Kingfisher, a gaggle of retail chains which looked close to being broken up three years ago, is launching a group-wide loyalty card scheme to tie all its disparate chains together.
The loyalty scheme (MW May 22) is further evidence that the group is over the worst of its problems from the early Nineties. It will offer loyalty points that can be earned, and redeemed at the electrical chain Comet, B&Q DIY stores, Woolworths and Superdrug chains.
Dubbed internally the “Kingfisher card”, it will be the widest ranging loyalty venture launched in the UK to date. Clothing retailer Sears has the Sears Card which works across its chains, though the company says it is more of a storecard to facilitate payment than a loyalty card as such.
So, as the first of its kind, the new loyalty card scheme will no doubt bring Kingfisher – which increased its pre-tax profit by 35 per cent to 390m last year – a level of publicity unseen for such a scheme since Tesco launched its Clubcard in March 1995.
Kingfisher’s head office officially denies that it has immediate plans to launch such a card. A company spokesman says: “We have no plans to launch any sort of loyalty card in the foreseeable future.” But the spokesman refuses to be specific about what is the “foreseeable future” and says there are “no current plans”.
Marketing Week can reveal the company has already put out a brief to loyalty consultants to come up with ideas about how to launch the card. Apparently it has been decided it should not be a smartcard. And Kingfisher is searching for card partners. It is understood to be in negotiation with BT to include BT “Talktime Minutes” as redeemable against points collected on the card.
Perhaps one reason Kingfisher is reluctant to talk about launching the card is that it would presumably end B&Q’s tie up with Tesco Clubcard, which allows shoppers to earn loyalty points on purchases at the DIY chain redeemable at Tesco.
Observers say the time is right for Kingfisher to look at such a loyalty scheme. The retail giant spent the first five years of the Nineties struggling with the recession, and trying to impose on unwilling customers its US-exported strategy of Every Day Low Prices (EDLP).
The strategy claimed that cost savings could be made by cutting out short-term price promotions on specific goods. The problem with such promotions, argued Kingfisher bosses led by then chairman, now chief executive, Geoff Mulcahy, was that they led to booms and slumps in demand for goods which caused unevenness in distribution. This in turn added costs as the warehouses struggled to cope with fluctuating demand.
The theory ran that if pricing could be made consistent, consumers would know just how much goods cost, and would be less likely to shop around for bargains, enabling Kingfisher to build increasing trust with its customers. The strategy sounded good, but was a miserable failure leading to the ousting of many top Kingfisher executives and the demotion of Mulcahy to chief executive.
Part of the problem with the EDLP strategy was the weakness of Kingfisher’s distribution and IT systems. The business hit a low point during Christmas 1994, when its poor stock-ordering systems hit Woolworths. The chain over-ordered for its toys department and was left with a huge stock overhang, which it was forced to discount heavily, seriously denting profits.
But since those dark days, Kingfisher has overhauled its stock-keeping systems and has sorted out the problems with its electronic point of sale (Epos) tills, particularly at Woolworths. With this new hardware at its disposal, it certainly has the means to launch a loyalty card.
While the leading supermarkets have, with the exception of Asda, launched loyalty cards, the experience has not to date been repeated widely across the stores sector. WH Smith is testing its own Clubcard, though this works only at the main WH Smith chain, and does not apply to others within the group such as Virgin/Our Price music stores or Waterstone’s bookshops. The results of the WH Smith tests have yet to produce clear results, but according to some sources it has not been successful.
Supermarkets are obvious candidates to run loyalty cards, as people visit them regularly and spend significant amounts of money. The average spend per visit at a WH Smith outlet, however, is just a few pounds, so it seems an unlikely candidate for a loyalty card. Shoppers visit Boots regularly and spend a lot, so this is another likely candidate for a loyalty scheme.
Boots is planning to roll out its Advantage Card loyalty scheme across its 1,200 stores. This is a smartcard and keeps details of the holder’s shopping history. When the roll-out of the Advantage card was first mooted, it was described as the biggest card in the UK, covering more stores than any other.
But the Kingfisher Card would outstrip it, covering almost 2,000 stores and would be the ideal way of tying customers into the Kingfisher empire. Its chains are broadly aimed at similar groups of shoppers, with Superdrug and Woolworths on the high street and B&Q and Comet present on out-of-town sites.
The concept of such a group-wide card has support among City observers. Tony Shiret, retail analyst at stockbroker BZW, says: “It is not a bad idea at all. There is an advantage in being the first in, though it depends on market positioning.” Kingfisher would be able to make a big splash with such a card and make a big play of being the first retail group with such a card.
Another leading analyst says: “It would be a good move – Tesco is the classic case where it has worked. It wouldn’t do Kingfisher any harm.”
Kingfisher is only at the development stage, although it is believed to have discussed above- and below-the-line accounts with incumbent agencies including Bates Dorland.
As with many retailers, Kingfisher is sensitive to rivals finding out about its plans, so the Marketing Week revelations may cause it to revise them slightly.
But being the first retailer to launch a loyalty card across its stores could give it the fillip it needs and underline its position at the forefront of the UK high street.