Inside the loyalty arms race: How rewards became retail’s $8bn secret weapon
From free coffees to mega perks, Aussie retailers’ loyalty programs have evolved into sophisticated powerhouses in an $8bn battle to lure customers. The best rewards programs ranked >>
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The once humble loyalty program where repeat customers received an occasional free coffee has evolved into an $8bn powerhouse as retailers offer insane perks in the battle to keep consumers coming back … and back … and back again.
The loyalty arms race has become a gold rush for Australian shoppers now spoiled with huge discounts, exclusive offers, insider access, $0 shipping and free stuff – often in the form of thousands of dollars worth of products.
Major retailers have drastically transformed their rewards programs into a secret weapon used to attract and retain customers, and gain valuable insights into their behaviour.
Retail Doctor Group chief executive Brian Walker said the loyalty program industry in Australia is now worth between $7bn to $8bn and continues to grow from its origins of offering simple freebies into a big-money, sophisticated machine luring customers back time and again.
“In the 80s and 90s we had basic rewards with stamp cards – buy 10 get one free,” he said.
“In the 2000s we moved to Woolworths and Coles and Flybuys, with points tied to purchases.
“Into 2010 we started moving into digital apps and email marketing, tiered systems – like Qantas, Priceline.
“Then now we’re entering an interesting AI-powered area, with experiential and gamified loyalty programs.”
Rewards programs are a part of everyday life for most Australians, with close to nine in 10 (87 per cent) of people part of at least one, research from comparison site Finder shows.
Major brands like Woolworths (Everyday Rewards) and Coles (Flybuys) offer instant discounts, fuel savings, and the ability to convert points into Qantas or Velocity Frequent Flyer miles.
Retailers like Priceline reward members with exclusive discounts, birthday gifts, and redeemable vouchers through their Sister Club program, while Myer offers tiered rewards including bonus points, special sales and personalised offers for loyal shoppers.
Cosmetic giant Mecca’s tiered ‘Beauty Loop’ program rewards over four million members with complimentary make-up applications, a birthday gift and regular boxes filled with products totalling up to hundreds of dollars worth of value annually.
And for $89 a year, Amazon Prime members get full access to its Amazon Prime streaming platform, Amazon Music, thousands of books on Amazon Reading and free and fast delivery on Amazon purchases.
Customers on loyalty programs spend 20 per cent more on average per transaction, Mr Walker said, and visit more often.
“Myer for example – Myer One members contribute to 70 per cent of their total sales,” he said.
Queensland University of Technology marketing and consumer behaviour professor Gary Mortimer said loyalty programs were a key mechanism to reward customers for their loyalty, but also a way to collect valuable data.
“The data they collect from customers is valuable because it detects shifts in consumer behaviours,” he said.
“For example they can determine seasonal shifts – when it starts to cool down do people shift from ice cream to confectionery products, are people shifting to gluten free or organic products.
“They can also be used to determine if promotions were successful – when they launch a promotion – what’s the hit rate.”
But Prof Mortimer said there was still a decent cost involved in running loyalty programs for the big businesses.
“One cost is the initial set up cost, you may have made a purchase and have to join or sign up to get the discount, that comes straight off a margin,” he said.
“Any programs where points can be redeemed for cash, that cash sits on a balance sheet and can’t be used otherwise.
“Qantas ran a program where they encouraged users to redeem the points, they had about $30m worth in money set aside.
“It shows that whether it’s Qantas or Woolworths or Coles, they have to set aside that money to meet those obligations.”
Prof Mortimer said Flybuys, which was among the first loyalty programs in Australia, started with a simple vertical program, where everyone got treated the same and accrued points based on their purchases.
“As more and more businesses enter into the loyalty program market, they have to innovate their product offerings to differentiate themselves,” he said.
“Now with Qantas points I can use them to upgrade flights, purchase tickets, but also to book Qantas hotels, purchase products. They can be used more broadly, not just for one thing.
“We’ve also seen the evolution of hierarchical schemes, from silver to gold to platinum, where you’re encouraged to get to that next level and you obtain more benefits the further you move up.”
Mr Walker said the programs at Mecca and Sephora were particularly strong as they tailored the rewards to their core audience which they “know so well”.
“It’s about emotional loyalty, status – with the tiers, and exclusive experience. All about building the tribe,” he said.
The best loyalty programs
Flybuys, Woolworths’ Everyday Rewards, Amazon Prime, Everyday Extra from Everyday Rewards and Coles’ Coles Plus take out the top spots on best ranking programs, according to research from customer loyalty consultancy The Point of Loyalty.
Other programs that ranked highly included McDonalds’ My Macca’s Rewards, 7 Eleven’s My 7 Eleven and Dan Murphy’s My Dan’s Membership.
