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U.K. groceries wage loyalty card war

By Susan Thorne

Industry observers looking for retail innovation in the United Kingdom should consider a stroll through the nearest supermarket -- U.K. food sellers increasingly are employing U.S. supermarket technology and services to squeeze every dollar out of the low-margin industry.

England's grocery retailers are engaged in a lively competition for market share, and are striving to outdo each other with a wide range of product, marketing and service innovations. And like their U.S.-based brethren, British food sellers are wooing shoppers with everything from in-store banking to e-mail orders, and from baby-sitting services to magazines, with new (to them) innovations constantly appearing.

The Big Three in the U.K. supermarket world -- London-based Sainsbury's, Safeway Stores PLC and Tesco Stores Ltd. -- have been pitted against each other in an intense rivalry for some time and consider customer loyalty an important element in their success.

"It's a very competitive industry, so we're always looking for ways to be more innovative," said Karen Marshall, spokesman for Tesco, which is based in Cheshunt, Hertfordshire, England. The company has 588 stores in the United Kingdom and 86 eastern European units.

"What we try to offer is competitive prices, as much choice as we can, high-quality products and the best customer service," she said.

As in the United States, loyalty cards rewarding shoppers for their patronage have become virtually a staple of the U.K. food industry. Tesco's Club Card, similar to those of other companies, awards a point for each £1 spent in its stores. Shoppers can then spend those points at Tesco stores or B & Q "do-it-yourself" hardware stores.

The company is also linking up with other businesses. Club Card points can be earned for patronizing certain gasoline stations, and a trial is underway which gives Tesco points for expenditures on food and drink at 30 pubs.

The cards not only enhance customer satisfaction but also provide a valuable source of customer data for marketing efforts, Ms. Marshall pointed out. Shopper names and addresses, and the category of products purchased are recorded and can be used for direct-mail campaigns and other promotions. Club Card evenings -- complimentary in-store gatherings for certain Club Card holders -- are organized to promote products. Shoppers who have visited the wine or cheese departments at Tesco might be invited to a wine-tasting evening; those who purchased shampoo or cosmetics might be invited to a "hair care evening."

"It's a small 'thank-you' to customers for shopping with us," claimed Ms. Marshall. "The main idea is to help serve our customers better." The popular evenings also provide an opportunity for personal contact with shoppers -- something difficult to achieve in the mass marketing age, she added.

Tesco also sends Club Card members a monthly magazine of recipe ideas, details of new product launches, and other information tailored to its particular demographic groups. Each separate edition of the magazine reflects the interests and lifestyle of a target market group such as young families, students or seniors.

Two other supermarket chain magazines -- A Taste of Safeway and Sainsbury's: The Magazine -- claim high monthly circulations, greater than those of several leading English women's magazines. Of course, unlike the women's magazines, they are unsolicited.

Besides rewarding loyalty, food stores are increasing the range of services offered in their stores, in a move to make groceries a one-stop shopping destination.

In a move mirroring recent U.S. trends, Tesco and Safeway have recently initiated their own banking services, a useful addition in England because many people do not have accounts with the chartered banks. Both chains provide debit and credit cards as well as savings accounts with interest; transactions can be performed at checkouts or via telephone. In addition, Safeway is introducing in-store financial advisory services by staff of the Abbey National bank during peak hours. Automatic teller machines are also widely found in most groceries.

Loyalty points are automatically awarded for expenditures made with debit or credit cards at Tesco; while Safeway's ABC Bonus Account pays 5% interest and even has an overdraft capability. These branded cards may also be used for purchases at associated gasoline bars.

"It's convenience that we're aiming at -- the idea that you only need one card to do your shopping, your banking, and to buy your petrol," said Ms. Marshall.

Coffee shops are a feature of many larger food stores, and additional services such as flower delivery, dry cleaning, photo and pharmacy service are available at some locations.

New technological applications are coming in to Great Britain as in North America; some stores are experimenting with alternative checkout systems such as self-scanning. Safeway, for instance, is piloting a system that reduces checkout lineups called Easy Pay, in which the shopper pays for groceries which she has self-scanned when loading her cart at an interactive computer terminal, using debit or credit cards.

A wide range of prepared home meal products is another convenience feature of supermarkets which is highly developed in England. Sainsbury's has made ready-to-eat and oven-ready foods one of its strengths. Of the company's approximately 400 stores in the United Kingdom, 330 have delicatessen counters which include heat-and-eat ethnic specialties and English-style meat pies, among other offerings. Chilled ready-cooked meals -- pasta, traditional British fare and soups are some typical items -- and chilled desserts are available in most larger stores. The Sainsbury's brand is also widely recognized and has become a strong selling point.

Home delivery and high-tech services are also being used to replace shopper visits to the store. Bristol-based grocery chain Somerfield Stores Ltd. (formerly Gateway Foodmarkets), which has 557 stores nationwide under the Somerfield and Food Giant banners, is maximizing its neighborhood shopping customer base with phone-in or fax-in ordering from an extensive product catalog. The company also offers personal shopping by professionals who select merchandise according to customer instructions.

"We encourage customers to meet their shoppers," said Peter Williams, a spokesman for Somerfield. "They can pop in and discuss their personal preferences -- maybe that they need quite ripe avocados, or prefer beef that's a little bit fatty."

The Bristol-based company is also piloting an office shopping program. Mr. Williams points out that services like these are important in capturing customer loyalty and staying ahead in the grocery business.

"Growth in things like home delivery is a step by supermarkets to stand out from the crowd, in what is a very full market at the moment," he said. "Supermarkets are definitely looking for ways to grow their businesses, and we have to enhance our services to the customer to do so."

Safeway Stores PLC, based in Hayes, Middlesex, is specifically aiming to become the leading "family friendly" retailer, with 10% baby discounts for new parents at Safeway, and specific areas of the parking lot set aside for the vehicles of parents and pregnant mothers. In-store Safeway coffee shops will warm bottles and baby food, which are provided free of charge.

One hundred of the company's stores have nursery/baby-sitting facilities -- it calls them "creches" -- for children aged 2 to 8, offering kids arts and crafts, dressing-up activities, and interactive computer games and books. Children's parties can be held there as well. Thanks to its creche program, Safeway now claims to be the largest provider of childcare in the country.