The supermarket giants of our country are battling it out again to retain control of the $90 billion grocery market they currently control. This time the battle revolves around loyalty points schemes. Woolies on Wednesday 28th October launched their new Woolworths Rewards scheme, which claims to pay members back twice as quickly compared to Coles’ FlyBuys program.
Woolies have ditched the Qantas frequent flyer points and will now reward members with instant cash rewards at the till. In my eyes it has the potential to benefit a much larger pool of members, but do all of them agree? Besides looking into this, I'll also delve into Coles' retaliation arguing with the validity of Woolies' claims as well as discussing which supermarket you're likely to be better off buying from under each one's respective schemes.
Woolworths will completely phase out its Qantas Frequent Flyer points program by 31st December 2015. But, from 28th October 2015 you can now earn ‘Woolworths Dollars’ by buying orange ticket items at their supermarkets and BWS stores. Woolworths has even been as bold as to say that members will be rewarded twice fast compared to Coles’ FlyBuys scheme, so it's understandable that Coles had to take action. To be fair to Woolworths, they did take this quote from external research conducted by Monash Business School.
In my previous blog about Woolies' new rewards program I covered the research they had based their claims on: that the average shopper spends roughly $108 per week, which would earn them $10 in discounts every 7.4 weeks. Brad Banducci, Woolworths Food Group Managing Director said the new Woolworths scheme now allowed all customers to shop as normal. “Its 100% relevant to 100% of our shoppers, totally automatic and hassle free” Mr Banducci explains.
Coles has responded though by saying that the Woolies program only applied to certain items, whereas the Coles FlyBuys scheme is far broader. Adam Story, Coles’ general manager of FlyBuys and Loyalties told reporters “At Coles, FlyBuy members earn rewards on every dollar they spend in our supermarkets and fuel and liquor stores – not just the specific products we want them to buy.”
He continued to stress that points could also be accrued through 27 partners e.g. Telstra, OPSM, AGL, Target, Kmart, Medibank and NAB.
“This is a major way that members accelerate their point earnings which is not reflected in the calculations in the report,” Mr Story exclaimed.
According to analysis at Coles, they're claiming that members are capable of earning as much as $10 worth of FlyBuy points in less than 6 weeks, but they haven't told us what these members were buying to earn those points. Their research also mentioned that the average FlyBuy member earns two points per dollar spent.
And while Coles has just committed to a new contract with Etihad Airlines, it seems as though a number Woolworths customers would still prefer to have their Qantas points. This based on messages left on their Woolies Facebook wall, such as:
“Really Woolworths? Have you lost the plot altogether? Your new system will only be giving me credit on items, which take up just two pages of your 40-page catalogue… At least with Coles, every item counts and I can buy what I want, not what items you want me to buy that I didn’t want in the first place,” Jason Young wrote in frustration.
Deutsch Bank have reportedly estimated that the new rewards scheme would cost Woolworths a staggering $500 million, so not a small investment for the brand. Despite Woolies' own research revealing that customers preferred discounted bills to schemes, I guess it was always inevitable though that a certain segment of customers would not agree with the changes. However, I think the main aspect that will make or break the Woolworths Rewards program will come down to the volume and popularity of the orange ticket products chosen for discounts. If the selection is too limited, customers won't buy them which means no earning of "Woolworths Dollars" resulting in no discounts at the till.
Just to end off with, I also came across an interesting comment by the finance editor of Canstar Blue, Justine Davies on the matter of loyalty schemes by Coles and Woolies. Based on her assumption that an average family would be spending $250 a week at the supermarket, she appears to be siding with Woolworths on this discussion. Davies goes on to explain that “for a $250 dollar spend a week, $13,000 a year, you expect to receive about $65 back per annum. With Woolworths Rewards, you would be spending about $6,500 to get that $65, so essentially you should get twice as much back as Coles FlyBuys.”