Britain's Tesco takes on discounters with paid-for loyalty card

By James Davey

LONDON, Oct 29 (Reuters) - Tesco will next week
become the first major British supermarket group to offer a
subscription customer loyalty scheme, the latest weapon in its
fight to stem the market share gains of German-owned
discounters.

Along with other leading UK grocers Sainsbury's,
Asda (part of Walmart) and Morrisons, Tesco has
been losing share to Aldi and Lidl, who have been
aggressively opening new stores.

The big four have been fighting back with initiatives that
aim to differentiate their offers versus the discounters, and
Tesco, Britain's biggest retailer, said on Tuesday it would
launch an enhanced version of its Clubcard scheme from Nov. 8.

Some 19 million Clubcard subscribers will be able to upgrade
to Clubcard Plus for 7.99 pounds ($10.27) a month, which in
addition to giving loyalty points redeemable for money-off
vouchers will also offer 10% off two in-store shopping trips of
up to 200 pounds per month.

That will equate to a maximum saving of 40 pounds.

They will also get 10% off selected Tesco brands in-store,
such as F&F, Go Cook, Tesco Pet and Fox & Ivy, and will be
entitled to double data from Tesco Mobile. And they can apply
for a Tesco Bank credit card with no foreign exchange fees.

Tesco said Clubcard Plus holders could save more than 400
pounds a year.

Analysts at Barclays said Clubcard Plus should theoretically
appeal to many shoppers. "In practice it's hard to judge the
deterrent effect of the monthly fee, but early membership
numbers from Casino's similar French scheme seem
promising," they said.

They estimate Clubcard Plus could deliver a 2.5 percentage
point sales boost, but said the impact on profit is harder to
judge.

Tesco's biggest rival Sainsbury's recently overhauled its
no-fee Nectar scheme, allowing shoppers to boost loyalty points
by pre-selecting offers on certain products.

Clothing and food retailer Marks & Spencer also
plans to re-launch its underperforming Sparks programme.

Discounters, which focus on low prices, regard loyalty
programmes as a costly waste of time and have used their
advertising to lampoon previous schemes as over-complicated.

But the Barclays analysts said the fact that mainstream
grocers have re-committed to their schemes, despite paring back
unproductive costs in other areas in recent years, suggests they
pay off through higher sales and valuable consumer data.

Earlier this month Tesco said its CEO Dave Lewis will step
down next summer after six years in the job.

($1 = 0.7778 pounds)
(Reporting by James Davey
Editing by David Holmes)