Monday, 18 January 2016

How discounters are reinventing customer loyalty schemes in Sweden

Are ‘cardless’ customer loyalty schemes the future?
While Brazil battles with the worst recession in recent years, the Scandinavian countries are leaving experts worried about the recent deflation. Sweden saw inflation for all 2015 drop by 0.04 percent, its third consecutive year of declining consumer prices.  Economists argue that prices need to rise in Sweden to further stimulate the economy, by flushing more money into the system.

However, even with more disposable income at hand, Swedes are still price conscious, hence the popularity of the hard discounters. Lidl is the largest discounter in Sweden, with 169 stores in the country (holding a 59% value share), and is continuing to grow. Sales increased by 5% in 2014. In addition to physical store expansion, Lidl has been successful in changing consumer perceptions about the quality of their products. A very smart marketing campaign was a pop-up restaurant Dill, a gourmet restaurant run by 2 star Michelin chef Michael Wignall serving produce solely from Lidl.

Another good example in terms retail innovation in Sweden was the discounter, Wyllis. Owned by Axfoods, one of Sweden’s leading food and wholesaler groups, Willys dominated Sweden’s discount food retail market,  but the company faced increased competition and needed to step up their game when it came to customer loyalty.

Instead of going with the traditional membership card points system, Willys adopted a ‘cardless’ loyalty programme called Willys+ : customers' ordinary credit/debit cards could be coupled to the system, and the rewards would be deducted automatically when customers pay at the checkout. This meant that Willys would not use mass emails or paper coupons. To me it seems simple and cost effective. Indeed, since its launch in February 2013, Wyllis exceeded the exceptions by engaging 1,000,000 active members in the first six months and increased sales by 5.1% in 2013.

As I mentioned on my previous post the UK’s big four supermarkets (Asda, Sainsbury’s, Tesco and Morrisons) have been losing market share to discounters (Aldi and Lidl) and still insist in the somewhat, old-fashioned membership loyalty card system, which in my opinion is already redundant. Maybe the ‘big four’ should look outside the UK and see what and how other grocery retailers are getting right and perhaps then, they will have some advantage over the discounters.

As for me, while the big four don’t get they act together, I will still be shopping at Lidl.