THE CLARUS Blog

3 Ways the Walmart+ Launch Will Change Loyalty Forever

The launch of Walmart+ happened today, but Amazon was one of the first to launch a premium loyalty program, Prime, back in 2005.

With more than 150 million members, Prime is now, arguably, the best loyalty program of all time.

Since 2005 we’ve seen a steady trend of other retailers launch their own premium loyalty programs.

Some of these retailers include CVS, GameStop, Wayfair, Barnes & Noble, Restoration Hardware, and Lululemon.

Walmart+ program cements this trend and includes same-day delivery of groceries, fuel discounts at 2,000 locations, and other benefits for an annual fee of $98.

Here’s how it will change loyalty forever.

 

The Launch of Walmart+ Will Raise the Bar for all Loyalty Programs

Loyalty just got tougher.

Our 2020 Premium Loyalty Data Study found that nearly 70% of consumers say that their loyalty is more difficult for a retailer to retain than ever before.

And this was before the launch of Walmart+.

Points are not enough to keep consumers loyal.

Consider that billions of people belong to loyalty programs, but 65% of consumers actively engage with less than half of these.

With Amazon and Walmart now both offering premium loyalty programs with elevated benefits like same-day shipping and members-only experiences, it’s going to be even tougher for other retailers to compete.

Since the pandemic hit and consumer spending shifted significantly online, many retailers have rethought their loyalty programs/strategies.

At our recent webinar with guest Forrester, 66% of respondents said they’ve made changes to their loyalty strategies/programs since the pandemic started.

If millions of Prime members also join Walmart+, those two programs cover so many goods and services consumers purchase that other retailers have to step up their loyalty games to compete on any level.

You need to understand what your customers find valuable, what their pain points are, and address them in a compelling loyalty program that shows members you know them and want to help.

 

Your Loyalty Program Needs to be Unique to Your Brand

Once you understand what your customers want, you can build an appropriate program to suit them.

But differentiation will be a requirement.

Walmart tried to copy Amazon before, and the first time was a failure.

ShippingPass, which launched in 2015, offered three-day shipping for $50 a year. And, after one slight modification, it ended in January 2017.

But Walmart+ is different.

With this program, Walmart leverages its uniqueness.

Amazon may have the advantage when it comes to sheer number of items available, but Walmart is really leveraging its strengths.

There are almost 5,000 stores, and all of them are located within 10 miles of 90% of Americans.

As a result, Walmart has the advantage with grocery, and groceries are cheaper at Walmart than Whole Foods.

A larger footprint also means other transactional benefits like gas discounts at almost 2000 locations.

And on the experiential benefits side, Walmart+ offers members mobile Scan & Go. This enables in-store members to scan and pay for items as they shop. No more checkout lines.

This is especially helpful as retail reopens from the pandemic, as it makes it easier to maintain social distancing.

But Walmart isn’t the only one rethinking experiential.

Starbucks, Target, and Lululemon are examples of brands that have gone beyond traditional loyalty programs to differentiate.

Besides picking up a latte ready to go when a Starbucks Rewards member arrives, Starbucks is adding more payment options to its app this fall—their most requested enhancement.

This month Lululemon will stage membership launches in Edmonton, Toronto, Chicago, Denver, and Boulder.

For $168, members enjoy their choice of exclusive Lululemon membership gear valued over $100; 12 passes to their choice of the hottest sweat classes or events; 20% off lululemon gear on members’ birthdays; and live digital workshops designed and facilitated by Lululemon to help navigate all of life’s twists and turns.

The experiential element of any loyalty program provides differentiation.

Janey Whiteside, Walmart’s Chief Customer Officer, said company officials plan to add to the program over time. The launch of Walmart+ was just the beginning.

To be successful today, your loyalty program must have some point of differentiation. Brands can never rest on their laurels.

There are simply too many choices for consumers. It’s not enough to launch the same program that your competitors have.

What makes your brand unique that provides relevant value to your best customers?

And how can you improve your program over time to keep members engaged?

 

Your Customers Will Pay for a Better Experience and Convenience

During the testing period, Ms. Whiteside said that Walmart+ members spent more and shopped more often.

This supports our own study findings.

Ninety-four percent of premium loyalty members shop at that retailer at least once a month.

And our own retail partner data shows that more consumers have signed up for premium loyalty programs since the pandemic began.

Walmart is making it clear that the future of loyalty is going to include premium loyalty in a big way.

Clearly, people are interested in paying a membership fee for the products and services they find valuable.

For example, look at the popularity of Netflix (as of Q1 2020, Netflix had more than 182 million paying subscribers) and Spotify (As of the second quarter of 2020, Spotify had 138 million premium subscribers worldwide).

Retail is catching up to this trend.

It’s becoming non-negotiable now that Walmart, the world’s largest retailer by revenue, and Amazon, the world’s largest online marketplace, are onboard.

Not every retailer will launch a premium loyalty program, the launch of Walmart+ means that most are probably having a conversation.

Have you had this conversation with your team?

 

There’s an Opportunity to Build Deeper Loyalty With Your Best Customers

Eighty-eight percent of consumers are likely to choose a retailer whose premium loyalty program they belong to over a competitor that is offering a lower price.

And nearly 90% of consumers would recommend a retailer to family or friends if the retailer’s premium loyalty program offers valuable benefits.

Sixty-nine percent of premium loyalty members plan to join additional premium programs in 2020. And 74% of millennials plan to join additional premium programs.

And Seventy percent of consumers would pay to join a premium loyalty program if their favorite retailer offered one and the benefits were valuable.

There’s still time for your brand to rethink loyalty heading into 2021.

This is your year to test a premium loyalty program like Walmart+.

Even if you already have a free program, adding a premium tier is a great way to appeal to your best customers and increase their frequency and spending.

Consumer behavior has changed and continues to change. And the launch of Walmart+ fits right in here.

Now is the time to be bold and think bigger.

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