What is more rewarding, a sandal or a sneaker? If you’re shopping at Zappos.com, the answer may be both.
The online shoe and apparel chain, legendary for its top-shelf customer service, is now offering shoppers a new perk: a free tiered loyalty program that rewards members for making purchases, writing reviews and simply logging into Zappos on a device.
This move has brought renewed interest to the notion of pure online retailers adopting loyalty strategies as part of their customer offerings. Zappos is not the first digital merchant to offer member perks. Gilt, Bulu Box and Zappos parent Amazon.com also operate loyalty programs.
Which raises the question: Is loyalty adoption a sign that the online-only retail category is maturing, or does it signal the need to build more engagement because customers have newer, more intriguing ways to deal with other retailers?
My hunch is it is a little of both. However, the addition of Zappos to the loyalty arena underscores some of the advantages online-only merchants have in this highly competitive industry. Following are five such areas, and examples of how pure online players are maximizing their loyalty propositions.
Benefits, From Data To Dollars
Online merchants are able to identify specific customer interactions (including merely browsing), gather and store information about all those interactions in real time. They can establish highly accurate portraits of their customers and adjust these profiles as shopper needs evolve. Amazon might now operate a few stores, but it launched Amazon Prime when it was an online-only retailer, and perhaps no other merchant has a data warehouse that can compare. Amazon operates an active user base of roughly 250 million worldwide and sells hundreds of millions of products. This translates to a massive supply of online purchase data. These insights provide Prime with added intelligence for better-targeted communications and offers. Prime, in turn, gathers added data to further fine-tune its offerings and communications.
The shortest distance between a consumer and an online-only retailer is the tap of a few keys, and each is tracked. Online tracking software enables e-tailers to know when customers are on their sites and what they are doing in real time. This enables them to send immediate messages and communications that are relevant at the moment – such as alerts of special reward offers on particular items. On a practical level, online-only retailers are more likely to get loyalty members to read, understand and take advantage of their terms and initiatives because their shoppers are already on their site. The “How it works” page is just a click away. Take a look at luxury online flash retailer Gilt as an example. It has leveraged the opportunity to get readers to better understand its Insider program with a graphically attractive explainer that looks like a page from a fashion magazine – not a wall of type.
Pure online retailers are not saddled with the expenses related to operating stores, such as staffs, rents and maintenance. This means they have more financial freedom to invest in marketing strategies such as rewards, and in other digital options. Mobile shopping apps, for example, can easily integrate with reward apps. It’s no surprise, then, that a growing number of merchants is lured to the online-only model. Sales among multichannel retailers with a high store presence rose by 9.5% from January to June; among online-only retailers, sales rose 24.8%, according to Clickz Intelligence. The contribution by mobile alone is substantial: Mobile purchases accounted for 45% to 61% of revenue among online-only retailers, with apps accounting for 30% to 40% of this figure, Clickz reported. Among multichannel retailers, however, mobile purchases accounted for 20% to 40% of purchases.
More immediate rewards
A core appeal of reward strategies is they encourage shoppers to increase interactions with the merchant in a quest for more rewards (shopping, posting reviews, following on social media). While more merchants added reward programs, shoppers simultaneously grew accustomed to the immediate gratification of social media, so they began to expect more rapid recognition for their loyalty, as well. The monthly membership program Bulu Box does this by encouraging its members to share reviews of each of the healthy living and nutritional samples it sends, and in return awards them points that can be applied to the next monthly shipment. Among the perks Zappos’ new program offers is free shipping in one or two business days (depending on the tier level achieved). Amazon Prime also offers free expedited service, but requires an annual fee.
There are other advantages for online-only merchants in the loyalty realm. The gamification possibilities, for example, can span across and link all digital interactions to reward opportunities. This time next year I wager more traditional retailers will be studying these players for pointers, or may simply acquire them, the way Saks Fifth Avenue purchased Gilt.
Along the way, I hope retailers keep in mind that the real winner of the digital-only rewards evolution should be the consumer.
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.