Amazon, the king of ecommerce, has long been a trailblazer in the world of online shopping. But now its business model is rubbing off on retailers, and changing the way we shop in traditional brick-and-mortar stores.
Amazon Prime is a paid loyalty program that costs $99 or $10.99 a month and grants members many benefits, including free two-day shipping and access to stream online videos and music.
Roughly 49 million American households, or 44% of households in the US, have Prime memberships, according to Cowen & Co. data. That’s nearly triple the number that had subscribed in 2012.
The success of Prime has left traditional brick-and-mortar stores desperate for a way to keep customers coming into stores. So far, their best effort has been simply to copy Amazon.
In late September, Bed, Bath and Beyond began testing a beta version of its new “Beyond+” loyalty program. The program takes a page out of Amazon Prime’s handbook, offering perks that include free shipping and 20% off every purchase, for an annual membership fee of $29 per year.
While Beyond+ adheres Amazon’s playbook closer than most, it follows in the footsteps of retailers such as Target, Kohl’s, and CVS that have unveiled revamped, app-centric loyalty programs in the last year.
Loyalty programs like Beyond+ have become an obsession of retailers for a multitude of reasons. First and foremost, they get you, the consumer, to spend more money.
Amazon Prime members spend more than double what non-Prime members spend with Amazon, according to Jared Wiesel, a partner at consulting firm Revenue Analytics. That’s because rewards programs make you, the customer, feel loyal to a certain brand.
“Retail loyalty programs are first and foremost about owning customer share of mind, which then allows a retailer the chance to earn customer share of wallet,” Wiesel told Business Insider. “Once a customer is enrolled in a great loyalty program, such as Amazon Prime, they become far more likely to first turn to that retailer to meet their shopping needs.”
In other words, once a customer joins a membership program, they are much more likely to check out the offerings at that retailer before looking elsewhere.
“Having a branded app is about owning the ‘first click,'” says Wiesel. “The more a retailer can do to get a customer to first search their site, the more likely they are to gain that customer’s purchase.”
There are also benefits for retailers that may not be obvious to shoppers.
“When a customer signs onto a retailer’s app, the retailer is able to garner a wealth of customer-specific information — everything from when a customer shops, to what they click on, to what they ultimately purchase,” says Wiesel. “Outside of the cash in the register, data is perhaps the most valuable currency for retailers today. The best retailers are tracking customers’ shopping behaviors and purchase trends at a very detailed level and using this information to inform business decisions that drive profitable growth.”
As an e-commerce company, Amazon has near unparalleled insight into customers shopping habits.
To compete with e-commerce, and convince customers to download an app or join a program, retailers need to offer convenience and benefits, like free shipping.
“The success of Amazon Prime has permanently altered customer perceptions about paying for shipping,” Wiesel says, citing programs such as Target REDcard and Beyond+. “Given the program’s pervasiveness, free shipping has become an expectation and traditional retailers are scrambling to find ways to match Amazon’s offer while minimizing the financial hit.”
Another way to make shopping more convenient is by offering a multi-purpose app, that allows shoppers to do everything from accumulate coupons to pay on their smartphones.
Payment apps have become more and more prevalent in the last year, with newcomers like Walmart Pay and CVS Pay.
On Wednesday, Kohl’s launched Kohl’s Pay, a mobile payment option in the retailer’s mobile app that is linked to customers’ Kohl’s Charge card. The app is also home to Kohl’s electronic coupons program, Kohl’s Cash, and the Yes2You Rewards loyalty program.
With programs like Beyond+ and Kohl’s Pay, retailers are aiming for all-encompassing convenience that bridges online and in-store purchases. From free shipping to speeding up check-out with in-app payment, these adjustments aim to draw in customers by doing away with roadblocks that were once simply part of shopping.