Loyalty plan under fire
The finance director of supermarket giant Safeway has rejected criticism by Big Five accounting experts that the cost of the chain's loyalty card scheme was one factor behind an 18% fall in first half profits
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.