Loyalty Programs Drive Growth in the UAE Retail Sector

Dhruv Verma, Founder and CEO of Thriwe

The retail sector in the UAE is booming, with retail sales estimated to reach USD 103.4 billion in 2024. However, the market is intensely competitive, and retaining customer loyalty is becoming increasingly crucial as well as challenging. Loyalty programs can be an invaluable tool in the strategic repertoire of brands looking to stand out in this competitive landscape, with rising consumer expectations for personalized experiences. Loyalty programs can help companies foster deeper customer engagement by offering personalized rewards, exclusive perks, and a seamless omnichannel experience.

Intensifying competition is prompting businesses to form strategic alliances and continuously innovate their offerings to retain customers in a crowded market. The rising adoption of loyalty programmes is fuelled by decreasing customer loyalty to products, compelling brands to invest in initiatives that help them stand out.

UAE’s loyalty program market has witnessed significant growth in recent years, with a compound annual growth rate (CAGR) of 11.8% from 2019 to 2023 and reaching USD 1.57 billion, with an annual growth rate of 10.4%, in 2024. This impressive progress is likely to continue in the coming years, with an expected CAGR of 8.9% between 2024 and 2028, reaching an estimated market value of USD 2.2 billion by 2028.

A number of factors can be attributed to the buoyant outlook of the loyalty programs market in the UAE. The country boasts a tech-savvy consumer base with high spending power and a preference for digital engagement. Consumer preference is increasingly shifting toward personalised and indulgent experiences amidst an abundance of choices, with numerous brands vying for customers’ attention. Technological advancements, especially in the fields of AI, big data, and analytics, are helping businesses engage in informed, data-driven strategies to tailor their loyalty benefits to the preferences of specific customers. The affinity of Emirati consumers for luxury and personalised care is another growth driver for the market. Also, as a global shopping hotspot, UAE’s retail market is highly saturated, and loyalty programs offer an effective avenue for brands to differentiate themselves amid intense competition.

Loyalty programs provide an essential platform for brands to achieve deeper and more engaging interactions with consumers. Personalised offers tailored to individual customers provide an essential perception of appreciation and reciprocity by brands. Multi-tiered membership programs offering incremental benefits can help customers feel more valued while encouraging higher recurring spending by consumers motivated by attractive perks at the upper tiers. Mobile and web-based applications to track loyalty points, explore deals, and redeem rewards drive regular interactions with brands, while offering additional channels for innovative marketing strategies. By incorporating gamification elements like points, levels, and challenges helps entice consumers toward active, repeat participation with these platforms. Also, integrating social media for sharing users’ loyalty status or rewards offers the potential for organic marketing and visibility.

However, businesses must be aware of certain caveats while adopting this strategy. Customers are inundated with an over-abundance of available loyalty programs, leading to cognitive overload, deterring them from engaging with certain offerings. This necessitates targeted messaging and the formulation of engaging narratives that resonate with end-users for effective outreach. Moreover, overly complex loyalty programs can hinder user engagement, which underlines the need for a simple, easily comprehensible process. Effective implementation of technological solutions with a polished user interface and seamless integration across multiple channels, including in-store, online, and mobile platforms, can be another obstacle for businesses, especially in UAE’s diverse market. This requires expertise across multiple technical domains, including front-end applications, back-end services, and data analytics. Moreover, businesses must act responsibly while handling customer data necessary for personalised and targeted offerings. Data privacy and security must be a priority and robust data protection systems as well as transparency regarding data usage are essential. In addition, the UAE has a diverse consumer base, which calls for careful consideration of local customs and cultural inclinations as well as emerging trends in user preferences for evaluating offers in terms of attractiveness and relevance.

In this era of conscious consumerism, sustainability and environmental concerns are gaining increasing prominence in the UAE, in alignment with global trends. Businesses must adopt sustainable and ethical practices in every aspect of their operation in order to appeal to today’s increasingly eco-conscious consumers. Companies can greatly benefit from sustainable loyalty strategies, like paperless points or rewards promoting environmental benefits and sustainable and ethical practices.

Technological advancements like big data, AI, machine learning, and blockchain technologies have been a transformative force in the loyalty programs sector and this is likely to continue in the years ahead. Advanced data analytics techniques are being effectively utilized to analyse consumer behaviour patterns and market trends in order to identify highly personalised and relevant offerings to individual customers to boost engagement. Automated systems leveraging machine learning and big data are helping prevent fraudulent activities. Seamless integration of technological solutions across offline, online, and mobile channels has been a crucial factor for customer participation and engagement.

Fuelled by technological innovations, the thriving loyalty programs market in the UAE is expected to continue to evolve. In the crowded retail landscape, businesses must remain customer-focused, respond quickly to shifting consumer behaviour, and adopt innovative strategies to foster long-term, loyalty-driven connections with consumers.