How people shop, and their loyalty to stores, has fundamentally changed. Whilst online shopping boomed during the pandemic, since the restrictions were lifted, many have fallen back in love with in-store shopping.
Online only E-commerce players have struggled to grapple with this shift. Many have faced logistical challenges, competition from ultra-cheap rivals, and soaring costs. This has been reflected by the stock market. Asos shares have crashed to £3.85 from their peak of over £57, whilst Boohoo shares are less than a tenth of their peak.
Transformative technology changes the retail game
Retailers that have always been predominantly have generally bounced back post-COVID. Marks and Spencer, in particular, has capitalised on the shift back to in-store shopping by growing its click-and-collect offering and developing its app to work seamlessly within its in-store environment.
Brands today want to be seen as available at all times online, with a physical presence delivering a greater consumer experience to boost loyalty. Technology is transforming what is possible and eliminating friction by joining the online and offline worlds. For example, through its app, Zara customers can book changing rooms, see where something from their wish list is on the shop floor, or order items for click-and-collect in-store. Others use geolocational in-app messages and push notifications, or augmented reality to create experiences.
Consumers shopping around challenges brand loyalty
Increased choice and consumers who are more price-sensitive than ever, has made customers far more likely to shop around for the best deals. To help customers bag a bargain, loyalty programs have become increasingly popular, with nine out of ten consumers in the UK now signed up for at least one. And with Gen-Z’s loyalty worth around $2.5 billion for the January sales, there’s plenty at stake.
In fact, during the recent Black Friday, Asda’s Rewards app, JD Sports’ loyalty app “JD STATUS” and Sainsbury’s Nectar rewards app were all among the top ten apps downloaded. Consumers today expect to be rewarded for their loyalty. Retailers are generally happy to oblige.
The use of loyalty apps is ubiquitous, and for good reason. They are highly intuitive and can be used to earn and redeem rewards, especially when money is tight. Loyalty apps are helping bring in a new era of retailing by encouraging multi-channel shopping. Whilst the grocery sector is leading the way, other sectors such as food and drink (i.e. restaurants, cafes, and bars) and beauty brands are gathering momentum.
A cornerstone strategy is essential for stronger retention
Clearly, loyalty programmes should be a cornerstone strategy for any business seeking to foster customer retention and brand allegiance today. Loyalty apps are often the bridge between the in-store and online environments. Sephora is one such brand that is doing it right. Whether in Dubai, London or Paris, a shop assistant is trained to always ask a customer whether they are part of its loyalty scheme. This has led to 80% of all transactions now being made by users enrolled in its loyalty scheme.
Yet, for a loyalty app to succeed, it is important to offer the right incentives. Special pricing and monetary rewards are most likely to impact brand consideration, especially among younger demographics. However, subscription fees and irrelevant rewards can be barriers that dissuade consumers from signing up to a loyalty programme in the first place.
The rise of gamification for loyalty
One way of garnering loyalty is gamification. In the past couple of years, we have seen brands increasingly capitalise on the immersive nature of mobile gaming. They are integrating their products directly into the gaming experience through seamless in-game advertising and virtual pop-up shops. They are also gamifying the shopping experience itself, and exploring strategic collaborations.
Central to this phenomenon is the exploration of platforms such as Roblox. Its pioneering use of user-generated content (UGC) provides a great starting point for brands wanting to connect with their audience within a game. By seamlessly embedding their stores within virtual worlds, brands can offer users new and exciting experiences while organically promoting their products.
A hybrid future for retail
Loyalty schemes are now so commonplace that a brand can lose market share by not having one. Yet, with so many schemes being so similar there is a danger that consumers may soon suffer loyalty fatigue. Because of this, I expect to see more elements like gamification coming to the fore to maintain interest.
What is clear, though, is that the retail landscape is morphing towards a hybrid future with technology at its core. Because of this, brands are rightly focusing more on brand ambassadors than influencers.