Loyalty: There is a Better Way

When loyalty schemes first hit the high street, the deal was simple: shop here, collect some points, and eventually get a free toaster or a few pounds off your shop. It was a novel way to say thank you. But fast forward to 2026, and for many UK retailers, that "thank you" has evolved into a massive, multi-million-pound administrative headache.

The Hidden Weight on the Balance Sheet

The primary issue isn't just the cost of the rewards themselves; it’s the financial "ghost" they create. In the UK, consumers are currently holding an estimated £3 billion in unspent loyalty points (Retail Focus, 2026). Under accounting standards like IFRS 15, these points are a contract liability. Retailers are sitting on mountains of deferred revenue that they cannot fully recognise, creating a permanent drag on the balance sheet.

Beyond the accounting, the operational "bloat" is staggering. Modern retailers now spend roughly 31% of their marketing budgets on loyalty and CRM (Antavo, 2025). Between SaaS platform fees, which can reach £8,500 a month for enterprise-level systems, and the constant need to manage data security and GDPR compliance, the "cost to serve" a loyalty member often eats any incremental margin they provide.

The Engagement Paradox

We’ve reached a point of loyalty saturation. The average UK shopper belongs to about eight different schemes but only actively uses five (Deloitte, 2025). This means retailers are paying to maintain "zombie" accounts for millions of people who have no intention of returning. Even worse, generic points systems often reward "mercenary" shoppers who are only there for the discount, rather than building true brand affinity.

Flipping the Script: From Cost Centre to Revenue Stream

The most innovative retailers are realising that they don't have to carry this burden alone. In fact, they are discovering that their loyalty infrastructure shouldn't be a drain at all, it should be a high-margin revenue stream.

The "new way" moves away from the traditional points-and-wallets model entirely. Instead of the retailer funding discounts out of their own margin, they are opening up their loyalty architecture to the brands they stock. By integrating Retail Media directly into the loyalty experience, the dynamic changes:

• Brand-Funded Growth: Instead of the retailer "buying" loyalty with points, third-party brands pay for the privilege of offering exclusive, targeted promotions directly to relevant shoppers.
• Zero Liability: By removing points and wallets, the retailer eliminates the "ghost" liability from their books. There is no deferred revenue because there is no stored value, just immediate, relevant offers.
• High-Margin Income: Retail media networks can deliver profit margins of 70% to 90% (Mirakl, 2025). By shifting from a "point-scoring" system to an offer-driven architecture, the loyalty program effectively pays for itself and then some.

Why Shoppers Prefer the Shift

From a consumer perspective, this is a win. Psychology shows that instant gratification, getting a relevant offer right now, is far more motivating than the "slow burn" of collecting points for a reward that feels months away. In fact, 49% of UK shoppers say it simply takes "too long" to earn traditional rewards (Antavo, 2026).

By using an architecture that focuses purely on promotions and offers, retailers provide a cleaner, faster experience. There is no wallet to manage, no points to track, and no frustration over expiring balances. Just value, delivered in the moment, funded by the brands. It’s a complete reversal of the old model: loyalty becomes a source of revenue rather than a cost to be managed.

References

Retail Focus (2026): £3bn in UK Loyalty Savings Lost Annually.

Antavo (2025/2026): Global Customer Loyalty Report - UK Edition.

Deloitte (2025): UK Consumer Loyalty Program Survey: The Saturation Point.

LoyaltyXpert (2025): Enterprise Loyalty Implementation Costs and SaaS Benchmarks.

Mirakl (2025): The Profitability of Retail Media Networks.