Q: I am concerned that loyalty schemes, such as the Farmlands card, result in consumers who are not members being disadvantaged. Retailers pay to accept the card, then offer a discount to those who have it. Surely that means they are hiking up their prices to cover the expense?
A: The Farmlands card operates as a charge card. Cardholders can put things on the card and pay it off in full on the 20th of the following month. If they don't pay it off in time, they no longer have rights to "exclusive pricing" deals. Farmlands says the card offers retailers a route to attract the rural market. It uses its group buying-power to negotiate discounts for its members.
The Ministry of Business, Innovation and Employment says the Farmlands scheme is legitimate. "The point, presumably, is that any disadvantage to the store in offering the discounts is recouped by the increase in sales volume the loyalty scheme delivers."
Businesses are free to not accept loyalty cards.
