The loyalty space is always changing, but presently, it seems more in flux than ever. With the rise of digital retail, personalized marketing, and big data, loyalty efforts have been forced to change to adapt to the times. We’re seeing brands drop their previous programs and launch new ones, and we’ve seen other brands dramatically revamp existing programs.
Basically, brands are experimenting. One particular experiment that we’re looking into is subscription services, particularly in light of J.C. Penney’s recently announced decision to drop its clothing subscription venture. J.C. Penney’s service was formed in partnership with Bombfell.com, which provides similar services to other major clothing brands. The program was simple enough: you signed up, paid a regular fee, clothing was sent to your home, and within the course of seven days, you decided which items to keep and which ones to return.
The subscription service provided J.C. Penney with valuable customer data. Data acquisition is a key area in which traditional retailers tend to lag behind their web and mobile counterparts. However, the data came at a price, as many customers felt the return process was inconvenient. Marketing the service was costly, too.
Investors seem to support the decision to end the subscription program. Bloomberg reported that “J.C. Penney surged as much as 23 percent—the most in five years.” We should note, however, that this increase in investment follows many changes with the brand, including closing stores and dropping furniture and appliances. Each of the changes was initiated by the brand’s new CEO Jill Soltau.
"At the end of the day, it all comes down to being customer-centric,” says Tom Caporaso, CEO of Clarus Commerce. “J.C. Penny has seen that its current customers prefer to shop in-store. They also found that members of the subscription program felt that the returns process was inconvenient.” Seen from this angle, ending the subscription service is the result of listening to customers.
However, subscription services may still be a valuable opportunity to clothing retailers who cater to a different audience. As we’ve seen from our own research, customers have come to expect omnichannel convenience and simplicity from all brands, regardless of industry. For this reason, many thought leaders feel that ecommerce and digital engagement are the future of the industry. Subscription services are likely to thrive in this type of environment.
“If J.C. Penney had found a way to make the process easier,” Caporaso adds, “it could have been much more appealing to their current customers. And with subscription programs on the rise, it could have been something that appealed to an up-and-coming younger audience.”
For those brands who do choose to go with subscription services, Caporaso says, “It’s smart to partner with a company that specializes in subscription for this type of program. How retailers acquire, retain, and bill for these types of services requires a set of core competencies that most traditional retailers just do not have."
While J.C. Penney’s decision to end its subscription service appears to be the right one given the context, we see the customer loyalty space doubling down on digital engagement and experience. In light of this trend, we feel that subscription services will probably increase over time. Perhaps, when the space changes enough, J.C. Penney will find value in such a service once more.