Why loyalty could cost you more
Why loyalty could cost you more
Being a supermarket’s favourite customer could become an expensive compliment. You return every week, buy familiar brands, and seldom compare prices. That makes you dependable. It may also tell the retailer that you need less encouragement to spend than the customer who keeps shopping around.
This possibility gives the humble loyalty card a more interesting role in the economy. In its 2026 Integrated Report, Shoprite says its rewards programme provides more than 5 000 data points per member. The group uses customer information to help shape pricing, promotions, and product ranges. Every shopping trip adds to the picture. The coffee bought only on special, the washing powder purchased regardless of price, and the switch to a cheaper brand can all reveal different things about the same household. You might be highly price conscious in one aisle and remarkably predictable in the next.
When your shopping habits become valuable data
A working paper published this month by the Toulouse School of Economics explores what these patterns could be worth. Using records from a supermarket in the United States, researchers simulated personalised pricing based on customers’ purchase histories. With a year’s history, modelled profits increased by 7.1% compared with uniform pricing. About 84% of consumers benefitted. Yet, consumers collectively became worse off, because the losses imposed on a minority exceeded the smaller gains spread across the majority. Overall economic benefits increased because the retailer gained more than consumers lost.
This is the twist: Most customers could truthfully say that they were getting a better deal while consumers, as a group, lost ground. A retailer could improve its reputation for savings even as more of the economic benefit flowed towards its own profits. The research does have limits in that it models only one store and does not capture competition between supermarkets. These are simulated possibilities, not findings about South African chains. Rivals offering better deals, implementation costs, and customers’ objections could all make personalised pricing less profitable.
The real value of knowing your customer
For investors, a loyalty programme starts to look like more than a marketing expense. It can be a source of knowledge that a new competitor cannot instantly copy. A rival can match a shelf price overnight, but reproducing years of customer behaviour is a completely different undertaking. The commercial temptation is clear: A blanket discount rewards everyone who buys the product, including shoppers who would have paid full price. A targeted discount can concentrate the retailer’s generosity on customers whose decisions it might actually change. Being a good customer and needing a good offer become different things.
Competition can turn this information against the seller. If rivals use it to identify dissatisfied shoppers and offer them better deals, prices could fall. The Bank of England emphasises this point by noting that the result depends on the strength of competition and how easily customers can compare offers.
There are also benefits beyond pricing. Better forecasts can reduce waste and help stores stock what customers want. Relevant offers can save shoppers money and spare them endless searching. These efficiencies matter in a country where getting to another supermarket can, in itself, involve considerable time and expense.
That being said, convenience makes the economic question more interesting. A customer who values a quick, familiar shop may accept a higher bill without being particularly wealthy. The willingness to pay more can reflect a shortage of time as well as an abundance of money. An efficient pricing system need not feel fair.
For shareholders, the opportunity comes with a condition: Customers must continue to trust the bargain. A retailer that earns slightly more today, but teaches its best customers to distrust tomorrow’s offers, could damage something much harder to rebuild than a discount campaign.
Your retirement portfolio may benefit from a supermarket that understands its customers exceptionally well. Standing at the till, you might wish it understood you a little less.
