Apparel is in peril.
If you work in the apparel industry, then you’ve most likely felt the pressure of “The Amazon Effect”.
Amazon has been overtaking the retail world category by category. It started with books, then electronics, and most recently, even grocery with the latest Whole Foods deal.
Just like grocery, apparel was a relatively safe category because shopping for clothes online causes a lot of friction.
Buying clothes without trying them on is tough and returning them if they don’t fit is a hassle just like shipping perishable food is challenging.
But if they’ve figured out how to do it with grocery, why not apparel?
Enter Prime Wardrobe. It works like other subscriptions wardrobe services and includes well-known brands, not just Amazon’s private label brands.
Prime members simply return the clothes that do not fit using prepaid shipping labels, taking the friction out of the buying process.
What’s next?
A huge part of Amazon’s grocery strategy was to buy a retailer with a great brick and mortar footprint. Couldn’t they do the same with a struggling apparel retailer?
According to this survey, department stores, discount stores and specialty stores remain the top-three store formats at which women buy clothes most often, so it would make sense for Amazon to extend its physical presence.
Apparel is already no longer safe and Amazon has been quietly gaining market share in the background.
The numbers are shocking.
The total value of the U.S. apparel market was about $200 billion in 2016. That’s including both online and brick and mortar sales. Amazon claimed $3.4 billion of that.
While total U.S. apparel sales did climb by 3 percent last year, Amazon’s apparel sales jumped 25 percent.
Amazon is coming for apparel retailers. How can you fight back?
You must give your customers the best possible experience and create a valuable loyalty program that keeps them engaged and coming back.
Here are 7 things a paid premium loyalty program does to help you fight against “The Amazon Effect” and win (and keep) your customers.
1. Drives Customer Engagement
Traditional, free loyalty programs focus heavily on acquisition.
These programs are great at getting massive amounts of people to sign up, but they’re not great at driving customer engagement because they’re all very similar.
Most of the apparel retailers out there rely on points systems which don’t do much to differentiate themselves from the competition.
If you want to increase engagement and average order value, you must stop thinking about acquisition and focus more on retention. That’s exactly what a paid premium loyalty program is best at.
A premium loyalty program isn’t going to attract everyone because customers must pay for it. What it will do is attract your best customers, keep them engaged, and keep them from going to the competition.
Charging your members allows you to offer them better benefits right away without the need for them to collect points over time.
In 2016, Amazon Prime members spent about five times as much as non-members.
As we can see from Prime, people are willing to pay to be members of programs that offer real value to them and those members are much more valuable than non-members who also shop the competition.
2. Creates a Personalized Experience
A big part of that value comes from a personalized experience.
Once a customer becomes part of your premium loyalty program ecosystem, you need to make sure their experience is personalized because 59% of customers say that personalization influences their shopping decisions.
Rather than just sending out generic blanket sales emails or direct mail which can be spammy, send out exclusive offers based on your members’ order history or what they are searching for the most.
You can even send out product recommendations based on what is currently in a member’s shopping cart.
Many retailers have been slow to adopt personalization because the data-driven technology behind it can be intimidating in which case it is a good idea to work with a loyalty partner that experience in this.
Make sure personalization not only happens online, but across all channels.
For example, Macy’s collects data ranging from style preference to store visit frequency to determine which products are on sale in each store.
Over 78% of consumers will only engage offers if they have been personalized to their previous engagements with the brand, so it’s critical to get on board with this to ensure they keep coming back to you and don’t start looking elsewhere.
3. Targets Each Customer Segment Differently
Once you have started to use your data to discover how to personalize the experience for each member, you should consider where and when those personalized experiences occur and begin to segment customers accordingly.
At a high level, you can segment customers by generation.
For example, both millennials and baby boomers use their digital devices, but millennials use theirs to research and shop much more than boomers do.
Conversely, when shopping in-store, baby boomers care much more about customer service, whereas millennials rely on technology to improve their shopping experience in addition to customer service.
