Subscription Programs Build Loyalty by Fulfilling Customer Needs

Sears, an iconic retail brand for over a century, has seen discouraging sales results over the last few years.

In a recent meeting with shareholders, Sears chairman and CEO Edward Lampert discussed the company’s multifaceted plan to address its woes and get the store back on a better track. Among other steps, Sears will open smaller outlets dedicated solely to home appliances while it closes larger, money-losing locations. Recognizing the ongoing increase in overall e-commerce sales, Lampert said the retailer will also focus on bolstering its omnichannel capabilities.

Shop Your Way, the Sears subscription program, is an essential component of its omnichannel push — and a vital part of its larger drive toward profitability. However, as Lampert acknowledged to shareholders, the program isn’t performing at its full potential; loyal Shop Your Way members account for 75% of Sears revenue, but they’re not making as many purchases as Sears had hoped. Lampert noted that the program needed to better engage members by:

• Providing them a great experience every time;
• Expanding their merchandise choices;
• Delivering every order smoothly and efficiently; and
• Improving the services they receive.

These aren’t just prerequisites for subscription loyalty programs, of course; they’re the cornerstones of success for retailers in general. In today’s hyper-competitive e-commerce environment, consumers can compare prices, shipping fees, deals, discounts, and other purchase-decision factors like never before. If a retailer doesn’t give them compelling reasons to return — again and again, whenever they’re in the market for whatever the retailer sells — its odds of surviving, let alone thriving, decrease significantly.

That’s where a subscription program really proves its value. Among other advantages, a well-designed program will help a retailer:

• Retain and expand your audience;
• Better communicate with your customers;
• Test, analyze, and learn from their behavior;
• Increase their purchase frequencies; and
• Drive up their average order values.

A successful subscription product typically does this by identifying and solving one or more customer pain points. The biggest pain point for online shoppers continues to be shipping charges on their orders. Nearly 70% of online carts are abandoned, and shipping costs account for 66% of those lost sales. It’s no surprise, then, that free shipping offers are:

• The most popular offer that retailers can make;
• The most important option for online shoppers at checkout;
• One of the best ways to improve consumers’ online shopping experiences;
• Almost seven times more popular than fast shipping when people are buying gifts;
• Highly effective in getting people to shop online; and
• Most importantly, a proven method for getting shoppers to spend more.

Sears and its affiliate, Kmart, already offer online shoppers free shipping on orders over $35. Their paid subscription version, Shop Your Way Max, goes even further, offering members free 2-day shipping on “tons” of qualifying purchases of $10 or more, including select products sold in the program’s Marketplace. This is critical to building loyalty, because customers will keep coming back only if they’re certain they’ll save on practically every purchase.

While eliminating shipping fees is a proven lure and a great way to provide ongoing savings, it’s not the only pain point that a subscription program can solve. In particular, consumers are also worried about return costs. Indeed, two out of three online shoppers will check a retailer’s return policy before placing an order.

From their perspective, return concerns are understandable. They can’t physically handle or try on an online offering until it arrives on their doorstep, so their confidence level is much lower than it is in a brick-and-mortar store. Based on their post-delivery behavior, their uncertainties would seem to have some merit. They send back up to 30% of their online orders, which is about triple their return rate for in-store purchases — even though in-store returns are typically cost-free.

Retailers justifiably have their own concerns about lenient return policies. On top of trying to absorb the bottom-line hit caused by return shipping fees, stores have to guard against the rising costs of return fraud. The good news for retailers, though, is that offering hassle-free returns is an effective way to pull online customers in — and get them to come back:

• 82% of consumers will place an online order if the retailer offers free return shipping or in-store returns.
• 79% say a positive gift-return experience would make them more likely to shop more at a store they rarely visit, and 83% would share that experience with family and friends.
• Customers who received free return shipping from a retail site increased their spending there by 58–357%.

Retailers that make returns difficult, on the other hand, often pay a cost. One study found that 81% of shoppers are less likely to shop again at sites that charge them for return shipping. Another study found that online shoppers who didn’t receive free return shipping at two brand-name retail websites reduced their spending there by 70 to 100 percent over the following two years.

Offering free return shipping as part of a paid subscription program can help retailers build loyalty while minimizing their own return shipping expenses. Beyond appealing to a retailer’s existing audience, a well-constructed program attracts new customers. Paying for members’ returns will increase the confidence — and spending — levels among both groups, which can offset any additional costs.

Sears is one of a growing number of retailers that are relying on paid subscription programs to enhance and expand their omnichannel efforts. It’s a wise decision. As e-commerce sales keep rising steadily, the bid to attract online shoppers will only intensify, and these programs have been proven to increase sales and loyalty.

In order to succeed, now and down the road, retailers need to offer customers easy, convenient, painless shopping experiences. A properly-constructed subscription program, especially one that offers free shipping, free return shipping, and other customer-focused benefits, will do all of that — and more.

Click here to find out how we can customize and implement a subscription solution that suits your company’s needs — and fulfills your customers’ wishes.