Legacy retailers turn to subscription programs to hook loyal customers

Legacy retailers turn to subscription programs to hook loyal customers

Excerpts from an article by Suman Bhattacharyya on Digiday

Legacy retailers are taking a page from Amazon Prime by adding subscription services to lock in loyal customers.

In recent weeks, a number of players in the category, including Lululemon and CVS, have rolled out membership programs to build loyalty. The programs keep a retailer’s most valuable customers coming back regularly, while helping to counteract growing customer acquisition and retention costs as e-commerce platforms broaden product choices.

“It starts with the realization that the only way to survive is to have repeat customers,” said Corey Pierson, co-founder of predictive marketing analytics platform Custora. “For the longest time, [retail business] was very product-focused, as in how many shoes did you sell, but given Amazon’s growth and how easy it is for customers to do price comparisons, retailers are realizing that if [customers] don’t become repeat buyers, the economics of the business won’t work.”

Lululemon’s membership program, currently being tested in Edmonton, Canada, offers subscribers a pair of pants or shorts designed exclusively for the program (it’s unclear if this is a one-time or repeat offering), access to classes and events and free expedited shipping for e-commerce purchases, for a $96 annual fee. Subscription rewards will be rolled out monthly to users. The company’s CEO, Calvin McDonald, told investors last week that it was considering raising the program fee depending on customer interest, which has been strong so far.

Meanwhile, Best Buy, widely known for its staff members’ tech expertise through the “Geek Squad,” in May began offering a yearly tech support subscription-based product called “Total Tech Support,” priced at $199.99 per year.

Similarly, DSW has been experimenting with subscription-based services. Last year, the company launched an “innovation lab store” in Columbus, Ohio, offering services like a shoe concierge and a nail salon. The location is reportedly driving 10 percent higher annual sales compared to other locations. The company is also offering TechStyle Fashion Group-owned online subscription services JustFab and ShoeDazzle space within the store to test how physical retail can help grow their customer base. The company earlier this year revamped its loyalty program, offering its 25 million members personalized rewards based on their purchase behavior.

Read the full article on Digiday