Coles v Woolies: which loyalty card scheme is better?

Are rewards points worth it?

Marketers' prey on the fact we all like to think we are getting something for nothing and the catch with some rewards cards is that cardholders can actually lose money.

Woolworths' new customer loyalty scheme unveiled this week should be welcomed by most of the 9 million holders of Woolies' rewards cards.

Frequent flyers will not be so happy. However, by replacing points towards Qantas flights with discounts at the checkout, consumers are going to have a much better idea of the value they are getting.

Too often rewards schemes are structured in complicated ways that allow the offerers to bedazzle consumers with rewards that are not worth that much.

Woolworths' loyalty program versus Coles' Fly Buys

Woolworths have dumped Qantas in their revamped loyalty program, but is it better and how does it compare to Coles' Fly Buys?

Coles has been winning the trolley wars and Woolies is using its new loyalty scheme as a way of getting back at its arch rival.

Under the revamp, existing card holders will continue to earn Qantas points until the end of the year.

The fuel discount of 4¢ a litre at participating Caltex Woolworths co-branded fuel outlets when spending $30 or more at Woolworths supermarkets is unchanged.

Woolies loyalty scheme wins

A study by Monash University's Australian Consumer, Retail and Services research unit, commissioned by Woolworths, finds the new Woolworths Rewards scheme is worth about $1.35 for each $108 spent.

The $108 is what Woolies says is the average weekly spend of its customers.

The analysis shows the Woolworths Rewards scheme compares very favourably with Woolies' old Everyday Rewards scheme, under which the rewards could be taken as Qantas frequent-flyer points or gift cards.


Monash estimates the old Woolies scheme was worth about 45¢ in Qantas frequent-flyer points for $108 of spend.

Points earned with the Coles FlyBuys scheme, if redeemed for a Coles voucher or in the FlyBuys store, is estimated to the worth about 54¢ for $108 of spend.

Coles only recently added Etihad​ Airways to its scheme.  

Shopping online is a welcome relief from the hassle of timing a trip to the supermarket between feeds and naps.
Shopping online is a welcome relief from the hassle of timing a trip to the supermarket between feeds and naps. Photo: Louise Kennerley

Woolworths wants to simplify its rewards scheme so that the value of the scheme is more apparent to shoppers.

Rewards points redeemable as frequent-flyer points take a long time to accumulate and the value of the rewards can be difficult to understand.

Consumers can struggle to work out the best value for their points when they can be spent in a number of ways.

Woolworths prices are about the same as Coles, according to Choice.
Woolworths prices are about the same as Coles, according to Choice. Photo: Jim Rice

Woolies is gambling the immediate discount at the checkout will appeal more than Qantas points; though, customers who fly frequently will feel hard done by.

Woolworths Rewards card holders earn credits when they buy any one of about 500 fresh food and packaged grocery products marked with orange labels.

When the value of the credits reaches $10, customers automatically receive a discount when they next pay their grocery bill or make a purchase at Woolworths-owned BWS liquor stores.

The Monash report estimates the average Woolworths Rewards member would earn a $10 discount on their shopping bill after 7.4 weeks of spending $108 each week.

That would work out at a price discount of just over $70 a year for the typical shopper.

To get the $70 annual discount, Monash estimates Woolworths' customers would need to spend about $9 of their $108 weekly shop on the groceries with orange labels that attract reward points. 

The Monash analysis is necessarily limited. It is only for purchases of groceries and not for purchases at BWS liquor stores, for example. 

And, it does not consider the other ways that customers can earn points, such as through co-branded credit cards and other points-based offers.

Coles points out Woolworths Rewards only apply to certain orange-labelled items.

The Coles FlyBuys scheme applies to every dollar spent in Coles supermarkets. It also applies to spending with scheme partners, which include Kmart, Target and Telstra.

Prices about the same as Coles

Is a saving of $70 a year at Woolworths really going to be enough to ensure the loyalty of shoppers? 

Who knows, as the experience of shoppers differs. Among other variables it will depend on how the products with the orange labels at Woolworths are priced.

It could be that shopping for the Woolworths' Red Spot specials and forgoing rewards will provide shoppers with biggest savings.

And it is worth bearing in mind the results of the Choice survey of supermarket prices that was released in June.

It compared prices on a typical basket of groceries at Woolworths, Coles, IGA and Aldi stores across the country and excluded the value of any rewards points.

It showed prices at Coles and Woolworths prices were about the same, while IGA prices were somewhat higher than the two supermarket giants.

Aldi prices were up to half that of Coles and Woolies, depending on whether specials were included. However, Aldi has fewer product lines than the two giant supermarket chains and many people do not have an Aldi near them. 

Twitter: @jcollett_money