Big Y Gambles on Fee-Based Rewards Card

SPRINGFIELD, Mass. — Big Y Foods' [4] introduction last week of a paid membership rewards card could capture the attention of retailers that have long considered — but until now resisted — launching similar loyalty efforts of their own, observers said.

Big Y acknowledged its new Silver Savings Club — which it said would offer members bigger savings on food purchases as well as additional rewards from its Express Rewards silver coin program for an annual fee of $20 — was a “revolutionary concept” in shopper loyalty.

“We were trying to think of a way to reward loyalty and make the [rewards] process simpler,” Clare D'Amour-Daley, a spokeswoman for Big Y, told SN, “and thought could we sweeten the deal with a more exclusive membership.”

Although a staple of club competitors like BJ's Wholesale Club [5], Costco [6] and Sam's Club, and not uncommon for booksellers and department stores, fee-based loyalty cards have not been a part of the supermarket industry. Observers contacted by SN last week were divided over the prospect of its success at Big Y, but said they would be watching closely.

“From one perspective I think it's surprising to have not seen a supermarket retailer try something like this until now, because many of the clubs have been charging a membership fee for years,” Gary Hawkins, chief executive officer of Syracuse, N.Y.-based Green Hills Markets, told SN. “The supermarket business is incredibly competitive, made even more so by the economy these last few years, and I think retailers have been gun-shy.”

Hawkins said a fee-based program would likely help create a stronger bond between Big Y and participating shoppers, but noted that the value offering would have to be compelling.

“Big Y is a very good retailer and has been in the loyalty business for a long time,” Hawkins said. “I'm sure they will make sure the value proposition is very strong, and that $20 membership fee is paid back many times over.”

Highlights of the program for Big Y include discounts on “hundreds” of additional items every week, as well as savings on gasoline at more than 70 participating fuel stations and other offers, including discounted movie tickets purchased at Big Y stores, the company said. The program would also automatically apply discounts to items on the silver coin rewards program that otherwise required customers to redeem their earned currency. Officials said customers were often frustrated by that process.

Some observers were circumspect. Kelly Hlavinka, managing partner at the Cincinnati-based loyalty marketing form Colloquy, said she was concerned that Big Y's program would distinguish itself enough to stand apart from competitors offering similar loyalty plans without a fee. The number of paid members, she added, would likely be around two-thirds smaller with a fee and as a result, provide Big Y with less data and scale than it would with a free program.

“The ability to put together a compelling enough value proposition is a real challenge,” Hlavinka told SN. “It has to be clear, and it has to be better than what's already in the marketplace.

“The cost savings is something you are going to get at any competitive grocer. The fuel savings is something you'll get at a lot of grocers today — the question is whether it's any better or richer than what's already out there,” she said.

Big Y said the program would track a customer's cumulative savings on register receipts and that it would provide a full refund if savings don't exceed the fee.

Hlavinka said it was likely that shoppers would first examine whether the $20 fee was worth it at all. “At the end of the day, when the customer looks at it, it's more than saying I will spend $20 if I can save more than $20. The customer is going to be asking, can I get these same types of benefits for free? They are also going to be comparing the grocer across the street.”