Department stores and vendor brands have embraced experiential marketing as a communication channel to directly reach customers. Department stores in particular have started bundling many services in loyalty programs as experiential rewards.
Barneys’ updated loyalty program is a prime example—aside from earning traditional rewards points in a tiered structure, rewards members gain access to beauty treatments, early sales and even benefits at the on-site restaurant Fred’s according to Gartner L2’s report on the topic. While any pure-play online retailer can offer points for purchases, department stores stand out from them and specialty retailers alike by offering all-inclusive luxury services. Department stores should model Barneys and Matches Fashion, which created personal interfaces in accordance with their loyalty programs, promoting exclusivity as a benefit. Consumers—especially younger consumers—turn to physical retail for product exploration and discovery over online assets.
Additionally, with more Gen Z shoppers preferring physical stores to online shopping than any demographic, loyalty programs should orient their offerings to highlight exclusivity and experiential benefits. Since pure plays lack physical storefronts, loyalty programs from pure-play online retailers prioritize more streamlined programs. In October 2018, Index leader ASOS, for example deprecated its fan-favorite tiered rewards program, A-List, after it cited outsize costs associated with the program. In its place, the pure play invested in its app, building out highly personalized app experiences, focusing on its ASOS Premium Delivery subscription program for its loyal customers. The brand now focuses on extending access to return status in “my account,” offering more comprehensive fulfillment packages for a fee according to Gartner L2’s report on the topic.
Pure plays across different geographies have built out fee-based fulfillment programs for smaller prices than Prime, and expedited shipping is increasingly a part of loyalty programs, rising to 15% adoption since 2018. For instance, Otto launched its OttoUp program in 2018, which offers free delivery for a one-time fee of €19. Unlike Amazon Prime, however, Otto’s program is a mixed bag of benefits. Otto’s rating and reviews are highly comprehensive and OttoUp incentivizes users to leave reviews with redeemable points. The program, however, sees little visibility on site and forces customers to enter codes to redeem points. Department stores choosing to offer these programs must invest in promoting them or risk being missed by already loyal Prime customers