying a car and the salesperson said, 'We'll throw in a free toaster,' I'm not sure it would get you over the line."
He claimed Coles and Woolies shoppers could get back far more than 0.5 per cent if they deserted the big boys. An average saving of $28 on a $175 weekly shop at Aldi was around 16 per cent. Multiply that over a month and you could spend the savings on, well, a toaster.
Aldi has claimed that its more than one million customers save around $1500 a year on their shopping which adds up to around $1.7bn that the big supermarkets and their reward programs have lost.
Coles and Woolworths don't buy that calculation. In 2017, Coles said the difference in price between it and Aldi's private label products was nearer 8 per cent.
Research in 2017 by marketing consultancy ICLP/Collinson found Aldi customers felt their loyalty was the least rewarded of the major grocers and the supermarket might have to look into setting up at a program eventually.
But Mr Christie said that was not on the cards: "We know people sometimes buy more than they need and what we say is we don't need that tomfoolery; what we don't try and do is mislead customers in any kind of way. We want to have a straightforward relationship and keep things simple," Mr Christie said.
"Our approach to loyalty is to provide good prices."
WHY WE LOVE REWARDS PROGRAMS
Lecturer in Psychology at the University of Tasmania Dr Rachel Grieve said loyalty programs can make people "less rational" with their shopping.
Smart retailer programs are structured to feel more like a club, hence terms like "member" or "sisterhood".
"Our brains have particular neural networks that detect rewards and that can actually change our brain chemistry, with different neurotransmitters released in response to rewards. These are often pleasurable in nature," Dr Grieve said.
"Once you are in a reward program, as you get emotionally closer to each goal, say the next free item, it can make you less rational about purchasing decisions."
A Woolworths spokesman said bonus points, member-only deals and email offers meant people could get money off vouchers far quicker than the Aldi analysis suggested.
"Australian shoppers are savvy and know value when they see it. There are 11 million members in our Rewards program and we work hard to offer them great value across their entire shop."
A Coles spokesman said its eight million Flybuys members could earn points not just at supermarkets but outlets including Target, Kmart and Medibank. Like Woolies, Coles said regular promotions could boost balances.
"Just last week, Flybuys members could earn 4000 points for spending $200 at Coles - the equivalent of 10 per cent off their shop."
Coles also took the opportunity to point out it employed 115,000 staff (Aldi has less than a tenth of that but also fewer stores) and that it paid "billions" in tax each year in Australia, a swipe at Aldi's overseas ownership. Aldi has said it pays its "fair share of tax" in Australia which is around 31 per cent.
Mr Christie said Aldi's new push against loyalty programs had been planned for some time and was not a reaction to Coles' extraordinarily successful Little Shop toy promotion, which is thought to have sucked in an extra $200 million to its coffers.
But doesn't Aldi miss all that personalised data programs like Flybuys can deliver?
"It doesn't matter to us," Mr Christie said. "We know if store A sells more chips than store B we'll put more chips in store B. We don't need to know the individual person and send them a half-price offer."