Over the years, apparel retailers have incorporated various strategies to improve customer loyalty in their businesses. These range from various membership programmes, loyalty schemes, discounts, and reward opportunities. Digital disruption and novel influencing methods have led to a shift away from traditional methods.
Listed below are the key macroeconomic trends impacting customer loyalty in apparel, as identified by GlobalData.
Covid-19 has impacted the apparel sector in various ways. There has been an over-reliance on online channels for shopping due to lockdown restrictions across countries and the risk of contamination in physical stores once lockdowns were lifted and stores reopened. This change in consumer consumption behaviour, supported by the availability of cheap and reliable internet, has created challenges for retailers with less-developed online propositions.
Retailers are customising their loyalty programmes to provide specialised services to a wider customer base. Nike, for example, has employed a wise strategy to enhance engagement using digital platforms during the Covid-19 crisis; it is offering its NTC Premium service for free to engage with its customers. The company also began offering health tips on its website and social media channels.
Growth in online and mobile spend
On the back of greater accessibility to the internet through electronic devices like mobile phones and laptops, retail sales have shifted to the online channel, with online sales growing drastically in the last decade. The online channel gives consumers access to a wider range of retailers and products and it offers shoppers convenience in terms of delivery options – home delivery, click and collect, and third-party pickup.
The online channel extends retailers’ reach to a larger audience, presenting a greater opportunity to grow sales, collect a larger amount of consumer data and create personalised efforts to maximise loyalty. The post Covid-19 era will see a larger consumer base spending through their smartphones, with a shift towards app-based shopping and contactless payments driving the popularity of this channel.
Apparel retailers with established loyalty programmes in physical stores should bring them over to their online channel and mobile apps, so that consumers can easily register themselves and avail rewards seamlessly. As people become more aware of their expenses amid financial uncertainty, non-paid loyalty programmes will garner more consumer attention than their paid counterparts.
Policies addressing security concerns such as data breach will enhance customer trust and loyalty. Online retailers are data-rich organisations and are therefore at risk of being shunned by consumers that have concerns about the security of their personal information. For example, Poshmark, a US-based marketplace for clothing and footwear products announced in August 2019 that its user data was acquired by an unauthorised third party despite using strong algorithms to scramble passwords.
Similarly, reports of Amazon recording and transcribing audio clips that were collected in Germany via Amazon smart speakers further add to consumer concerns. Such allegations against firms where shoppers have registered for loyalty schemes greatly impact customer loyalty, as these schemes often require considerable personal data to personalise offerings.
Increasing online penetration has also led to a significant rise in counterfeit goods. According to Pymnts estimates, online sales of counterfeit products are estimated to have reached $1.8tn by 2020 and fake apparel products command a lion’s share of this, posing a severe challenge to marketplaces. Therefore, retailers are investing heavily in advanced technologies to eliminate counterfeiters in order to drive consumer confidence and loyalty.
This is an edited extract from the Customer Loyalty in Apparel – Thematic Research report produced by GlobalData Thematic Research.