The Australian Competition and Consumer Commission (ACCC) has been calling for a comprehensive review of Coles and Woolworths’ loyalty program practices. This statutory review is scheduled to occur every three years. This recommendation comes as more and more states are enjoying increased participation rates in these programs—even as the numbers still remain low nationally. The ACCC has settled some significant concerns. These are member-only pricing, less price transparency due to bonus point promotions, and the increased use of consumer data to enable targeted marketing. The commission’s order directs an investigation into whether these practices are harming consumers and competition.
The ACCC has insisted that the loyalty program summaries which Coles and Woolworths are required to provide, be clear. These new summaries will further shine a light on the financial value of these points both earned and redeemed. She explains that they’ll show how much the customer has spent overall over a time range. Such transparency is necessary to allow consumers to make informed choices about their involvement with these programs.
Participation and Revenue Insights
Even as loyalty all around Australia is climbing, nationwide, loyalty programs with a paid option—like Coles Plus—remain relatively niche, with relatively few members. Indeed, by the end of 2023, Coles Plus had signed up fewer than 70,000 members. Yet, in that fiscal year, these subscribers made up only 4 percent of the system’s total revenue. This signals an outsized effect on attractiveness to donors, given the relatively small membership base.
In response to the uptick, the ACCC pointed out that shoppers are increasingly using the loyalty programs run on the duopolical Coles and Woolworths. The commission sounds the alarm that most consumers are not equipped to determine if they are receiving a fair deal. Much of this struggle is due to unclear information.
"Ultimately many consumers are left to make a judgement of whether they are getting a good deal overall based on impressions or perceptions rather than clear and useful information." – ACCC
Potential Concerns and Recommendations
The ACCCC has raised a number of specific issues with respect to Coles and Woolworths’ loyalty programs. These are things like member-only pricing and improved price transparency via bonus point offers. The commission rightly worries about convenience. They are concerned that the non-monetary benefits — which are exclusive to program members — are replacing options that are available to everyone.
"We have identified a number of developments in supermarket loyalty programs which have the potential to raise competition and consumer-related concerns as they continue to develop," – ACCC
One major concern is the collection of extensive data that would result in “consumer lock-in.” The ACCC’s concerns about the increasing use of customer data to inform personalization are not new. This new, backward-facing trend would reduce choices for consumers and chill competition.
"The gamification techniques featured in loyalty programs may leverage … the 'goal gradient effect', which predicts that the amount of effort people put [in] will increase as they get closer to achieving their goal." – ACCC
Looking Forward
In response to these issues, the ACCC suggests that supermarket loyalty programs be reevaluated in three years. Whether their practices have become truly malign to consumers or competition will be the focus of this extraordinary review. And how they can make sure that loyalty programs continue to offer real value without harming transparency or consumer choice.
The basic points-based systems of programs such as Everyday Rewards and Flybuys offer discounts after a points goal has been achieved. Nevertheless, the ACCC is clearly focused on how these systems will develop and ultimately affect consumer choice.
"The core points-based systems of the Everyday Rewards and Flybuys programs [do this] by providing consumers with a discount once they reach a points threshold." – ACCC
