Retail

How to Drive International Expansion Without Escalating Complexity

Customise or standardise? That’s perhaps the most important question a brand at the beginning of its international expansion has to answer.

Depending on who you ask, you will get very different answers. If you ask your brand and marketing management, they will vote for as much standardisation as possible. If you ask your sales force, the answer will be quite the opposite.

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Omnichannel Best Practice at Scale

How do you achieve loyalty card identification in 80% of all purchases and 2x higher spend of omnichannel versus retail only customers?

In this article we explore the ecosystem and customer journey touchpoints that enable Dutch grocer Albert Heijn to meet customer demand and drive omnichannel spend. With 1000 stores and >100k online orders per week, this is true omnichannel best practice at scale.

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How Important is Diversity for Successful Retail?

Research shows that diversity and inclusion make businesses more successful. Diversity in retail matters across leadership, workforce, workplace culture, marketing as well as from a consumer perspective.

Study after study demonstrates how crucial diversity and inclusion practices are to a company’s success. This article examines what these insights mean when applied to the retail industry. (more…)

How to Manage Successful Brand Post-Merger Integration

Far over 100 lifestyle brands are taken over every year. While a majority of post-merger integrations fail, here’s what the successful ones have in common.

As a seasoned CEO and experienced retail executive I’ve been part of my fair share of successful (and less successful) post-merger integrations. In my current role, I advise family businesses and financial investors on growing their brands, organically or via acquisition. Although the backgrounds of individual companies, the company cultures as well as the strategic reasons for takeovers differed widely, clear patterns emerge for both successful and unsuccessful cases.

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How to Improve Your Hit Rate and Make Good Use of Bestseller Potential

When brands need to reshape their portfolio and close stores, they face the challenge of improving Like-4-Like performance at the remaining points of sale. The two product strategies introduced here help improve the top and bottom line of your P&L.

Improving like-4-like performance often focuses on mechanics and triggers that can be influenced by sales staff and a retail organisation. Surprisingly, it often excludes an honest evaluation of the assortment’s performance. This article shows how improving hit rate and using best seller potential can push sell-through, create incremental sales potential, reduce mark-downs and improve the gross margin. (more…)

Rapha is not a brand, it’s brand community management at its best

How does a small UK cycling apparel brand become the global benchmark for brand community management? Here’s why brands around the world use Rapha as a best practice case study.

In case a cycling jersey isn’t yet part of your casual wardrobe, read this brand story to learn why bike apparel may well set trends in mainstream clothing by 2025.

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Driving Customer Lifetime Value with Brand Loyalty Programs

Successful brands use loyalty programs for customer segmentation and to increase lifetime value

Zalando has just announced its loyalty program Zalando Plus as one of their key initiatives for 2019, and Amazon Prime has been present in every other US household in 2018. The concept of loyalty programs, however, is not new.
Premium department store Breuninger in Germany launched its loyalty program as far back as 1959. The original aim was to allow customers to buy on credit, which later evolved into a loyalty program with different tiers and membership rewards. As one would expect, today’s card is no longer in paper but integrated into a shopping app.

Evolution of Breuninger Membership Rewards Program with different cards and App on Smartphone; Source: Breuninger; WikiCommons

Evolution of Breuninger’s customer loyalty program (Source: Breuninger; WikiCommons)

Reward and Focus on Your Most Valued Customers

The goal of having a brand loyalty program is to better serve and focus on the most valued customers, eventually driving Customer Lifetime Value (CLV). Amazon Prime members spend USD 500 more per year compared to non-prime customers. And there is good reason for Net-a-Porter to invite the top-spending 2% of their customers into the EIP (Extremely Important Person) membership rewards program, as they account for more than 40% of sales and shop on average 12x more than the average customer. Focussing on those 2% of customers and increasing their buying frequency by just 3% would lead to an increase of 1.2% in the overall net sales of the business.

The Journey from Acquisition to Retention

Providing incentives such as free shipping or free alterations can be a strong tool in acquiring more members into a customer loyalty program. Keeping members engaged after the first transaction or sign-up is often more challenging. Leading marketing or ‘growth hacking’ teams know when to reconnect with new members with the goal to drive engagement, which at a later stage can lead to the second sale transaction.

Tiering Members is Key

While all customer loyalty or membership programs are using some sort of tiering, a brand needs to decide whether to openly tier and thereby create the feeling of exclusivity to the customer. One advantage of this approach is the ability to nudge members to move up to the next level, for example by the means of monthly point statements or by informing members how close they are to reaching the next tier and thereby stimulating additional sales. However, traditional customer segmentation is typically based on annual spend per customer, which does not take ‘share of wallet’ into account. A better metric is customer lifetime value (CLV or CLTV), which incorporates expected future spend and potential.

Harrods Membership Rewards Tiering and Benefits for Customers, Customer Segmentation; Source: https://secure.harrods.com/account/en-gb/harrods-rewards

Membership program tiers and benefits at Harrods (Source: Harrods)

Paid Memberships are Strong Loyalty Drivers

A powerful way of keeping a loyal customer is to convince her to pay for membership in the customer loyalty program. Multi-brand and product stores are at an advantage here, as customers can leverage the fee over a higher number of transactions.

The average active Zalando customer, for example, orders 4.4 times per year and is charged EUR 7.90 for premium or same day delivery per order (read here for a detailed review of the benefits of same day delivery options). A Zalando Plus membership at an annual fee of EUR 15 includes free premium or same day delivery, among other benefits, which makes it an attractive offer for frequent shoppers.

