When Tesco launched its Clubcard loyalty scheme in 1995, it created a new way for retailers to understand their customers' behaviour.
Since then, most major supermarkets have followed suit. There are now over 20million Clubcard members, while Sainsbury's Nectar scheme boasts 18million.
Despite their popularity, there has been growing criticism about the privacy implications of handing over reams of data about who you are, and what you buy, to supermarkets.
There are over 20million Tesco Clubcard members - what are they sacrificing to bag a bargain?
For years, willing shoppers have been giving big retailers a window into their life in exchange for points.
But in the cost of living crisis the cards have become harder to avoid, as supermarkets are now not only offering points, but also deep discounts on certain products to loyalty card holders.
If you're not comfortable with your supermarket linking what you buy, where, and when with your personal details, and allowing it and potentially other retailers to market products to you accordingly, then you are probably going to be spending more at the checkout.
We decided to investigate what data supermarkets collect on customers, and what they do with it.
Why do supermarkets offer loyalty cards?
Loyalty card schemes can give retailers an important insight into the habits of consumers by tracking their purchases, which can help bring customers more personalised offers.
Retail expert Richard Hyman tells This Is Money: 'They are able to connect really potentially valuable purchasing and behavioural data.
'They offer a better deal, and that is designed to make people spend more of their money to allocate a bigger share of their grocery spend to that particular supermarket as opposed to others.
'They're building a virtuous circle so they are giving a bigger discount, a better deal to people who spend more with them, which I think is fair enough.'
As well as bringing benefits to customers, loyalty cards can help with the stock management of bigger retailers like Tesco and Sainsbury's, Hyman says.
'The more data supermarkets have got, the more they are able to forecast demand on the basis of past behaviour, and the better able they are to manage their stock.
'It should mean that the supermarket of your choice will stock more of what you like, and less of what you don't like.'
'It makes or breaks these retailers because they've only got 3-4 per cent wiggle room in the net margin.
Curiously, though, discounter Aldi doesn't offer a loyalty card scheme, and still manages to keep costs low.
Hyman suggests this is because it offers a much smaller range of products - around a tenth of the variety offered by the likes of Tesco and Sainsbury's, so there is less scope to rotate stock depending on customer tastes.
Running a loyalty card scheme also costs money and could eat into the firm's bottom line.
'There's not really much of an incentive for it to launch a loyalty scheme,' he says.
But despite their comparatively limited range, the pandemic saw many shoppers switching to Lidl and Aldi, a trend that ramped up even further during the cost of living crisis.
This led rival supermarkets to offer even more discounts and rewards in the hope of enticing them back.
Hyman says: 'In the 2008 downturn, the four major supermarkets protected their margins by increasing prices. It was a strategically stupid thing to do [and] it cost them billions and billions of market share.
'This time round with the cost of living crisis they have avoided making that mistake again.
'We've learned from history that they need to protect their market share and the best way of achieving any semblance of loyalty is to give customers a good deal.'
> When might the cost of a weekly shop start to fall?
How much are customers saving?
Consumers have been hit with huge price rises over the past year. The latest grocery inflation figures by Kantar showed food costs are up 17.2 per cent.
As people look to cut the cost of their weekly shop, the major supermarkets are offering better discounts for loyal customers. Tesco, for example, says customers can save up to £351 a year using a Clubcard.
Critics say it's a cynical ploy to entice customers, as those with loyalty cards are receiving better offers than those without.
But Hyman suggests that the success of loyalty card schemes over the years has helped to bring costs down: 'Good stock management absolutely plays a part in in pricing,' he adds.
Trouble brewing? A Nectar card customer could save 80p on a pack of Yorkshire Tea - but to sign up to these loyalty schemes they will need to agree to share their personal data
It still does little to explain why customers using loyalty cards are given preferential treatment, though, with those who choose not to opt in paying significantly more.
For example, Tesco currently sells Cathedral City cheddar cheese for £5.40, but for Clubcard customers it's £1.40 cheaper.
In Sainsbury's, 80 Yorkshire Tea bags cost £2.50 for those with Nectar cards, a whole 80p cheaper than its usual price.
A spokesperson for Sainsbury's said: 'Initiatives such as our Nectar loyalty programme allows us to offer customers great deals and personalised offers based on their shopping habits, which means they can get even lower prices on the products they buy the most.'
Tesco did not respond to a request for comment.
What are YOU sacrificing to bag a bargain?
Most consumers are probably all too aware that they're giving up personal information to receive discounts, but there are some surprising things customers are consenting to when they blindly tick the sign up box.
For most supermarkets, purchase information is used for marketing purposes, but some loyalty schemes also track movements and share information with third parties.
Big Brother Watch, a privacy campaigning group, recently analysed the privacy policies of the schemes and found that Sainsbury's and Tesco sell the information to other companies who use it for advertising.
This includes Sky, which creates targeted ads to the supermarket's customers watching their shows.
Jake Hurfurt, head of research and investigations at Big Brother Watch tells This Is Money: 'It is worrying that a growing number of retailers are taking advantage of a cost-of-living crisis by pushing shoppers into swapping their personal data for discounts that used to be available to all.
'There is a serious risk that shoppers will be coerced into handing over their data if the trend of tying access to special offers to owning a loyalty card continues, making privacy a luxury available only to those who can afford it.'
'Shoppers will understandably use loyalty schemes to save money, but most people will have no idea that Tesco, Sainsbury's and other retailers sell on data gleaned from their weekly shop to third parties on an industrial scale.
'They should be told clearly and upfront how the information might be used, and retailers should not bury the details deep in complicated privacy policies.'
Unsurprisingly, these terms aren't displayed in-store and are instead buried in long, confusing policies online.
Sweet deals? Nectar, owned by Sainsbury's, is quickly catching up with Tesco's Clubcard, now boasting 18million members
How are supermarkets protecting customer data?
As more consumers wake up to the dangers of handing over too much personal information, some might wonder what supermarkets are doing to protect it.
A Sainsbury's spokesperson told This Is Money: 'To protect Nectar accounts, combat fraud and protect our business, we will use personal data to implement security measures, such as multi-factor authentication, and to investigate and prevent any suspected fraudulent activity across Nectar.'
Waitrose, which does not sell customer data to third parties, said: 'Our team of specialists ensure that any customer data is managed carefully, in a way that fully complies with legislation, and best practice across the industry.'
Even with this in mind, Jake Moore, global security advisor at cyber security firm ESET suggests consumers think carefully before blindly signing up to loyalty schemes.
'Just like when limiting personalised data tracking online, it's a good idea to limit the amount of information you give away to companies in the form of a loyalty card,' he says.
'These cards are often marketed to suggest you could potentially save money, but the reality is that they make far more money from analysing your shopping habits.
'The information handed over when signing up to these loyalists services is often quite personal too, such as home address, phone number and email address - so it's important to think about limiting the data where possible in case this information is ever compromised.'
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