In this first edition of Retail Recap, we saw the divide between traditional and modern strategies widen even more. Customer expectations continued to change and a few big brands have been reacting to them.
Companies like Restoration Hardware, MoviePass, and Amazon / Whole Foods continued to change the loyalty space. They keep blazing the trail for others.
The first quarter of 2018 was an interesting one for retail. Here’s what we learned.
Loyalty is a Year-Round Strategy
We saw many retailers focus on loyalty during the holiday season, which is the right thing to do. However, traditional loyalty programs just aren’t cutting it when it comes to holidays or a year-round strategy.
Our CEO Tom Caporaso offers insight in a recent PaymentsSource article.
“Traditional, or transaction-based, loyalty programs that focus on discounting simply train customers to wait for coupons and incentives, and don’t engender brand advocacy,” Tom says.
Today, most companies realize that customer loyalty isn’t about a points program. Instead, it’s a key strategy that, if executed correctly, will strengthen consumer relationships and create brand advocates.
Loyalty programs are changing, and a brand’s approach means understanding that true loyalty requires a combination of function and emotion. But it’s up to brands to assess the purpose of their loyalty programs and the value they provide.
As Tom points out, “It’s the job of retailers to follow the trends and give customers what they demand. Customers today want the best benefits 24/7/365 and they are willing to pay for them (as well as give up valuable data).”
Amazon is the standard-bearer in the world of premium loyalty programs. Consider the staggering fact that Amazon Prime has more than 90 million members.
“Prime set the stage for premium loyalty programs over a decade ago, and it’s taken the retail industry a while to catch up,” Tom remarks. “Now, there’s no choice.”
Just ask Restoration Hardware, which launched its RH Grey Card Membership program two years ago.
Restoration Hardware Sees the Results of Going All-In
Restoration Hardware CEO Gary Friedman wrote in 2016 that most of the company’s promotional efforts were outdated. Traditional sales and promotions did not reflect the brand it was trying to build due to a lack of alignment with its customers.
So what happened?
Tom wrote this NASDAQ article describing what most customer-centric companies do. In the case of Restoration Hardware, it listened to its customers, eliminated all promotions, and went all-in with a premium loyalty program called the RH Grey Card.
For $100 annually, members receive 25% off all full-price purchases immediately after signing up. Besides other discount-related benefits, the program gives members experiential benefits like free interior design services.
And for Restoration Hardware, the results from the RH Grey Card premium loyalty program have been transformational.
In a little over a year after launch, the program was driving most of the company’s sales. With nearly 400,000 members and counting, membership fees alone currently account for a significant percentage of income.
Loyalty Disruptors Aren’t Just Tied to Retail
For a stellar example of disruption among loyalty marketers, Tom took a look at what MoviePass has been doing in the movie theater industry with this NASDAQ article.
“MoviePass is making big waves in the movie theater industry with their subscription program,” according to Tom. “With 1.5 million members and quickly growing, they’re demonstrating the power of the subscription model, even outside of traditional retail and wholesale clubs.”
For $9.95 per month, MoviePass members can see one movie per day at most theaters. That’s less than the price of a single ticket in most cities.
In November, MoviePass ran a $6.95 promotion to get members in the door.
“Allowing consumers to try out a subscription program before buying is a great way to demonstrate its value,” Tom says. “Amazon does the same thing with Prime trials during Prime Day.”
And speaking of Amazon, the Seattle-based online behemoth opened its first Amazon Go store in Seattle.
A Prime Time for Amazon to Take Over Grocery
Housed in Amazon’s headquarters, the store features hundreds of cameras, sensors, and computers. They track inventory and charge for items without the aid of a cashier. Customers can simply walk in, scan an app on their phones, pick the products they want, and walk out.
“Amazon continues to frame everything through the lens of technology as an enabler for retail, and Amazon Go is simply the latest way to integrate themselves into people’s everyday lives,” according to Tom.
What else has Amazon been up to?
Well, after acquiring Whole Foods last year, Amazon announced the introduction of free two-hour delivery of natural and organic products from Whole Foods Market through Prime Now, with plans to expand across the U.S. this year.
“By acquiring Whole Foods and making Prime its premium loyalty program, benefits like special savings and two-hour delivery will be available to members,” Tom says. “While that will surely help drive new Prime joins, bringing all of this to their 90 million existing Prime members is going to make it very difficult for other online grocers to compete.”
Takeaways from Q1 2018
In this Retail Recap, we continued to see companies making meaningful and impactful changes to their loyalty programs. Prioritizing internal alignment and employee engagement is crucial.
We saw Restoration Hardware and MoviePass make strides to better meet the expectations of their customers last quarter. Amazon has started to change the grocery game. It will be interesting to see what the second quarter has in store for retail.
One thing is certain: Learning what customers want is something that any brand can leverage daily to enhance their loyalty programs and customer relationships.