The loyalty card illusion — what the points really cost
What supermarkets really get for those points, how the scheme earns its keep, and why the card is oddly the most honest trade in the whole data economy.
The modern loyalty card was largely invented in Britain, and the story is worth telling properly, because one small company sits at the centre of it.
In 1989, two married mathematicians, Clive Humby and Edwina Dunn, founded a data-analysis firm called dunnhumby. In the early nineties Tesco hired them to analyse a loyalty-card trial running in a handful of stores. When they presented what the data showed, Tesco’s then chairman, Lord MacLaurin, is famously reported to have said that they had learned more about his customers in three months than he had in thirty years.
That sentence is the entire data economy, a decade early. Clubcard launched nationally in 1995 and helped push Tesco past Sainsbury’s to become Britain’s biggest retailer. Tesco liked the engine so much it bought a majority stake in dunnhumby in 2001, then the whole firm — and Humby went on to be credited with coining the phrase “data is the new oil”. He would know. He drilled one of the first wells.
Where the money actually comes from
“Points for data” is the visible half. Here is what the scheme earns, stream by stream — none of it hidden, all of it easy to never think about.
Loyalty and pricing power. Clubcard Prices puts a lower shelf price next to the standard one, for members only. That lets Tesco match the discounters on headline products without cutting the price for everyone — and it keeps over twenty million households coming back to the same tills, which is where every other stream starts.
Insight for the shelves. dunnhumby sells analysis of what actually sells — to Tesco itself, and to the manufacturers on its shelves, with names like Unilever, Nestlé and Heinz reported among the buyers over the years. The supermarkets’ position is that what changes hands is insight and segments, not lists of named customers — a distinction that matters, and is also cold comfort, since the segment is you.
Retail media. The newest and fastest-growing stream. Through the Tesco Media and Insight Platform, run with dunnhumby, brands pay to aim advertising at audiences built from Clubcard behaviour — in the app, on the website, on screens in the stores. The supermarket has quietly become an ad company with aisles.
Reward Partners. Those pages inviting you to turn vouchers into double or triple value at restaurants, cinemas and days out are not generosity — they are the scheme’s partner arm. The partners get customers delivered to them; Tesco gets the cost of your loyalty partly shifted onto someone else’s books, while you credit Tesco for the day out. Everyone in that triangle is paying with something, and the currency, as ever, started as your basket.
The same playbook crossed the Atlantic: when Tesco tried to sell dunnhumby in 2015, the US grocer Kroger bought out their American joint venture and re-formed it as its own in-house data business, 84.51° — the Clubcard machine’s direct descendant, now running on American shopping.
What a basket gives away
A shopping history sounds mundane until you remember that inference is the whole game. What you buy reveals your household size, your income band, your diet, your pets, your habits improving and collapsing. The canonical story is American: in 2012 the New York Times reported how the retailer Target scored shoppers on the likelihood they were pregnant, from shifts in buying patterns — and how baby-product coupons reached one household before a teenage daughter had told her father.
Nobody at the till asks whether you are pregnant. The basket answers anyway. That is the uncomfortable property of purchase data: you cannot withhold what you never said out loud.
- 01 you scan the card points land, pence come off — the visible half of the deal
- 02 the basket is recorded item by item, trip by trip, store by store, for years
- 03 the record becomes insight habits, household and life events, inferred from what you buy
- 04 access is sold manufacturers and advertisers pay to reach the segments you are in
The same four steps run behind every free app — with no scan, no discount, and no sign at all that it is happening.
Not just Tesco
The pattern is the sector, not one company — the interesting part is how each retailer’s own paperwork describes it.
Lidl Plus dispenses with the card entirely: the member prices live in an app, so the discounts require the profile. Lidl’s own UK privacy notice describes purchases being assigned to your customer profile and your purchasing behaviour analysed, and its data-protection policy goes further — describing user-data lists uploaded to Facebook’s Custom Audience system to target advertising, with Facebook also using the data for its own purposes. A discounter’s till, wired into Meta’s ad machine.
IKEA Family looks gentler — member prices, digital receipts — but the mechanics rhyme: IKEA’s own policy describes purchase history collected whenever you identify as a member and used to analyse how you shop and what you shop for, feed segmentation, and tailor offers. The free hot drink has a ledger behind it too.
And Sainsbury’s runs the same play with Nectar, complete with its own retail-media arm. Once you see the shape — profile, analysis, segments, paid access — you see it at every checkout in the country.
Being fair about it — the card deal is real
Here the honest thing is to defend the supermarkets a little. In November 2024, after years of suspicion that member prices were a con, the UK’s Competition and Markets Authority published its review of around 50,000 loyalty-priced grocery products. Its finding: 92 per cent offered genuine savings against the usual price, averaging 17 to 25 per cent, with very little evidence of “usual” prices being inflated to fake the discount. The CMA looked at the data-collection side too, and found no consumer-law breach.
So the trade is real. You are paid, in actual money, at a rate you can see, by a named company, under UK data law, with the right to ask what they hold and to walk away. As data deals go, it is strangely close to fair dealing.
Which is exactly what makes it useful as a measuring stick.
The same trade, without the till
Now hold the free app in your hand up against that standard.
There is no scan moment — collection is continuous and invisible. There is no discount shown — you are paid in access to the app, at a rate nobody states. The buyers are not named; the record is not one company’s but flows through an ad-tech chain you cannot enumerate. And there is no checkout at which to quietly decline: the choice is take the app, tracking included, or leave.
We accept, roughly consciously, a visible trade worth a fifth off the shopping. Meanwhile the invisible version of the same trade runs constantly, pays us nothing we can count, and is conducted with counterparties we cannot name. The outrage, such as it is, tends to land on the card — the one player that showed its hand.
Where that leaves you
Not, probably, cutting up the Clubcard. Knowing the price, you may well judge it worth paying — that is what informed consent looks like, and it is fine.
The useful habit is to run the till test on everything else: what is the scan here, what is the discount, and who is the dunnhumby? When an app cannot answer those three questions, you are still in the deal — just on the wrong side of the counter. And for a growing number of everyday tools there is a third option the supermarket can never offer: run the thing yourself, and there is no counterparty at all.
The problem was never that you sold your shopping history for a discount. It is everyone who took the same history and paid you nothing — while the card quietly taught us all that this was normal.