Zalando’s launch of premium service Zet is the latest retail membership scheme, adding to the proliferation of such initiatives.
Zet is at present a trial for customers in Berlin, Leipzig, Frankfurt and Hanover and includes same-day delivery, pick-up of returns on demand, personal fashion advice and early access to Sales.
While subscription services have been around for donkey’s years in other business fields such as publishing, there has been a slew of retail membership programmes in recent years. And the phenomenon shows no sign of abating as retailers jump on board a ship that could deliver much sought after customer loyalty.
One of the first retailers to launch a membership scheme was Hotel Chocolat. Its pioneering Tasting Club was launched almost two decades ago.
Boss Angus Thirlwell terms it the “beating heart” of the business, asserting that club customers are “terrifically” loyal.
“That loyalty feeds into lifetime value and, I suppose, a lucrative and profitable trading relationship that works for both parties,” he adds.
“The consumer has unlimited next-day delivery and we have more orders. It promotes loyalty and helps impulse buying, which is really important in beauty”
Joel Palix, Feelunique
“We were one of the very early pioneers of subscription and I think the challenge for a lot of the new subscription start-ups is making sure the longevity is really there.
“Ours has been going for 20 years next year and in that period we have had to evolve it quite actively to maintain its relevance and its focus.
“That’s not easy, but if you can put it at the heart of your business, it’s almost the best business model ever.”
A newcomer to the membership scheme model is beauty etailer Feelunique, which launched Unlimited Delivery this month.
“We thought it would be a win-win combination” says chief executive Joel Palix. “The consumer has unlimited next-day delivery and we have more orders. It promotes loyalty and helps impulse buying, which is really important in beauty.
“We have a really wide choice of products and so we want this membership to be an incentive to do all your beauty shopping with us.”
Platforms: the new loyalty card
But another iteration of the membership scheme is coming into focus, putting a new spin on customer loyalty.
“The new thing, which has really emerged over last couple of years, is retailers looking to tie a big portion of their consumers into a subscription model,” says KPMG head of retail Paul Martin. “It’s the next evolution of loyalty schemes.”
The most prominent example of this is Amazon Prime. Instead of focusing on VIP customers who buy into a brand or lifestyle, this next step in memberships tries to appeal to as many customers as possible.
“It’s all about creation of platforms and ‘containing’ the consumer within a platform ecosystem”
Paul Martin, KPMG
In this way, it mirrors loyalty schemes of old.
Both function in much the same way – retailers sign up as many customers as possible and give them discounts in return for points.
But that approach to loyalty is becoming less appealing.
“It’s quite a costly undertaking,” observes Martin. “But if we look at one of the biggest growth opportunities in subscriptions it’s all about creation of platforms and ‘containing’ the consumer within a platform ecosystem.
“It’s a completely new iteration of loyalty scheme and basically tries to ensure a consumer stays in the retailer’s product ecosystem and maximises customer value over their lifetime.
“It’s a growing market and platforms are one of the biggest evolutions we’ve seen in a while – I would call it fourth-generation retail. And subscriptions will play a major part.”
“There will be a few really big winners, not a whole host”
Anita Balchandani, OC&C
However, some experts question how many retailers can really make ecosystem platforms a success.
“I think that is a space where there are not going to be that many winners,” says OC&C partner Anita Balchandani. “Instead, there will be a few really big winners, not a whole host.”
She reasons that in order for consumers to sign up for such a platform, whether it’s Amazon Prime or a similar offer from one of the grocers or department stores, it needs to be wide-reaching and include a range of benefits which really change the consumer’s life and shopping habits.
Most consumers would not be willing to sign up to multiple schemes, meaning that if a retailer launches an initiative they need to be sure of outperforming the competition.
Planet Retail global research director Natalie Berg cites Walmart’s Shipping Pass as one such initiative that failed to thrive, leading the retailer to cut it earlier this year. Berg believes that the Shipping Pass “couldn’t compete with Amazon Prime”.
While there are definitely dangers to watch out for, Balchandani believes that subscription models are worth retailers’ time.
“One of the biggest costs to subscription services is customer acquisition,” she says. “Retailers already have a customer base so if they were able to launch a compelling idea they’d have a big advantage already.
“A lot of retailers see subscriptions as something very small but it could have a lot of potential, especially as they already have so much information about customer’s purchasing history and preferences.
“It’s not for everyone but it could be really good for some.
“I would urge retailers to think about whether there is a role for subscriptions to play in their business and to be a bit more unconventional about what they could do with them.”
So don’t dismiss subscriptions as not for you – they could be the next driver of your business.