One of the biggest differences is with influence. 82% of millennials tend to favor word of mouth while boomers are influenced most by retail websites, then by advertising and salespeople.
A premium loyalty program can target each segment differently.
No matter who you are targeting, however, it’s important to provide a consistent brand experience across all channels, whether it’s in-store, on social media, or on mobile and desktop websites.
4. Provides A Seamless Omnichannel Experience
Different customers have unique needs and it’s important to offer a seamless experience no matter where they interact with your brand.
A busy mom might not always have the chance to visit a brick and mortar store, but she might be afraid to order online because return shipping is costly if the shoes don’t fit.
With a premium loyalty program, custom benefits that are specific to the retailer can be offered, such as the option to ship them back and be reimbursed for return shipping as an alternative to taking them back to a physical store.
In fact, the vast majority of women are buying womenswear from both online and offline channels.
Therefore, you must ensure the shopping experience is seamless across all channels.
According to a study of retail customers by Harvard Business Review, “only 7% were online-only shoppers and 20% were store-only shoppers. The remaining majority, or 73%, used multiple channels during their shopping journey.”
A premium loyalty program can accomplish this by being flexible enough to offer the same benefits whenever a customer interacts with the brand. Point of sale versus shopping online should not affect benefits like free shipping, cashback, and free return shipping.
5. Makes Your Brand Top Of Mind
Really great loyalty programs go beyond points and focus on convenience. When you make the lives of your customers more convenient or better in some way, your program becomes top of mind for them.
The incremental revenue gained from program membership fees can be used to build an app that allows customers to order, choose to ship to them or pick up in store, track their order status, and receive notifications when their order is ready via their preferred contact method.
They should also be able to track their exclusive offers and cash back savings as well as handle returns all in one place.
By taking all the inconveniences out of the shopping experience, your premium loyalty program will always be top of mind for your members. The fact that they are paying for their membership will also keep them coming back.
6. Becomes Another Channel to Communicate With Customers
Once your best customers are in the ecosystem, you can use your premium loyalty program as an exclusive communication channel just for members.
For example, if you have segmented your customers, you can give them the best your brand has to offer in the form of exclusive emails that remind them of their current member status, benefits, and personalized tips or recommendations.
92% of consumers trust an influencer more than an advertisement or traditional celebrity endorsement, so use some of the revenue generated from memberships to include influencers as members of your premium loyalty program.
If you show them the value that your program offers, they will spread the word and others will want to join.
7. Provides Data & Insights On Your Best Customers
Data is what ties all of this together and since a premium loyalty program focuses on your best customers, it allows you to collect the best data.
The good news is that customers expect you to collect data about them when they sign up for a loyalty program.
You only need the basics such as name, address, and phone number to start personalizing. Payment methods can be collected and tied into a customer’s account to make the checkout process more convenient as well.
Things really get interesting when you start collecting data like purchase history because this allows you to start tailoring coupons and rewards specific to the interests of each member.
People don’t want tons of coupons for things they’ll never buy.
All the data collected should have one big thing in common: It should all be used to benefit the member in some way. Amazon is an expert here, but with the right premium loyalty program, you can do this as well.
Collect data and use it to make the overall experience better for your customers and they will keep using your program.
Amazon Isn’t The Go-To Place For Apparel… Yet
While Amazon is quickly on the way to becoming the largest U.S. clothing retailer, it hasn’t taken over the category just yet. There is still time to win over your customers for good and prevent them from looking elsewhere.
If you haven’t thought about a premium loyalty program yet, now is the time to get moving.
By charging a membership fee, you’ll get the most loyal customers and be able to offer them the best, most personalized experiences with your brand. You’ll also be able to collect the most critical data about your members so that you can continue to improve their experience and keep them coming back.
If you would like to learn more about how to build a premium loyalty program for your brand, get in touch with us anytime.
Michael Iannucci
Michael Iannucci is our Executive Vice President, Business Development & Client Management. He has over 15 years of experience at top loyalty marketing and subscription commerce companies, where he held leadership positions in sales, business development, and account management.
