What the Boohoo story tells us about customer loyalty

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Sustaining customer loyalty is notoriously difficult in the world of fast fashion, which is built on low prices and fast turnover. When you think that 2 in 5 consumers feel no loyalty to fashion retailers, and they will only stay loyal if they perceive that they are receiving real value, it’s quick to see why loyalty is hard won by brands like Boohoo.

Boohoo bucks the trend because it is one of the most customer-centric, agile and responsive brands in the marketplace. Its young customer base is loyal and the online retailer knows what its target customers want and need – both functionally and emotionally. Boohoo gives its customers the celebrity and must-have seasonal trends they want at prices they can afford.

And over the past year or so the online retailer has given a masterclass on how to retain customer loyalty in a crisis. Online shoppers have always been able to shop in their pyjamas. Lockdowns have meant that they’ve also had the opportunity to live in their sleepwear and lounge wear. Boohoo was quick to pivot to meet surging demand for stay-at-home clothing. It’s been one of the biggest success stories of the crisis – as less nimble brands count the cost of huge inventories that they still need to shift.

Building a customer-centric culture

Everything Boohoo does – from its products to its multi-brand platform to its marketing – is driven from the customer back. Boohoo’s ‘test and repeat’ business model, whereby products are tested on its website and then reordered if sales indicate they are popular, is mirrored in its customer strategy. By leveraging customer insight, the company has been able to build a loyal customer base that wants to come back time and again. It replicates its success story when it adds new acquisitions like Coast to its platform.

Retaining the customer loyalty of a new base

Boohoo has gone from strength to strength from its market trader days to its emergence this year as owner of a virtual department store. In buying the Debenhams brand, Boohoo has added one of the nations’ most historic high street names to its online marketplace. While many retailers are working out how to shift stockpiled ranges because of the pandemic, Boohoo has been busy extending its reach into new categories and stretching its demographic appeal. Boohoo again opened its wallet to buy Dorothy Perkins, Burton and Wallis when Arcadia came crumbling down earlier this year. These retailers will also be online-only.

Buying the three Arcadia brands is more typical in that Boohoo has a strong track record in integrating fashion brands into its marketplace. Retaining loyalty will not come without its challenges. But as we mentioned earlier, Boohoo has a tried and tested formula to keep new fashion customers by building the offering around what they want and need. Debenhams is a different proposition.

Boohoo is venturing into new territories including sport, beauty, weddings and homeware. And there is some interesting data and insight from YouGov’s BrandIndex scores that explain why Boohoo has made such a smart acquisition with Debenhams. On customer satisfaction (across all age groups) Boohoo is inheriting poorer scores versus John Lewis, for example. Debenhams fell behind John Lewis soon after the first lockdown in March 2020 and struggled to catch up. But dig a little deeper into the scores from Debenhams customers who are over 50 and the numbers hold up better on quality / value (two of the key drivers of the department store’s customer loyalty).

Working out how to retain this perception of quality and value will be key if Boohoo wants to keep its footing with its new demographic, and unlock the value of more profitable customers who shop for designer and high-end labels. Boohoo has already built the technology platform. But a great user experience and an understanding of price point won’t be enough to retain customer loyalty and inspire repeat purchases.

Tapping into the drivers of customer loyalty

Improving customer satisfaction will not be enough either to boost loyalty. Being ‘satisfied’ doesn’t mean a customer will want to come back time and again. Boohoo will need to work out how to create ‘super fans‘ by offering a differentiated, superior online experience and by creating new sources of value that are important to Debenhams customers. With the pandemic and store closures, Debenhams customers have already had months to adjust to shopping online. Boohoo has a big opportunity to bring the magic of experiential retail online. So one of the first questions will be:

  • How can we provide a differentiated online experience for customers that replaces the need to visit a store?

To then turn these online experiences into ‘wow’ moments – the answers could include exclusive online consultations with beauty advisers and product experts, or ‘try-ons’ of cosmetic products using augmented reality apps. The answers could include a virtual concierge service or a partnership with outside event planners that wow bridal parties from the comfort of their sofa. A real-time refund policy would make returns effortless. The list is long.

There will be wider questions too (some of the answers above will also help address these):

  • How do we identify what needs to happen at every stage of key digital journeys that are critical to customer trust and loyalty?
  • How can we create memorable online experiences worth talking about?
  • How do we make our customers feel individually recognised and rewarded?
  • How do we understand purchasing patterns and make personalised recommendations?
  • What makes our customer service different?
  • How do we inspire advocates to spread the word?
  • How do we build emotional connections with our new customers on shared values?
  • How do we continually improve?

To be continued …

Boohoo is the new custodian of some the UK’s best known retail brands From a technology viewpoint, it has built the capacity to seamlessly integrate its brand acquisitions into its platform. That, on its own, will not be enough to revitalise the customer experience of its new base and retain customer loyalty. But by building its proposition around its new customers and embedding a differentiated, meaningful CX, Boohoo has strong foundations to tap into the drivers of loyalty to help grow market share and deliver the value of its deals.

There will be major challenges ahead – and not just in retaining the loyalty of its new customers. With recent queues snaking around the block for bricks and mortar retailers like Primark that reopened their doors, will the Boohoo brand also be able to hold the ground it gained over the past year and sustain customer loyalty?

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