Fashion retailer Bonds’ program – which offers buyers one point for every $1 spent, with 100 points equivalent to a $5 Bonds Bucks discount voucher – ranked well also.
The 2025 data was determined by the loyalty program experience index SPV – a rating of a loyalty program by its members based on how Simple (S), Personal (P) and Valuable (V) the program was to them.
The Point of Loyalty founder Adam Posner said the top ranked programs are often from the more frequent purchasing categories, such as groceries.
“There are also subscription based programs which often have more value for their membership based on the extra fees to gain more benefits and savings,” he said.
“Life Insurer Medibank’s Live Better Rewards also ranks highly which is not your typical retail program, however it has partnerships and ways of earning points for being healthy.
“All the programs which rank highly are offering valuable rewards for their members based on their members’ feedback and hence the Index which is heavily weighted on the Value variable gives them a higher score.”
Personal finance expert at Finder, Sarah Megginson, said some rewards programs had recently changed to offer slightly less value.
“Woolworths made headlines earlier this year for removing the 10 per cent discount from Big W from their Everyday Extra program, and Qantas has increased the points required for Classic Rewards as of next week,” she said.
“But these programs can still deliver a lot of value.
“I’ve personally used Qantas frequent flyer redemptions to enjoy tens of thousands of dollars worth of free flights, including business class and first class trips overseas, and family holidays to Fiji and America.”
The most popular loyalty programs
Supermarket loyalty programs are the most popular option, followed by the Qantas and Velocity frequent flyer programs.
A whopping two thirds of Australians collect Woolworths Everyday Rewards, and around the same (63 per cent) use Coles Flybuys, Finder survey data from June revealed.
More than one in three say they collect Qantas points, while 29 per cent use Velocity points.
Behind the usual suspects were rewards for banking giants CommBank (12 per cent), ANZ (eight per cent), Westpac (six per cent), NAB (five per cent) and Amex (five per cent).
The majority of Australians also cash in their rewards regularly.
About half of Aussies who have rewards points used them to save money off their everyday expenses in the last 12 months, additional Finder research from April this year shows.
Around one in 10 cashed them in on flight rewards seats, or opted for money off of consumer goods such as household appliances and clothing.
Stays in hotels (eight per cent), points plus pay for flights (nine per cent) and flight seat upgrades (five per cent) rounded out the top ways users redeemed their hard earned points in the last 12 months.
Tips on how to get the most out of your rewards
By just focusing on one or two programs you are able to “supercharge” your points, experts say.
“For example, if you choose to build your Qantas frequent flyer points and work towards flight redemptions, you can also then earn points through Qantas-earning credit cards and shopping at Woolworths,” Ms Megginson said.
“That way, all of your efforts are working towards meaningful growth in your points balance.
“If you choose Flybuys, you can earn points through Flybuys-earning credit cards and shopping at Coles.”
Users are able to “stack” rewards too, including deals and discounts, to rake in substantial savings.
“So at the supermarket, you might activate a points booster, shop the half-price specials, use a 10 per cent reward discount and then pay using a discounted gift card, and you’ll earn rewards points on the whole shop,” Ms Megginson said.
“You can also earn extra points by using a rewards credit card. Just keep in mind these cards tend to have higher interest rates, so make sure you can pay off your spending at the end of each month.”
Some of the most interesting loyalty programs
MECCA BEAUTY LOOP
Since launching in 2012, Beauty Loop members, which total over 4 million people, have received curated product boxes, early access to launches, exclusive events, and other surprise benefits. Mecca says they now share over 4.5 million rewards each year.
AMAZON PRIME
An Amazon Prime membership provides a range of benefits, including free and fast delivery on eligible items, access to streaming services like Prime Video and Amazon Music, and exclusive shopping deals.
MEDIBANK LIVE BETTER REWARDS
The program offers members the opportunity to earn up to $400 in rewards annually for tracking healthy activities and participating in challenges. These points can then be redeemed for various rewards, including gift cards, discounts on premiums, and other health-related products and services.
BAKERS DELIGHT’S DOUGH GETTERS
Members of the rewards program, get $5 of ‘dough’ (a $5 voucher) for every $55 they spend at participating bakeries. They also receive a welcome gift when signing up and enjoy exclusive offers.
PETSTOCK REWARDS
Customers earn Petstock Dollars, which can be redeemed for products and services, and Brand Cash, which is a percentage back on participating brands of premium food and parasiticides. Members earn $10 in Petstock Dollars for every $500 spent, and 15 per cent back in Brand Cash on eligible items.
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Originally published as Inside the loyalty arms race: How rewards became retail’s $8bn secret weapon
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