Analysis
Retail

The perks and pitfalls of the UAE’s retail loyalty sector

February 1, 2024

Users participate ‘out of habit’
Companies need to innovate
Tech offers way to update

When customers consistently fly with Emirates or buy their daily coffee at Tim Hortons, the chances are high that they are members of a loyalty programme – and companies deploy them to ensure they return to the brand.

But UAE consumers are increasingly discerning about the brands and products with which they interact.

“The direct benefits, including cashback, points and discounts, resonate with consumers, fostering repeat purchases and increased ticket sizes,” said Sulochana Betwala, co-founder of TOTL, a Dubai-based cash back-rewards platform.

“Customers are naturally drawn to businesses offering tangible rewards, creating a lasting connection and loyalty,” she said.

However, Betwala said a common pitfall in UAE loyalty programmes is a reliance on traditional points-based systems. This can lead to a lack of enthusiasm, with customers often participating out of habit rather than “genuine engagement” which retailers crave.

“The key challenge lies in capturing and maintaining consumer attention. The competition within sectors issuing similar points poses a significant hurdle,” she told AGBI.

The struggle to differentiate becomes even more pronounced in sectors where multiple companies issue points.

By offering varied and personalised rewards, retailers can boost their loyalty programmes’ value.

With more reward choices, shoppers actively participate to earn what they desire, boosting “retailer conversions” – when customers shift from one airline to another or one coffee shop chain to another.

Brands are now taking a more serious approach towards their programmes, said Gunjan Kumar, chief revenue officer at Loyyal, a loyalty and rewards platform.

“Brands are now exploring the use of emerging technologies such as blockchain in reshaping the design and effectiveness of these programmes,” he said.

In the UAE in 2022, Aladdin.life, a mobile and broadband services marketplace, expanded to a blockchain-based rewards platform that offers customers 100 percent value back in the form of discounts on its online store.

Earlier in 2020, UAE telco e&’s rewards platform Smiles launched a loyalty programme also powered by blockchain.

The advantage of blockchain based programmes, promoters argue, is that the technology allows for aggregation of different loyalty schemes and targeting of rewards.

It can track customer purchases on a blockchain ledger and, when a customer makes a purchase, they receive a digital token that is stored on the blockchain.

These tokens can then be redeemed for rewards.

“Members can easily track and manage their rewards across various loyalty programmes that they are enrolled in,” Kumar said.

“Interoperability provided through the technology makes it easier to transfer and exchange points or rewards between the programmes,” he said.