The Adverse Impact of EFRIS on Customer Loyalty Programs

Amid the tight competition among Uganda’s retail sector where businesses fiercely compete for customers, the battle for customer loyalty has taken an unexpected turn. While loyalty programs have proven to be a cornerstone for enterprise retailers globally, a surprising shift is occurring in Uganda, with major players, including Capital Shoppers and Quality Supermarket, suspending their loyalty programs and only Carrefour openly advertising its MyCLUB digital loyalty rewards programme. This move, unprecedented in the industry, is partly attributed to the introduction and enforcement of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) by the Uganda Revenue Authority (URA) in 2021.

The Impact of EFRIS on Loyalty Programs

The EFRIS, introduced in 2019, serves as a tax administration solution aimed at enhancing efficiency in tax payments. However, its recent enforcement has led to a significant disruption in the way supermarkets operate their loyalty programs. According to William Kakuru, the Manager of Capital Shopper’s supermarket Ntinda, the URA’s stringent monitoring through EFRIS has compelled them to halt the issuance of loyalty vouchers to their customers. The reason, Kakuru explains, is that the URA system they are now mandated to use does not accommodate discounts and loyalty vouchers on purchases.

Kakuru elaborates, “We cannot use that system and have a separate one for vouchers and loyalty points. There is no way we can include something which is not in the URA system unless we create a completely separate payment system which we hope URA is thinking about.” The decision to suspend loyalty vouchers has not been without consequences, as customers express their dissatisfaction with the sudden change, hoping that the tax body will address this matter.

The Operational Challenges Faced by Supermarkets

The practical implications of integrating loyalty programs with the EFRIS system have posed operational challenges for supermarkets across the country. Kenneth Obbo from Quality Supermarket in Naalya confirms that they, too, have suspended their loyalty voucher system as they navigate the complexities of compliance with the new tax regulations. Similarly, an administrator at Frain Supermarket in Ntinda reveals that their loyalty program has taken a hit due to the incompatibility between the Star Financials system they use and the Right Books system, which does not accommodate loyalty programs.

Isaac, the administrator at Fraine Supermarket, highlights the adverse impact on their business, noting that the loyalty suspension has affected customer expectations. Previously, customers could accumulate points through loyalty programs and redeem them for goods at their convenience. However, with the current limitations imposed by the EFRIS system, this cherished benefit has been temporarily withdrawn.

Customer Discontent and the Unforeseen Consequences

As the news of loyalty program suspensions spreads, customers are expressing discontent, even if many remain unaware of the underlying changes. The impact on customer loyalty, a critical factor in the success of supermarkets, is becoming evident, with some businesses reporting a decline in customer satisfaction and loyalty.

The Way Forward

In navigating this unexpected challenge, supermarket managers are hopeful that the URA will consider the implications of the loyalty program suspension on customer satisfaction and loyalty. William Kakuru suggests that a separate payment system, compatible with the URA’s requirements, may be a viable solution. Until such measures are put in place, the loyalty landscape in Uganda’s supermarkets remains uncertain, with both retailers and customers anxiously awaiting a resolution.

The intersection of tax reforms and customer loyalty initiatives in Uganda’s supermarkets has created a unique conundrum. As the battle for customer loyalty intensifies globally, the unexpected suspension of loyalty programs in Uganda sheds light on the complexities that arise when regulatory changes collide with established business practices. Supermarkets, once racing to secure customer loyalty through innovative programs, now find themselves at a crossroads, grappling with the challenge of aligning with tax regulations while maintaining customer satisfaction. The resolution of this issue will undoubtedly shape the future of loyalty programs in Uganda’s supermarket industry.

Extra content sourced from Uganda Radio Network.