2PM - Retail Email ≠ Loyalty

Ten years ago, this month, the Boston Consulting Group released a seminal piece on the economics of loyalty, providing a crucial framework for understanding how loyalty programs can be profitable.

This analysis introduced the concept of “loyalty margin,” a key metric that helps businesses measure the effectiveness of their loyalty programs by comparing the benefits provided to customers with the costs to the company.

Over the past decade, this framework has become an essential tool for businesses in various sectors trying to harness the power of customer loyalty. Companies have learned to balance the costs of offering perks and rewards with the generated revenue increases from loyal customers who buy more frequently or in greater volumes. The insight from the Boston Consulting Group has guided many companies to design loyalty programs that not only attract customers but also enhance profitability and encourage lasting relationships with consumers.

The original analysis highlighted the importance of tailoring loyalty programs to the specific needs and behaviors of customers while integrating these programs seamlessly into broader business and marketing strategies. A decade later, these principles remain just as relevant, helping businesses navigate the complexities of customer engagement and retention in an increasingly competitive marketplace. While 2014 may seem like it may be seem late to pioneer an understanding of the economics of loyalty and 2024 may be even more far fetched for a principled conversation on the matter – consider this:

The concept of “loyalty margin” is central to understanding the economics of customer loyalty programs. This balance between customer rewards and business expenses is crucial for determining the overall effectiveness and profitability of such programs. 

More for Members 🔐: View the 12 brands still relying on email capture and read the rest

Brands want your loyalty-and will offer more than points to get it

Email / Excerpt: "If you are the average U.S. consumer, you probably get dozens of emails, app notifications and SMS messages from various companies. Whether you've been a loyal customer for years or made one purchase, brands across different industries are always offering deals and discounts for repeat purchases and loyal patrons."

America's best loyalty programs 2024

Data / Newsweek: Newsweek has partnered with Statista to rank more than 300 loyalty programs across 40 categories in our fourth annual ranking of America's Best Loyalty Programs.

Humane's AI Pin got trashed by a YouTuber

Media / Insider: Marques Brownlee, the influential YouTube tech reviewer whose channel moniker is MKBHD, delivered a scathing review of Humane's new AI Pin.

Editor's Note: I watched it, it seemed fair. I also appreciated how Humane AI's head of engineering handled the criticism and I hope that he finds a way to win. Of note, Gear Patrol posted a negative review of the device before famed Youtuber Marques Brownlee, it appears. 

MKBHD's for everything

Excerpt / Stratechery: "Brownlee, though, is successful because he remembers his job is not to go easy on individual companies, but inform individual viewers who will make individual decisions about spending $700 on a product that doesn’t work. Thanks to the Internet he has absolutely no responsibility or incentive to do anything but."

New Update Coming (4/18), presented by Bold Metrics. All brands are updated with the secondary interest poll. The fourth update of 2024 sees some major movers: Vitaly (+118), Little Sleepies (+110), Dai (+100), Hydrow (+61), Pattern Brands (+54), 5.11 Tactical (+29), Chubbie (+28), Dude Wipes (-66), Arthur Ashe (-46), and Parade (-71).

800+ Brands Measured

Marketers pick their top 10 WNBA draftees

Brands / Fast Company: Dallas-based agency The Marketing Arm (TMA) has compiled a list of the top ten 2024 WNBA draft picks with the projected highest commercial appeal. 

Golf fashion moves into the mainstream

Brands / Retail Dive: A new line from Tiger Woods, LVMH's latest collaboration with Tyler, the Creator and indie brands are helping to bring the sport from performance wear to streetwear.

2PM published this in February, listing 24 interesting golf brands. 

HBO's Brandy Melville doc reveals the dark side of fast fashion

Brand / Excerpt: The brand's popularity with teenage girls was bolstered by its social media presence. As an early adapter of the influencer marketing model, it used the content created by the teenage girls who were posting about the clothing on Tumblr, Instagram and TikTok to grow its consumer base.

Editor's Note: I am astutely aware of the power of this brand due to our soon-to-be college bound daughter. It still makes little sense.

Future of Shopping podcast: Why luxury eCommerce crumbled

Luxury eCommerce / Vogue Business: Kirsty McGregor and former Matches, Farfetch and Net-a-Porter exec Elizabeth Von der Goltz unpack the challenges facing online retail and what happens next.

2PM answered this 👇🏽

Question: Why is China dominating the West in luxury eCommerce marketplace retail?

This explains 🔓: American-owned luxury retail marketplaces have failed while their Chinese competitors have thrived. American-owned dollar stores chains are experiencing their own struggles, closing 100s of stores across multiple retail chains and citing the lack of profitability as the culprit. One class of retailer discounted too often, the other could not discount enough. What gives?

The evolution of luxury eCommerce presents a tale of contrasting fortunes. While Western platforms struggle, China’s digital luxury market has seemingly bloomed, despite China’s economy faltering. This explores the impact of broader economic factors such as inflation, the role of discounting in American marketplaces, and the importance of a growing middle class.

Unraveling The Western Puzzle

The landscape of luxury eCommerce in the West has been marred by significant challenges. Platforms like Farfetch, MatchesFashion, and Yoox Net-a-Porter (YNAP) have grappled with a competitive market saturated with similar services, and diminishing consumer loyalty. The strategic missteps of these platforms, particularly their overreliance on discounting, have not only eroded profitability but also diluted brand value, alienating luxury consumers seeking exclusive and personalized experiences.

February 2024 saw Farfetch narrowly escape bankruptcy through a sale to South Korean giant Coupang in a pre-pack administration deal; by March, MatchesFashion had announced its shuttering. All the while, Richemont’s loss-making retailer YNAP continues to search for a buyer.

Meanwhile, in China, the largest global e-commerce platforms in terms of revenue — JD.com, Tmall, Taobao, and Luxury Pavilion — are thriving marketplaces for high-end brands. (JING Daily)

The issue of discounting, a tactic widely leveraged to attract consumers, has become a double-edged sword in the context of persisting inflation. As consumers face an increased cost of living, the allure of discounts can drive traffic but at the expense of the brand’s perceived value and margins. This dynamic has led luxury brands to reassess their reliance on multi-brand platforms, which often engage in aggressive promotional strategies to clear inventory.

Continue @ 2PM

What's driving China's unstoppable secondhand luxury market?

Luxury eCommerce / Jing Daily: High-end brands can no longer ignore China's booming luxury resale market. They can either solidify, or damage their brand value and reputation.

Grocers lose billions as mass retailers gain market share

Archives (1/24): "Walmart, the world’s largest retailer, is now attempting to position itself as a leader in regenerative agriculture, despite the inherent contradictions with its low-cost business model. The Walton family, owners of Walmart, have made vast investments in regenerative agriculture."

Finding calm in the chaos: how 3PLs can navigate supply chain

NATSEC / SupplyChainBrain: Brands, carriers, and third-party logistics providers are rapidly adapting their operations to address a chaotic shipping landscape and skyrocketing customer demands.

Additionally: Shipping braces for response to Iranian attacks.

Why mergers might be the next wave of DTC exits

Finance / BOF: It’s the latest example of how fashion start-ups are exploring more unconventional paths to grow their businesses as funding remains sparse and acquisitions at desirable valuations are, for the most part, on hold.

Editor's Note: Rowing Blazers just did this but was not included in the report.