The COVID-19 pandemic and its associated lockdown almost dealt a gut blow last year to Canadian apparel retailers with total sales decreasing 23.6 percent to $23.8 billion, says a new report by Trendex North America, a marketing research and consulting firm.
The report said women’s sales were down 24.6 percent and men’s by 20.6 percent.
“Apparel retailers over the past 12 months have had no choice but to play defence as they struggle to survive,” said Randy Harris, President and Owner of Trendex North America. “However, with the end of the pandemic somewhat in sight, apparel retailers should be increasingly focused on rebuilding their sales and their loyal customer base.”
Harris said two ways to do that, research by Trendex has noted, is to invest in two marketing initiatives. One traditional and one new.
“The traditional marketing initiative is one that has been a staple of many Canadian apparel retailers. The loyalty program. Although operating a loyalty program was thought to be a basic concept of a retailer’s marketing program, in fact only 25 percent of Canadian apparel retailers, according to Trendex research conducted in January of this year, operate a conventional loyalty program versus 60 percent in the United States,” explained Harris.
“Canadian apparel loyalty programs can best be described as plain vanilla like that of Laura whose customers accrue points for making purchases. In most cases the points equate to a fixed amount of money that can be applied to future purchases at only the retailer. It would be safe to assume that few customers buy from an apparel retailer in order to build up their point total. This is evidenced by the few customers who announce up front at the cash ‘I am a member of the store’s loyalty program’.
“Acquiring loyalty points is often seen as an afterthought, not a driving force in the purchase decision. La Maison Simons’ loyalty program offers a slightly better incentive — a combination of points, free shipping as well as free in-store attendance at events. The retailer’s description of its loyalty on its site is one of the best examples of how a loyalty program should be described.”
Harris said an even more interesting version of a loyalty program is one being tested by lululemon in a number of major cities. For an annual fee, members receive a free pair of pants, expedited shipping, and special access to classes.
“Needless to say, the majority of Canadian apparel retailers cannot offer the types of benefits available as part of Lululemon’s loyalty program but they can still offer experiential activities including evening in-store style shows or in-person discussions with the retailer’s design team,” said Harris.
“What history has demonstrated over and over is that successful loyalty programs combine transactional and experiential to create differentiation and true customer loyalty. Regardless of the loyalty program a retailer offers, its existence has to send out a clear message to the consumer that their business is appreciated.”
But Harris said the question remains: Why don’t all retailers offer a loyalty program and why are retailer programs so unimaginative?
“A new marketing program that all apparel retailers should adapt immediately is what has been labelled ‘pay to play’, but even better ‘buy now, pay later’. Retailers including Aritzia, the Gap, Frank and Oak, Ardene, lululemon, and Shopify are already offering the service,” said Harris.
“There are four or five companies offering a type of pay for play service that’s best known as after pay. It’s a simple scheme. From the consumer’s perspective the consumer announces at the cash that instead of VISA or Mastercard they want to pay with AfterPay. They fill out an application. The application is immediately approved on the spot and they pay one quarter of the purchase price. Over the course of the next six weeks, they make three equal payments,” said Harris.
“The retailer pays 30 cents per transaction plus four to six per cent of sales. Note that it’s more than the standard fee charged by a credit card company. The merchant is paid the full amount of the transaction within 48 hours.”
Harris said the claimed benefits from a retailer offering a buy now pay later service are: 30 percent of the customers are new to retailer; a 20 percent increase in cart conversion; average orders are 18 to 25 percent larger; return rates are lower; and the retailer can advertise offering the service and the service advertises that the retailer offers the service.
“The bottom line, having a loyalty program and offering a buy now pay later option are no brainers. The costs of offering both are very small compared to the possible incremental benefits,” said Harris.