Most importantly, the incentive for members to shop with a different online retailer decreases, as the cost for the same premium services would be very high for just a single transaction. As a result, Zalando management expects their brand loyalty program to be key in increasing the gross merchandise value per customer spend by approximately 20-25% in 2019.  The increase on customer lifetime value (CLV), which is calculated over several years would be similar.

Zalando Plus Program Customer Lifetime Value (CLTV; CLV; LTV) and Share of Basket; Customer Segmentation; Source: Zalando Investor Relations

Zalando Plus membership drives shopper spend (Source: Zalando Capital Markets Day Presentation 28 Feb 2019)

Opportunity to Focus on Value Rather Than Discount

While product discounts and rebates dominate the most-valued membership rewards, it is worth noting that millennials place a higher value on service, experience and customer recognition.

This is especially interesting for premium brands aiming to use their loyalty program to increase the brand value perception of the consumer. Nike, for example, offers their NikePlus members access to member-exclusive products. Net-a-Porter allow their EIP members to shop new collections earlier than everyone else and offer them a personal shopper. Online supermarket Albert Heijn Online provides its loyalty club members a personalised dashboard that suggests healthier substitutes for previously purchased products, which can have significant positive impact on personal health.

Having worked with a client on a project in Retail/Health Tech in China last year, I’m convinced that the trend to personal health and well-being is one of the strongest drivers for loyalty, but comes at very high level of complexity for brands.

For brands with a smaller budget, a more focused approach to a brand loyalty program can be an option. Cycling wear brand Rapha, for example, has created a cycling club with frequent member bike rides and services tailored to the needs of race bikers in large metropolitan areas. The focus of the stores (called ‘Rapha Club Houses’) is to provide the best member experience, featuring racing bikes for loan and a café. They become places for the member community to connect after organised bike rides, which start and end at Rapha Club Houses. The selling area dedicated to cycling merchandise in store is surprisingly small.

Rapha Clubhouse with Customer and Members of Brand Loyalty Program Customer Lifetime Value

Rapha Club House Tokyo (Photo: Rapha)

Drive Your Member Strategy Now

With many brands already having a customer loyalty or membership program in place, 2019 will be the year to evaluate the impact on customer experience and lifetime value (LTV). To start, brands should measure ROI and engagement across the channels. An end-to-end calculation, including supply-chain and/or labour cost, is especially relevant when calculating the ROI for lower margin brands or product groups. The second step is to calculate customer lifetime value (CLV) per member and start customer segmentation to budget future marketing spend. For many brands this can mean a shift from member acquisition to retention and increasing spend per member.

Driving customer experience for the most valued members requires having the same top-level standards across all customer touchpoints, from front-end to operations to last mile delivery or stores. Setting up a matrix membership team structure with experience beyond just marketing but also in store operations, supply-chain, merchandising and finance can be a powerful way of driving this end-to-end experience across digital and retail channels.


About the Author:

Maximilian Gellert gets excited about transforming a range of digital options into pragmatic every-day solutions for retailers. Combining consulting experience with industry functions in premium apparel and online grocery, he supports retailers and etailers in their digital challenges and last mile innovation. Get in touch with Max via email or connect with him on LinkedIn to discuss your own plans for a membership program and other challenges related to customer loyalty.

Special Edition: Processes & Operations for Retail Managers

While everyone talks about  growing online sales, offline retail still makes up the vast majority of consumption. This special edition offers inspiration and guidance on processes & operations for retail managers in this context.

E-commerce managers and financial investors can be quick in labelling your stores as part of the so-called ‘old economy’. But today, retail still stands for 85% of all consumption and offers many opportunities to create superior consumer experiences and be commercially successful. As many brands and retailers have shown, a great brick and mortar store can grow far more profitable that online sales.

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Retail Portfolio Management: Store Staff Performance

While excellent staff and service are what distinguishes brick and mortar from online retailers, staff performance is often overlooked in store evaluations. Two new KPIs help account for the human factor.

When evaluating a retail portfolio, very often mangers only look at the financial results of a store. But excellent service, competent and dedicated sales staff are a key differentiator of brick and mortar retailers. A fair and objective store staff performance evaluation is therefore increasingly important. This article introduces two new KPIs that help to fairly evaluate staff performance and to determine optimal staffing for each store in your portfolio.

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Brick & Mortar is the new Online: E-commerce Trends 2019

Amazon just released sales numbers for 2018 and the details indicate that the mother of all e-commerce is confronted with new growth realities.

And Amazon is not the only one.

  • GLORE, the stock index for global online retailers stayed far behind old economy stocks.
  • E-commerce became ‘weather sensitive’, had bankruptcies and major players missed sales forecasts by far.
  • Almost all online pure players are working on brick & mortar concepts, already leading to over 20 stores in Berlin.

So let’s look at the fundamentals behind the e-commerce trends 2019 that indicate a new direction in growth.

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Retail Portfolio Management: Renegotiating Your Rental Contracts

This is the second installment of a short series that dives into a few uncommon KPIs for successful retail portfolio management. Learn how traffic cost and footfall per hour can help you renegotiate rental contracts.

For many years, retail expansion was the main growth strategy in the brand retail world. More recently, however, brands increasingly face an under-performing retail portfolio. Realising that retail expansion doesn’t work without like-for-like growth of existing stores, brands are busy assessing their retail portfolios in order to focus on profitable stores and stores with potential for improvement.

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Spain & Portugal on the Brand Horizon

Is it time for brand expansion to Spain and Portugal? The economic outlook for the Iberian peninsula is currently boosting the confidence of international retailers on the lookout for new opportunities.

Spain and Portugal are back in the mindset of expansion managers! Several international brands are currently revisiting their expansion strategies or considering taking up business in Spain and Portugal. There might even be more opportunities for international brands now than there were before the crises.

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