The stampede to cash in loyalty points has forced Nectar owner Aimia to shell out an extra £52m worth of rewards this year, as customers squeeze every inch of value out of their cards.
With 18.5 million customers, Nectar is the biggest loyalty scheme in Britain and points can be awarded and redeemed with retailers such as Sainsbury’s, BP garages, Argos and Amazon as well as British Gas.
But Aimia Coalition Loyalty UK says customers are redeeming far more points than usual.
Chief financial officer Mark Grafton said: “The level of engagement from our customers – that is the amount of Nectar points they redeem – is at an all-time high so we have looked to increasing our provision for that by £52m.
“Austerity Britain means that everyone is looking for value everywhere and people are redeeming more of their points than ever before, helped by the increased level of awareness due to marketing by the brands that offer Nectar.”
Launched ten years ago, Nectar receives payment when a retailer issues a Nectar point to a shopper. Nectar then compensates retailers when the points are redeemed.
It recently signed up online auction site eBay and restaurant chain Cafe Rouge. Grafton said it was looking to sign up more big brands.
According to financial accounts just filed, Aimia’s turnover for 2011 was £191.5m after the £52.3m cost was deducted, resulting in the company making an overall pre-tax loss of £47.9m compared with a profit of £6.9m the previous year.
Nectar is awaiting the results of a Supreme Court decision about its long-running battle with Revenue & Customs over whether it should pay VAT on its Nectar points. If successful, the company looks set to receive a £50m tax refund.
Earlier this month, a study from Halifax revealed that nearly £2bn in rewards is likely to be splashed out in the run-up to Christmas, on the likes of Tesco Clubcard, Nectar and Boots Advantage Card.
£2bn in loyalty points spent on Xmas