Catching up

I have a theory that supermarkets in Hong Kong are about 10-15 years behind the UK.

About 10 years ago, Tesco in the UK introduced their Clubcard scheme, and it has been a huge success. It's basically a marketing thing - Tesco collects information about what you buy, and in return offers you coupons to spend in their store, either for specific products (based on your buying patterns) or to spend as you choose. There's an interesting article from the FT here that explains more about it.

Dunnhumby [the company that runs the Clubcard scheme] takes the information registered on Clubcards each time those 13 million families come into Tesco for their weekly shop, and turns it into five billion pieces of data. Each separate product bought has its own set of attributes. A ready meal can have up to 45 "values" ascribed to it: is it expensive, or cheap? Tesco-branded, or made by Birds Eye? An "ethnic" recipe, or a traditional British dish? Clubcard is the Big Brother of the shopping world.

This information is also stored in a vast search engine that can be used by suppliers trying to launch products. Dunnhumby makes about £30m a year selling Tesco data to more than 200 consumer-goods companies, such as Procter & Gamble, Unilever and Coca-Cola. Within hours of launching a product or introducing a promotion into a local Tesco store, brand managers can track who is buying their products or responding to their promotions. Are they empty-nesters or young mums, lawyers or factory workers? "If you understand who is buying and how they are buying, you can make better decisions," [says director of consumer strategy and futures Martin Hayward]. "The joy of our sample is that it is so large, and because Tesco is so representative of the country it is the best source of insight a supplier can get."

Now ParknShop have finally got round to copying this idea, though their rewards seem rather rather mean. If you spent £1,000 at Tesco, you would get coupons worth £10, whereas if you spend HK1,000 in PnS you only get a $4 coupon. On top of that Tesco gives out extra coupons for specific categories, products, or brands, to encourage you to buy something you wouldn't normally buy - and I'm not sure whether PnS will be doing this.

What's clever about Clubcard is that it helps both Tesco and their suppliers to know a lot more about their customers, and to make decisions accordingly. It has enabled Tesco to achieve a dominant market share (of over 30%) and become hugely profitable. Hong Kong is different, because the two main supermarket chains (PnS and Wellcome) already dominate the market, but I suppose extra profit is always welcome.

From a customer's point of view, there is obviously a concern about privacy and that you are simply making it easier for people to sell more stuff to you, but I have to say that I would choose Tesco over any Hong Kong supermarket every single time. If PnS could emulate even some of the improvements that Tesco have been able to make over the last ten years, I'd be very happy, and if PnS make higher profits as a result then that's just fine by me.