Burnham’s crackdown on ‘price-gouging’ splits supermarkets
Tesco and Sainsbury’s have stood firm after the boss of Aldi hit out at loyalty discounts, as a “price-gouging” row threatens to divide British supermarkets.
Giles Hurley, the chief executive of the discount grocer, has backed the government’s plans to clamp down on retailers which offer “misleading” discounts which do not offer real-terms value.
Aldi is one of the few UK supermarkets who do not offer special prices to loyalty card members. At the weekend, Hurley hit out at rivals who “give the impression they’re getting a great deal, when the price they pay at the till can still be higher than elsewhere”.
Loyalty card discounts – like those offered by Tesco’s Clubcard and Sainsbury’s’ Nectar card – distort shoppers’ understanding of the real value they are getting at the till, he said.
“The problem with loyalty pricing is that it encourages shoppers to focus on how much they’ve supposedly saved, rather than how much they’ve actually spent. Taking £2 off a £6 product doesn’t make it good value if you can buy it for £3 somewhere else,” Hurley added.
Tesco and Sainsbury’s claim hundreds in savings
But Tesco and Sainsbury’s, the UK’s biggest grocers by market share, have doubled down on their loyalty schemes, which each attract millions of members.
Tesco’s Clubcard prices follow strict rules to ensure that they represent genuine savings compared to rival prices in the grocery market, a person close to the supermarket said.
The person pointed to a 2024 investigation by the competition watchdog, which found that loyalty discounts offered between 17 and 25 per cent savings across five major grocers.
“Our comparative price analysis indicates loyalty prices generally do offer shoppers savings when compared with the price of the same product at other supermarkets when it is not on promotion at the other retailers,” the Competition and Markets Authority (CMA) found.
But the watchdog said this was “not always the case,” adding that “several” loyalty-priced products were found to be “significantly more expensive” than the cheapest price at rival grocers.
Sainsbury’s is also confident that its Nectar card savings offer real value to customers, it is understood.
A person close to the grocer pointed to the CMA investigation. They added that Sainsbury’s offers the largest Aldi price-match range among British supermarkets.
British grocers offer ‘lowest prices in Europe’
The UK’s grocery giants have stepped up attempts to compete with German discounters Aldi and Lidl in recent years.
Tesco’s Clubcard offers shoppers as much as £404 off of their annual grocery bill, according to its annual report, while Sainsbury’s has promised up to £450 savings on its Nectar card.
Earlier this month, Chancellor John Healey revived a row over supermarket pricing when he threatened to crack down on retailers if they exploit the Iran war to engage in “price gouging”.
The British Retail Consortium (BRC), which represents the UK’s biggest supermarkets, has said it would challenge any claims of profiteering, though the trade body has backed the government’s efforts to clamp down on “fake” discounts.
Jim Bligh, the BRC’s corporate affairs director, said: “UK supermarkets are perhaps the most competitive in the world, and it’s that competition that means UK shoppers have some of the lowest prices in Europe.
“Competition between retailers is also keeping food price inflation down, despite huge supply chain challenges and rising costs imposed by [the] government.”