Loyalty cards such as those at major supermarket chains could enable dynamic pricing and ultimately lead to higher prices at the checkout, Consumer NZ has warned.

According to the organisation, loyalty programs allow supermarkets to gather data about individual shopping habits, including clues as to how much each person is willing to pay for a particular product. 

This data could drive targeted dynamic pricing, where prices change based on different variables rather than remaining fixed. 

While dynamic pricing already exists, with different regions paying different prices for the same item, Consumer NZ warned retailers could take this further by changing prices based on market demand and customer behaviour. 

The most controversial version of dynamic pricing is when items are priced differently for each shopper, based on an algorithmic calculation of how much each individual will be willing to pay. 

There is no evidence of this practice yet in New Zealand, but Consumer NZ is concerned that customer data could still be used to drive prices up. 

“While some shoppers may love getting a ‘deal’ at the supermarket through loyalty programs, there is concern that our already highly concentrated supermarket sector could grow more powerful as they push harder to collect increasing amounts of customer data,” said Gemma Rasmussen, Consumer NZ’s head of research and advocacy. 

“The widespread collection of personalised shopping data could end up being detrimental to customers, as it greatly increases supermarkets’ understanding of how aggressively items can be priced to individuals. Customers could end up paying more,” Rasmussen added.

Consumer NZ also raised concerns about supermarkets making it harder to access their services without a loyalty membership. Earlier this month, Foodstuffs followed Woolworths’ lead to make online shopping available to loyalty program members only. 

“New Zealanders need a grocery market that works in their interests. That includes confidence that personal data is not being used in ways that disadvantage shoppers,” Rasmussen stressed.

• Further reading: Rising prices force Kiwis to rethink grocery priorities.