How Loyalty Can Help Retailers Compete Against Amazon

January 9, 2018 Catherine Malone

According to data from One Click Retail, Amazon was responsible for about 44 percent of all U.S. e-commerce sales last year, or about 4 percent of the country's total retail sales figures. The fastest-growing product categories on Amazon.com in 2017 included luxury beauty and pantry items, and consumer electronics saw the most sales (more than $8 billion). There’s no doubt that Amazon has transformed the e-commerce space and raised consumer expectations, leaving retailers challenged to find ways to compete on price, product selection, convenience and service. Retailers can learn from Amazon’s success and establish a competitive advantage. Loyalty is the answer. By investing in a loyalty and engagement program, retailers can collect data, reward and engage customers at every touchpoint, and personalize their experiences to increase customer satisfaction and drive sales.

Improve the in-store experience

An advantage many retailers have over Amazon is brick-and-mortar stores. According to a study by June20, 84 percent of Americans prefer to shop at brick-and-mortar stores or at a combination of online and in-store retailers. Yet so many retailers don’t incentivize or advertise the benefit of shopping in-store to their online customers. Retailers should strive for, and can compete better against Amazon by providing a strong omnichannel experience. This means providing a seamless shopping experience across all channels. An omnichannel loyalty program is integral to providing this, by helping to extend customer touchpoints and promotions across websites, mobile and social media, allowing shoppers to transact from and interact with a brand whichever way is most convenient. The offline and online experience should be aligned. This means when a shopper walks into a store, the retailer already knows their purchase history and the products they are interested in and can tailor the in-store experience for them. For example, using Beacon technology, retailer, Frank & Oak’s loyalty program app alerts staff when a high-ranking program member walks into the store. A staff member then offers the customer a freshly brewed cup of coffee. Some larger retailers such as  Nordstrom, and Target, are using beacon technology to send personalized messages to customers while they’re shopping in stores.  Steve Madden’s SM PASS loyalty program has unique POS integration capabilities which enable customers to seamlessly engage with loyalty wherever they engage with the Steve Madden brand; in-store, online or on the Steve Madden App. Storewide points promotions drive members to the store, and SM PASS members are also surprised with targeted bonus campaigns, powered by email personalization and geotargeting. This drives a better in-store experience and encourages customers to make a purchase.

Personalize the shopping experience

Amazon utilizes purchase history information and algorithms to identify what look-alike customer segments are buying and make product recommendations to encourage sales. They also target customers with ads based on products they’ve searched for or abandoned in their cart. This all contributes to a highly individualized shopping experience. Retailers with an omnichannel loyalty focus are consistently gathering data about their consumers across channels and platforms, and analyzing data through sophisticated tactics like machine learning and predictive analytics. Through these methodologies, they are able to predict future behaviors and create marketing experiences that speak to their customers’ wants and needs, resulting in higher engagement rates and a greater experience. Sephora’s Beauty Insider rewards program collects customer data such as skin tone and eye color to build personalized profiles which allows the brand to make product recommendations to customers. Additionally, Sephora allows shoppers to sort product reviews by people who share similar profile traits. This helps Sephora customers make purchase decisions and it helps demonstrate that the brand understand their customers and their needs. This helps set Sephora apart from other beauty brands and compete against Amazon.

Compete on perks, not price

One of top reasons why consumers purchase from Amazon is due to their competitive pricing. Shoppers who want to purchase generic products can browse an affordable selection, but for most retailers, competing on price is not an option. Retailers can however compete on the benefits customers can enjoy in exchange for their loyalty. Amazon Prime, Amazon’s subscription loyalty program, provides free two-day shipping and access to Amazon TV. The best strategy for retailers investing in loyalty is to reward customers with the gift of choice and flexibility. By adopting a loyalty program, retailers are in the position to offer much more than access free shipping, they are able to provide greater opportunities to engage their customers. Here are some ideas to help retailers differentiate their offerings from Amazon:

  • Leverage a mobile loyalty program which incentivizes members to download a app to help them track their points and rewards. Retailers can also leverage mobile geolocation services to reward consumers for actions they take in a specific location. For example, Nordstrom Rewards members can browse items via the app, reserve items and collect in-store. Members are rewarded for each purchase, no matter where the transaction takes place. This provides members with a convenient way to shop and be rewarded for their purchases.
  • Consider making it easier for customers to pay by integrating mobile payment solutions such as Apple Pay and Google Wallet. For example, Rite Aid accepts mobile payments, providing a convenient way for customers to check out at the register while allowing them to collect points for purchases.
  • Offer unique rewards and experiences. From elite rankings to special events, unique experiences and early access to sales, stand out from the competition by offering rewards and experiences that make members feel special, valued, and appreciated. For example, as part of their rewards program Yes2You, Kohl’s awarded one loyalty member with the experience of participating in a photoshoot for the LC Lauren Conrad fashion line. These one-of-a-kind experiences not only help the retailer stand out from competition, they help retailers build a deeper emotional connection with the customer.

Deliver a better level of customer service

Despite Amazon’s ability to personalize the customer experience based on purchase recommendations, Amazon currently lacks the ability to provide a high level of customer service. For example, it’s difficult to get in touch with the customer service department and email communications appear automated and generic. This is understandable given Amazon’s size. When retailers provide a personalized, one-to-one exceptional level of service they make customers feel valued and appreciated for choosing their product and assure them that they have made the right purchase decision. This helps build lifelong relationships between the retailer and customer. For example, when a customer purchases a mattress from Sleep Number they receive a welcome kit in the mail with information on how to get a better night’s sleep. When their mattress is delivered, the driver is trained to communicate the benefits of joining a loyalty the program to the customer in-person. Sales associates follow up with calls to ensure the customer is satisfied with the purchase. These activities are in addition to the benefits customers can enjoy as part of membership in their InnerCirle online loyalty program. Brands that go out of their way to provide a personal touch can help create a customer experience far superior to Amazon’s.

In order to compete against Amazon, retailers must shift their focus towards adopting an omnichannel loyalty solution to differentiate, attract shoppers and drive sales.  An omnichannel approach will help to drive more in-store traffic and provide a seamless shopping experience. Retailers can leverage a loyalty program to drive engagement and loyalty by incorporating perks and rewards Amazon doesn’t provide and by capturing customer data and personalizing communications to create a better level of service. As customer expectations continue to grow, retailers should be looking for opportunities to demonstrate and communicate their value to customers.

Go Back
Marketing Predictions for 2018
Marketing Predictions for 2018

This whitepaper identifies the trends and technologies that will provide the maximum opportunity for market...

What's Next
The 7 Biggest Loyalty Trends of 2017
The 7 Biggest Loyalty Trends of 2017