Safeway, the UK’s fourth largest retailer, announced pre-tax profits down from #228.2m to #187.4m, for the 28 weeks to 10 October. In the same week, Northern Foods announced a 4% drop in pre-tax profits for the half year, raising fears of a downturn in the food retail sector.
Safeway last month (October) withdrew its triple point loyalty scheme in favour of its standard card.
David Sheldon, a management consultant in the consumer and retail division at Ernst & Young, said Safeway’s investment in a loyalty card scheme had eroded profits.
‘Loyalty card schemes are a very expensive option for buying customer loyalty. Catching and retaining customers has even been at the expense of early profit decline,’ he said.
But Simon Laffin, Safeway’s FD, claimed a 2% increase in sales had paid for the running of the loyalty scheme. ‘It’s absurd to say that the loyalty scheme is a waste of money. It’s about tuning into what the customer wants,’ he said.
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