Why loyalty, not discounts, is shaping retail’s next growth phase

As the festive rush fades and discount fatigue sets in, many retailers are entering the new year questioning whether traditional promotional playbooks are still fit for purpose. While deep discounts continue to generate short term spikes in traffic, they are increasingly failing to deliver what brands need most: repeat engagement, loyalty and sustainable margins. For a growing number of retailers, the focus is shifting away from one off price cuts towards strategies that prioritise longer term customer relationships. January, in particular, presents a reset moment. Gen Z and Millennial shoppers are approaching the new year with more intentional spending habits, heightened sensitivity to value and a desire for more meaningful brand interactions. In this context, loyalty programmes are emerging as a more effective way to re engage customers, offering consistent and transparent benefits that go beyond blanket sales. Early access, personalised rewards and member only experiences are proving more aligned with how younger consumers want to shop at the start of the year.

In this Q&A, Attila Kecsmar, chief executive of loyalty technology company Antavo, shares what the company is seeing across its global retail client base. Drawing on real world insights from brands including Paul Smith and Benefit Cosmetics, Kecsmar discusses the warning signs of discount fatigue, how loyalty strategies can drive behaviour change beyond transactions, and why loyalty is increasingly becoming a core commercial lever rather than a tactical add on as retailers look ahead to 2026.

Discount fatigue is clearly setting in. Based on what Antavo sees across its retail clients, what concrete signals show that traditional festive promotions are losing effectiveness, and where are brands still over-relying on them?

What we’re seeing in the data and in conversations with our clients is very consistent: big discounts are getting less traction than they used to. Retailers often report that while steep promotions still drive short-term spikes in sales, they don’t create the kind of repeat engagement or deeper customer relationships that justify the margin hit. Some brands tell us they’re seeing higher traffic but flat or lower repeat purchase rates, which is a clear sign that discounting alone isn’t building loyalty. To truly shift consumer behaviour, loyalty programmes need to move beyond transactional mechanics and focus on engagement outside of big sale events if they’re going to strengthen customer ties over time.

Loyalty is often positioned as the alternative to discounts, but not all programmes deliver real value. What separates loyalty strategies that genuinely change customer behaviour from those that simply repackage promotions under a different name?

There’s an important distinction between programmes that focus solely on transactional rewards and those designed to encourage broader engagement. While points-based mechanics remain a popular and effective way to incentivise purchases, the programmes that drive deeper loyalty often complement points with additional forms of engagement; such as interacting with brand content, participating in communities, accessing personalised experiences, or receiving early access to new launches. This combination helps customers feel a stronger connection to the brand, beyond just earning and redeeming points. We’ve emphasised this focus on emotional engagement and relevance in our work for years, and it’s why we encourage brands to think beyond points-for-pounds and instead design programmes that reflect what their customers actually care about.

January has long been a weak month for retailers. How can loyalty programmes be used to re-engage shoppers after Christmas in ways that align with Gen Z and Millennial priorities around more intentional spending, rather than encouraging over-consumption?

January should not be treated as an extension of the sales cycle; it’s a period for re-engaging customers in more considered and meaningful ways. Younger consumers especially are approaching the New Year with a focus on intentional spending, sustainability and more thoughtful brand interactions.. In this context, loyalty programmes can play a different role. Instead of just launching new discounts; successful retailers are using loyalty to offer experiences, personalised offers and opportunities to connect with the brand’s community or values. For example, early access to spring collections, exclusive content or member-only events all feel more purposeful and rewarding than another price cut. This approach aligns with the broader trends we’re seeing in loyalty research; brands that create relevant, personalised and experience-led rewards tend to see much higher engagement, because customers feel valued rather than marketed to.

Retailers now have more customer data than ever, yet many struggle to use it meaningfully. How can loyalty data be applied in the New Year to create relevance and trust without crossing into over-personalisation or consumer scepticism?

The most effective use of loyalty data is responsible, transparent and customer-centric; not just more personalised messaging. You don’t need to know every detail about someone’s life to make their experience better; you just need to use data to deliver relevance that feels genuinely helpful. That means leveraging broad behavioural insights to tailor communications and offers that match preferences and patterns, not push overly granular assumptions. It also means being clear with customers about how their information is used and why it benefits them, that builds trust, which is the foundation of long-term loyalty. In interviews and in our global loyalty research, we’ve emphasised that the best programmes are those where customers feel understood, not watched.

Looking toward 2026, do you see loyalty programmes becoming a core commercial driver for retailers, or are they still at risk of being treated as a tactical add-on? What needs to change for loyalty to deliver sustainable growth rather than short-term uplift?

Loyalty must become central to commercial strategy if brands want sustainable growth. Too often it’s still treated as a marketing add-on, something that happens after you’ve driven a sale; rather than as a strategic tool that helps shape pricing, product development and customer experience. Often retailers wait until they identify a churn issue before they think about loyalty, when they do have customer relationship teams, loyalty ‘is’ your customer relationship. For loyalty to truly drive commercial performance, retailers need to recognise this and embed it into their long-term planning and measure success holistically, not just in points issued or members acquired.

We’re already seeing a shift in how brands prioritise loyalty; our 2025 Global Customer Loyalty Report shows that loyalty now accounts for over 30 percent of marketing budgets, up significantly from prior years, indicating it’s becoming a central commercial driver rather than a box-ticking exercise. That long-term focus is what separates programmes that deliver sustainable value from those that give a short bump and then fade.