Tesco Joins Retailers Watering Down Rewards Amid Inflation

As retailers bow under inflationary pressures, some are cutting the value of their rewards points.

Tesco, the leading supermarket chain in the United Kingdom, shared in the FAQ section of its website that it is cutting the exchange rate of consumers’ loyalty vouchers with rewards partners by a third starting in June.

“We are making a change to how members can use their vouchers with our Reward Partners, but they will still be able to unlock great value in the same range of ways as before,”​ a Tesco spokesperson commented in an email to PYMNTS.

Currently, Tesco Clubcard members can cash in vouchers to receive codes to spend with rewards partners (which include restaurants, movie theaters and more) that are worth three times what those vouchers are worth if used on Tesco purchases. So, for instance, vouchers that would get consumers £1 off at the supermarket can get them £3 off at a partnered company.

As of June 14, however, they will receive only twice the in-supermarket value with rewards partners, rather than three times. Those same vouchers would only be worth £2 at a partnered company.

“We’re making this change to the scheme to make sure we can continue to provide a wide range of rewards that meet the needs of all our Tesco Clubcard members, while keeping prices low for everyone,” the company stated. “Tesco Clubcard continues to have the biggest and most generous Reward Partner scheme with access to over 100 Partners at 2x your Clubcard voucher value.”

Also this month, major U.K. pharmacy chain Boots reduced the value of its rewards points by 25%, offering £0.03 on the pound rather than £0.04, a change set to go into effect in May, according to BBC News.

While inflationary pressures may be putting pressure on retailers’ margins and making it more difficult for them to afford generous rewards schemes, pulling back now could have major drawbacks, as consumers, too, are straining under the impact of these price increases. In fact, many consumers are leaving their previous go-to grocers in search of less expensive options.

Cutting back loyalty now could only exacerbate these effects, especially considering U.K. shoppers’ outsized demand for grocery loyalty programs. Research from PYMNTS’ study “What UK Consumers Expect From Their Grocery Shopping Experience,” created in collaboration with ACI Worldwide, which draws from responses from more than 2,500 U.K. consumers, finds that 63% of British shoppers use at least one grocer’s loyalty program. In contrast, only 54% of U.S. shoppers said the same.

Indeed, U.K. merchants are aware of the importance of these programs. Data from PYMNTS’ study “Big Retail’s Innovation Mandate: Convenience and Personalization,” created in collaboration with ACI Worldwide, which draws from a survey of 300 retailers across the United States and the United Kingdom, finds that three-quarters of grocers think consumers would be very or extremely likely to switch merchants if digital coupons and rewards were not provided.

U.S. merchants are not as convinced about the effectiveness of these offers as their U.K. counterparts. The report noted that 81% of U.K. merchants believe in their importance, compared to 74% of U.S. merchants.

Grocers and pharmacies are not the only ones reducing the value of their rewards; many restaurants have been doing the same. For instance, Chick-fil-A, which has more than 2,800 restaurants in the United States and Canada, recently informed customers that it is increasing the number of points required to redeem some items in its Chick-fil-A One rewards program, not specifying which items or what the increases will be.

Similarly, last month, the world’s largest restaurant company by revenue, Starbucks, put into effect changes to its rewards program, making it more costly to earn many popular items and less costly to earn a handful of others.