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When It Comes To Brick-And-Mortar Loyalty, Walmart Is Up As Fashion Brands Lag

An inMarket study of retail loyalty rates and foot-traffic, fashion brands like Nine West, Bebe, The Gap, and others appear to be at a particular disadvantage.

The challenges facing major retail brands has been known for a long time, but the main opportunities those marketers still possess is the ability to command loyalty at scale by dint of their awareness and widely spread locations.

But, as with anything, some are better at driving loyalty than others.

As detailed in proximity platform inMarket’s Spring 2017 Loyalty report, the brands doing loyalty well are varied — Walmart was in the lead with a score of 2.68, followed by electronics chain Fry’s with 2.54, on down to Dollar General, Fred Meyer’s Jewelers, Target, Family Dollar, 99 Cents Only, Dollar Tree, The Home Depot, and Lowe’s.

What’s Driving — And Restraining — Retail Loyalty

Before getting to the brands that are struggling with loyalty, inMarket’s methodology for ranking the brands is based on location data captured 50 million mobile devices per month via its app partners.

The company looked only at non-grocery retailers based on customer loyalty from January through May, 2017. Each retailer is assigned a loyalty score, which is determined by repeat device visitation and is normalized for comparability.

For example, a retailer with 1,000,000 visits from 500,000 devices would have a loyalty score of 2, whereas a retailer with 10,000 visits from 4,000 devices would have a loyalty score of 2.5. Note: The average loyalty score for all non- grocery retailers in Spring 2017 was 1.45.

As for the bottom 10 companies in inMarket’s rankings, shoes and accessories retailer Nine West had the lowest performance with a 1.23 loyalty score. It was followed by other fashion and apparel brands Crocs, Wet Seal, Bebe, The Gap, H&M, American Eagle Outfitters — the non-clothing names were Toys ‘R  Us, The Kitchen Collection, Disney Store.

Personalization, Not Payoffs

The themes on both lists are clear: brands that promise savings and discounts tend to invite more loyalty. The primary presence of convenience stores like Walmart and Target, along with the dollar stores, naturally tend to have more frequent foot-traffic versus fashion retailers.

“Overall, there’s a clear trend toward discount/value retailers in the Top 10,” said Dave Heinzinger inMarket’s VP, Communications. “Walmart leads the pack, but the growth of dollar stores is being widely reported right now.

“It could be because millennials have become the ‘frugal generation,’ and they now make up the entire 18-35 prime spending demographic,”Heinzinger added. “They carry tons of student loan debt and make less than their parents when adjusted for inflation. I found it interesting that both Home Depot and Lowe’s not only made the list, but ranked with the exact same loyalty score. Perhaps its because of those never-ending home improvement projects that many of us have.”

On the question of whether apparel retailers tendency to lack the frequent foot-traffic that convenience stores do, Heinzinger added: “We view repeat device traffic as a key loyalty indicator — so if a retailer is retaining customers below average for their category, that’s a sign of distress.

“E-commerce is certainly a major factor in decreasing foot traffic, but it’s not the whole story,” he added. “Many of these mall-based fashion retailers are the polar opposite of the discount/value chains that are growing in 2017. They’re often charging full price for products that might turn up at outlets at a deep discount — which seems to be better aligned with today’s consumer behavior and specifically with millennial shopping preferences.”

Another obvious point, but worth noting nevertheless, is that loyalty is often connected to rewards in the form of discounts in the minds of consumers.

But as brands struggle with balancing the ideas of “value” and “premium,” the notion of driving loyalty beyond lowering costs for regular customers has been taking hold by brands.

Speaking at the NRF’s Big Show in January, Mike Mauler, EVP and president of GameStop International, made the point that loyalty needs to be defined more around the idea of personalization, not deals.

“The true power of our loyalty program is not the points or perks,” Mauler said. “We don’t find that consumers come into a GameStop to get points. We use loyalty to enhance our knowledge of what the customer wants,” Mauler said. “We send out updates and promotions. We can send out emails letting customers know, ‘Hey, Christmas is coming, you can trade in points worth $110 that they can then buy games for your friends.'”

For inMarket, the loyalty scores also provide a forecast of what retailers are likely to face in the near future.

“Eight out of the bottom 10 retailers for customer loyalty are either closing stores, halting expansion or laying off employees in 2017,” inMarket’s report said. “While Nine West hasn’t announced any store closures yet, their financial woes have been widely reported. Based on the Spring 2017 data, we predict Nine West will announce store closures before the end of 2017.”

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of GeoMarketing.com. A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.