Why loyalty programs are losing their power — and what Trader Joe’s figured out years ago

With its cult-like fan base, Trader Joe’s has no need for a loyalty program.

That’s because the grocer leads in customer loyalty without a loyalty program, relying on products and services instead.

Trader Joe’s ranks highest in customer loyalty among U.S. grocers — all without offering a loyalty program. While competitors invest heavily in points, perks and personalized offers, the chain relies on private-label products, everyday low prices and strong customer service to keep shoppers coming back.

To experts, that approach works because loyalty is built through experience, not enrollment.

“Most of the folks signed up for those programs are not necessarily loyal to that brand. They’re loyal to their own wallets,” said John Pedini, principal analyst at Forrester.

While Trader Joe’s resists the trend, the broader industry has moved toward loyalty programs. Enrollment in loyalty programs is growing, members account for a larger share of revenue, and return on investment continues to improve, according to the 2026 EY Loyalty Market Study. But the same study found that just 48% of consumers say a loyalty program makes them feel more positive about a brand, down from 67% two years ago.

According to experts, customer experience matters far more.

“If the app is frustrating, if resolving an issue takes too much effort or if redeeming rewards feels harder than it should, another offer or another discount isn’t likely to change how customers feel about that relationship,” said Patricia Camden, managing director of EY Studio+ Customer Experience and loyalty leader for EY Americas, Grocery Dive reported.

More than 80% of Trader Joe’s products were private-label as of early 2023, with items like its Mandarin orange chicken developing devoted followings. That product strategy drives both store traffic and higher profit margins — but it also raises the cost of running a loyalty program, since the chain cannot rely on manufacturer-funded discounts the way other grocers do.

Trader Joe’s views that limitation as a feature, not a flaw.

Such discounts often lead customers to chase deals rather than build genuine attachment to a brand, Tara Miller, vice president of marketing at Trader Joe’s, said on the company’s podcast in 2023.

“The best loyalty program is not as good as the best products,” said Brad Jashinsky, director analyst at Gartner.

Trader Joe’s also benefits from the natural frequency of grocery shopping, which gives the chain repeated opportunities to encourage purchases and deepen customer relationships — without needing a formal program to manufacture those touchpoints. Many customers began shopping there as children with their families, creating organic loyalty over time.

Matt Sloan, vice president of culture and innovation at Trader Joe’s, reframed the concept entirely on the company’s podcast in 2023.

“We think of loyalty as something that we have for our customers. We are loyal to our customers,” Sloan said.

Not every retailer can take that approach.

Brands that interact with customers infrequently — such as apparel or furniture companies — often benefit from loyalty programs because customers can more easily forget them or switch to a competitor. On the other hand, in markets where robust programs are the norm, such as airlines and hotels, loyalty programs are “nearly mandatory” to remain competitive, said Bobby Stephens, principal in Deloitte Digital’s retail and consumer products practice.

Value-focused brands like Trader Joe’s and Walmart, which depend on everyday low prices as a core promise, face natural limits on what a loyalty program can add. Luxury brands face a different risk: discounting can undermine the exclusivity that defines their appeal.

For brands that do launch programs, experts say the most effective ones solve a real customer pain point rather than simply reward transactions. When Hertz redesigned its loyalty program, research from the redesign process showed customers wanted a smoother rental experience, not more points. The revamped program allowed higher-tier members to bypass the rental counter and, at some locations, choose their own vehicle.

Experts also caution that a loyalty program cannot substitute for getting the fundamentals right.

“If your house is on fire, you shouldn’t be thinking about redecorating. You should put out the fire first,” Jashinsky said.

Generative AI was used to draft this story, based on data provided by Grocery Dive. It was reviewed and edited by Advance Local.