For many of you, 2020 posed never-before-seen challenges that impacted almost every aspect of life.
Due to the pandemic, consumer behavior significantly shifted which led to increased online spending.
From a loyalty perspective, in the fourth quarter we saw:
- The first-ever Prime Day held in October, which set records for Amazon and positively affected other retailers as well.
- Walmart+, a premium loyalty program that launched in September, gain millions of members.
- Chipotle’s loyalty program exemplify the power of customer loyalty during the pandemic.
- Some loyalty program revamps and lessons learned.
We’ll cover these items in our fourth edition of Retail Recap for 2020.
Let’s take a closer look:
Amazon’s Prime Day in October Jumpstarted the Holiday Shopping Season
Due to COVID-19, Amazon moved its Prime Day annual event from mid-July to mid-October (Oct. 13-14) in the fourth quarter of 2020.
For the first time, Amazon’s two-day event sparked the beginning of an extended holiday season. Since the pandemic began, consumers gravitated toward online shopping, something that was evident during Prime Day.
The question was would customers show their loyalty as much in October on Prime Day as they had in the summer in previous years?
And the answer was a resounding yes!
Although Amazon doesn’t release specific figures, industry estimates say Prime Day 2020 sales reached $10.4 billion.
Other retailers have benefitted from Prime Day’s halo effect in the past and did once again in October.
Compared to the Tuesday before Amazon Prime Day 2020, non-Amazon retail sites in the U.S. saw traffic increase 17% and conversion rates rise 13%.
Online sales for non-Amazon retail sites in the U.S. rose 76% on the first day of Prime Day 2020 compared to the first day of Prime Day 2019.
It’s safe to say that moving Prime Day to October was historic for Amazon and helped other retailers as well.
Given Amazon’s record-setting performance during Prime Day 2020, it begs the question: Will Amazon keep Prime Day in October this year to serve as the unofficial kickoff to the holiday shopping season?
And what should other retailers do about it?
There’s no doubt that Prime Day presents a challenge but there’s also an opportunity.
Every year, Prime Day creates a halo effect.
The first 24 hours of Prime Day last year generated a 66% revenue lift for other e-commerce retailers.
And research shows that more than 75% of Prime Day shoppers in the U.S. visit competitor websites to make sure they’re getting the best deals.
Plus, nearly 70% of consumers plan to join additional premium loyalty programs, like Prime, going forward.
It may be a huge day for Amazon, but it’s also a day every other retailer should take advantage of.
Customer Loyalty Is a Driving Force at Chipotle
Chipotle has had its fair share of ups and downs in recent years, but one theme is constant: Customer loyalty.
Early in 2020, the Chipotle Rewards loyalty program had about 8.5 million members, which is significant since it didn’t launch until October 2018.
Chipotle officials always seek to incentivize program members, which was a point of emphasis since the pandemic started. They have prioritized their digital tools, which has paid huge dividends since the pandemic started.
Jason Scoggins, Director, Loyalty & CRM, Chipotle talked to Clarus about this strategy.
“Over the last few months, we’ve seen an increase in new members which was driven primarily by customers discovering the brand through our digital channels,” Jason explained. “We have definitely seen customers pivot to digital ordering, particularly when it comes to order ahead for pick up.”
Coming out of the pandemic, Jason said Chipotle is “really focused on leveraging Chipotle Rewards to keep those customers engaged – whether that’s driving continued behavior toward our digital channels or introducing them to our in-restaurant experiences.”
To illustrate the popularity of Chipotle Rewards, it now has more than 17 million members.
Check out the full interview with Jason Scoggins from Chipotle.
Walmart+ Continued to Gain Traction
Amazon created the singular power of a premium loyalty program when it launched Prime in 2005.
Since then, several other brands have created premium loyalty programs such as Restoration Hardware, Overstock, and GameStop.
Now you have Walmart, the world’s largest retailer by revenue, also invested in a premium loyalty program. Walmart+ launched in mid-September, and its membership has swelled ever since.
In the first two weeks after launch, 11% of Americans became members of Walmart+.
Walmart+ plays to the company’s strength: Brick-and-mortar stores.
Most Americans live within 10 miles of a Walmart. With 5,000 stores, Walmart has an advantage when it comes to grocery delivery.
And its annual fee is $98 ($21 less than Prime).
Walmart+ will likely fare better than Prime in the hard goods spaces–grocery, household products, etc.
This year, coming on the heels of a most unusual 2020, could shine an even brighter spotlight on premium loyalty for brands seeking a competitive edge.
Is premium loyalty the right choice for me?
Some Key Loyalty Launches and Revamps
Gap realized its customers shop cross-brand within its portfolio.
As a result, Gap made its updated loyalty program a family of brands. This means members can earn and redeem points across brands to help spark additional shopping and discovery.
Gap’s family of brands includes Gap, Banana Republic, Old Navy, Intermix, Hill City, and Athleta.
Meanwhile, Kohl’s made it easier for customers to understand loyalty redemption by moving from points to cash. With so many valuations out there, simplifying to a cash approach made the program much easier to use.
The new MyMcDonald’s loyalty program, set to debut this month, is aimed at personalizing the customer experience to greater levels.
It offers personalized order suggestions and deals at the chain’s kiosks, mobile app, and digital menu boards at the drive-thru.
Our CEO, Tom Caporaso, told Restaurant Dive that McDonald’s could leverage its coffee program as a major loyalty driver like Panera.
Sephora’s Beauty Insider loyalty program partnered with several charitable organizations and allowed members to convert loyalty points into donations.
Chewy donated nearly $19 million in food, medication, and supplies to GreaterGood.org and other animal welfare organizations. Also, it launched a telehealth service in select states, connecting veterinarians to individuals with questions related to their pets’ health.
See more loyalty launches, revamps, and lessons learned in 2020.
What Should Brands Focus On in 2021?
Since we closed the door on 2020, what should you focus on in 2021?
Always listen to your customers, but more importantly, add value. If your loyalty program makes their lives easier, that’s the goal.
Implementing a loyalty program without a firm grasp on customer insights won’t yield success.
Focus on your best customers.
If you want to attract more members, consider offering a premium loyalty program or tier in 2021.
If you offer a premium loyalty tier on top of your free loyalty program, you’re letting your best customers self-identify, regardless of their annual spending.
This truly marks your most loyal customers.