The launch of Clubcard in Thailand in August this year extends Tesco’s loyalty cards operation further across the globe, and belatedly brings Thailand’s biggest retailer into a loyalty card market which already contains offers from Carrefour, Tops and Big C. It will clearly be big: in its first three weeks Clubcard gained more members (two million) than competitor Carrefour’s I-Wish card has accumulated since its launch in 2007. The recent launch in Malaysia has resulted in 70% of scanned transactions being covered by Clubcard.
The benefits to Tesco are clear. Their dominance of the UK market has been underpinned by Clubcard, and whilst their latest campaign to double points has yet to prove effective (Tesco growth in the period still lags Asda*, a competitor which does not use a loyalty card), there is a consensus amongst industry observers that it has historically been a critical part of their marketing mix. The benefits to manufacturers are less clear; and one suspects criticism of one’s biggest customer would naturally be muted. So what are the implications for Tesco’s suppliers and how should they respond to Clubcard?
Clubcard is a loyalty card, and is designed to encourage shoppers to use a particular chain more. In its simplest incarnation a loyalty card gives rewards, usually in the form of discounts against future purchases, based on how much is spent. Because Clubcard registers who did the shopping, it is possible for Tesco (through their partners Dunnhumby, majority-owned by Tesco), to analyze who buys what, which should enable activities such as promotions to be better targeted. So, for example, a coffee supplier could target their next promotion only at shoppers who bought the competitor product. The targeting of promotions offers a theoretical improvement in effectiveness, but the real boon is the potential to effectively evaluate activities – knowing which shoppers bought adds useful data to a promotion evaluation which is currently limited to whether sales went up or not.
Clubcard promises suppliers much: Insight into shoppers, more efficient promotions, and unprecedented access to new in-store media opportunities. Suppliers will need to evaluate the potential benefits of the Clubcard offer against the inevitable associated costs. Yet it clearly has limitations: Clubcard in Thailand has two million card holders, yet with Tesco enjoying 25% of the Thai retail market, their total number of shoppers must be significantly higher than this. So how skewed is the sample, how representative, and what is missing?
More importantly manufacturers need to question how important Tesco will be to future strategies.
Any retail investment decision should not be made without firstly understanding which shoppers, in which channels driving brand consumption; and what will influence their behavior in-store.
Regardless, we believe that Clubcard will have three significant impacts on suppliers, namely;
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