(Apac) region is expected to grow by 11 per cent annually, to reach US$52.05 billion in 2024. In Australia, the growing importance of loyalty programs could be seen in the half-year results of both Coles and Woolworths, the country’s leading supermarkets, which reported that the e-commerce, digital and loyalty aspects of the business were responsible for strong growth. Sharing the good fortune Another example of a retailer’s growing focus on loyalty programs is Australian department store, Myer. It recently strengthened its Myer One loyalty program by partnering with American Express, Commonwealth Bank, and Virgin Australia’s Velocity program. These partnerships now allow customers to pay for purchases with CommBank Awards points and allow for collaboration across programs in accumulating and redeeming rewards. Myer One currently has about 4.2 million engaged members of its 7.3 million in total and during FY23 almost 75 per cent of all purchases made at Myer were linked to a Myer One account. The program constitutes a key factor driving Myer’s growth and the business is using data analytics and machine learning models to make informed decisions to build more engagement with its customers. Similarly, Woolworths Group is leveraging its Everyday Rewards program to drive business growth. In August 2023, the group introduced members-only discount pricing at Woolworths supermarkets as an incentive for shoppers to scan their Everyday Rewards cards, which was modelled off a similar earlier initiative from discount department store chain Big W, which is also part of the group. Membership loyalty programs are resonating well with customers; Woolworths EverydayX active members grew by 8 per cent in the first half of FY24 to 9.4 million active members, with 5.2 million having purchased products at the members-only price. Coles’ loyalty program Flybuys grew its active memberships by 9.5 per cent in the same period, and CEO Leah Weckert said that value was delivered to customers through lowered prices of products included in the retailer’s “Great Value, Hands Down” campaign, as well as Exclusive to Coles products and the business’ weekly specials. The X factor The “fresh food people” reported a 2.5 per cent increase in net profit in its half-year results in February,  which grew to $929 million, with Woolies X being a major driver behind this growth. Woolies X, the business’ online digital, e-commerce, data, and customer divisions drove growth and will continue to focus on providing value to customers heading into H2. If the success of Woolies X is anything to go by, Woolworths is only headed for further positive growth trajectory given the division’s leader and managing director, Amanda Bardwell, will be stepping in as the group’s CEO, effective September 1 this year. Solid numbers in Woolworths’ Australian Food and B2B sectors also bolstered revenue, in contrast to the shortfalls of the New Zealand operations and Big W. Coles, anything but down, down Coles reported a modest 3.6 per cent increase in net profit in the half, to $594 million, including an e-commerce revenue growth of 29.2 per cent. Similarly, Coles highlighted the progress it made with its Coles 360 digital venture which is all about connection. Momentum with this undertaking will see Coles further maximise its shopper data to foster a deeper customer connection through more meaningful and targeted campaigns. The venture appears to be the supermarket’s version of Woolies X with a spicy Coles seasoning. The Coles App had a 42.3 per cent growth in the number of active users and the Coles 360 Media arm saw income growth of 29.2 per cent, reflecting that the investments made in fostering a loyal customer base are paying dividends. Despite the current significant economic pressures Australia’s second-largest supermarket conglomerate Coles Group Limited was able to pay a stable fully franked interim dividend of 36 cents per share, a 9.1 per cent rise in comparison to last year. Comparatively, Woolworths reported a 2.17 per cent rise and paid out 47 cents per share. Konark Saxena, associate professor, at the University of New South Wales, told Inside Retail, “This robust market response to Coles’ earnings sharply contrasts with Woolworths, which is currently trading at a 2 per cent discount compared to last week, despite reporting a profit of $929 million, excluding one-off reductions.” Triple checking  However, the ongoing inquiries into the price-setting practices of Australian supermarkets could call into question just how much value the supermarkets’ loyalty programs are delivering to customers through weekly specials versus the businesses themselves through the granular data collected at checkouts. So far, investors appear to be betting on the supermarkets coming through the inquiries relatively unscathed.  The significant price jump for Coles following its earnings reporting last week “suggests that investors believe the ACCC inquiry will not materially affect Coles and that, as the media cycle progresses, attention will shift away from the company,” Saxena said. Further, the Prime Minister ruled out breaking up Coles and Woolworths, stating, “We’re not the Soviet Union,” in speaking to the current allegations against the two major Australian supermarket players. Given Coles and Woolworths’ dominant position in the Australian market, Saxena anticipates that both will continue to report strong results in the second half of this year. Uncertainty surrounding the departure of Woolworths’ CEO Brad Banducci introduces a degree of unpredictability.  “If this transition is managed smoothly, Woolworths’ robust loyalty base, coupled with initiatives aimed at reducing costs and increasing efficiencies — such as the online marketplace — should help in maintaining higher margins and profitability,” Saxena told Inside Retail. “The key risks I see are macroeconomic in nature, such as mortgage stress, interest rates, and persistent inflation, which could drive down demand and create a stronger call for action to increase domestic competition,” he concluded. The reality appears to be positive for financial investors, but where this leaves consumers will be determined by the benefits of rewards and loyalty programs offered by the major retailers.