Grocery store rewards programs seem like a free and easy way to get a discount. We sign up for a card, we scan it at the checkout, and we get the “sale” price. However, this system has a dark and very regressive side effect. In recent years, these programs have evolved into a two-tiered pricing system. This system effectively creates a “tax” on the shoppers who are not members. These are often the poorest and the most vulnerable customers.
The Creation of a Fake “Regular” Price
The “regular price” that you see on the shelf is often a new, inflated, and artificial number. Stores have quietly raised this base price on thousands of items across the store. The “rewards” or “member” price, which you can only get by scanning your card, is now the product’s true, original price. This means that the program is no longer a way to get a “discount.” It is now a system that you must join to avoid incurring a penalty.
Why This Is a “Tax on the Poor”
Low-income shoppers are the ones who are most harmed by this two-tiered system. They are often the ones least likely to be a part of the program. Many may not have a permanent address to sign up for a card or even a smartphone to download the store’s app. They may also be a part of the “unbanked” population. This means they are more likely to pay with cash and to avoid the tracking that comes with a loyalty card. This forces them to pay the higher, non-member price on their essential groceries.
The Barrier of the “Digital Divide”
As many programs, like Kroger’s, move to a “digital-only” coupon system, this problem gets even worse. The best deals are no longer in the paper flyer; they are only on the app. This creates a “digital divide.” It punishes shoppers who are not tech-savvy, which often includes the elderly on a fixed income. If you do not have a smartphone and a data plan, you are locked out of the best savings. You are forced to subsidize the discounts for the wealthier, more tech-savvy shoppers.
The Data-for-Discounts Trade-Off
This system is not a charity. It is a data transaction. In exchange for letting you pay the “real” price, the store gets to track every single item you buy. They use this valuable data to build a profile of you. This profile helps them send you targeted marketing, and the data they collect can be sold to third-party companies. The individuals most concerned about their privacy, and who choose not to join the program, are the ones who ultimately pay the higher price.
The True Cost of a “Free” Card
The “free” loyalty card is not really free. It is a tool of price discrimination. It is a system that has allowed retailers to quietly raise their prices on everyone. They then sell the “antidote” to that price hike back to you in the form of a “membership.” The shoppers who are unable or are unwilling to join this data-tracking ecosystem are the ones who are left to pay the price. It is a hidden tax on the poor that is hiding in plain sight.
How do you feel about these two-tiered pricing systems? Do you think loyalty programs are a fair way to offer discounts? Let us know your thoughts!
What to Read Next
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- 5 Grocery Deals You Thought Were Saving You—Until You Swiped Your Rewards Card
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