Shoppers Optimum and PC Plus programs merging

A Loblaws PC Plus and a Shoppers Drug Mart Optimum card are shown together in Toronto on Tuesday. Nov. 7. (THE CANADIAN PRESS/Graeme Roy)

Customers at Shoppers Drug Mart or any of Loblaw Companies Ltd.'s grocery stores will soon use a new, unified loyalty program that replaces Optimum and PC Plus points.

Loblaw (TSX:L) will merge the two programs starting Feb. 1, 2018 under the name PC Optimum -- a long-anticipated move that comes more than three years after the grocery giant acquired the pharmacy chain and its in-house Shopper Optimum system.

"We're bringing the very best of Shoppers Optimum and PC Plus together," said Uwe Stueckmann, senior vice president of marketing.

PC Optimum is "the future of loyalty programs for Loblaw companies," he said, "harnessing both the power of PC Plus and Shoppers Optimum across the unified network of our stores coast to coast."

For the company, the merger creates a more efficient and unified data collection system to gather insights to better target customers, an increasingly important tool for grocers in a highly competitive market.

Consumers can keep collecting points as usual until Feb. 1 next year when their Optimum and/or Plus points will move to the new program at equal value. If a collector has $100 worth of Optimum points, they will receive $100 worth of PC Optimum points, for example.

In Quebec, where Shoppers Drug Mart operates under the Pharmaprix name, the Pharmaprix Optimum program will end on Jan. 31, 2018 and members will have until May 2 that year to redeem their points or convert them at equal value to the new program.

Collectors will then use a single card or app and continue to earn points on money spent at Shoppers. They'll also be able to earn points through personalized offers and in-store promotions at all stores, and by using the President's Choice Financial MasterCard.

The new program will have an easy to remember redemption system -- with 10,000 points valued at $10, 20,000 points at $20 and so on to a maximum single transaction redemption of $500. Shoppers can use their reward money at any of Loblaw's nearly 2,500 stores and the company's websites.

Consumers will earn 50 per cent more points for almost every dollar spent at Shoppers Drug Mart locations to help account for the higher number of points needed for each redemption level. Under the current Optimum program, collectors earn 10 points for every $1 spent, but need 2,000 fewer points to buy $10 worth of goods, for example.

However, BMO analyst Peter Sklar notes that it's difficult to gauge whether the new system will provide extra value for consumers because while the change in the point structure means points are earned faster, they are redeemable for less dollar value.

"As a result, we believe the management of the marketing program to educate consumers on the value of PC Optimum will be crucial for consumer reception," he wrote in a note.

More than 19 million active members make up the base of the two current programs, with at least 50 per cent of members enrolled in both, said Jim Noteboom, senior vice-president of loyalty and consumer insights.

After Loblaw acquired Shoppers in 2014, Noteboom said consumers told the company they wanted one program rather than two separate ones because it would make their lives easier.

"Make it one program, that's easy to understand and easy to earn, with points that are redeemable at all stores," he said collectors told the company while it gathered research on its loyalty cards.

Analyst speculation about a points merger has heightened since August when CIBC (TSX:CM) and Loblaw's PC Financial announced they would end their nearly 20-year relationship.

In its place, CIBC launched Simplii Financial -- a no-fee direct banking brand -- on Nov. 1. In the breakup, savings, chequing and mortgage accounts went with Simplii, while MasterCard credit cards and the PC Plus points program remained with PC Financial.

The change means PC Financial debit card holders no longer earn PC points when using those cards.

Both spokesmen said that the end of the company's relationship with CIBC was unrelated to the decision to merge both programs, which has been in the works for a few years.

For RBC retail analyst Irene Nattel, the merger answers a long-standing question about how the company would deal with its two loyalty programs in order to maximize reach and impact, she wrote in a note Wednesday.

"In a world with increasing retail fragmentation, PC Optimum has the potential to be a powerful tool to retain and grow share of wallet within the Loblaw ecosystem."