Gap’s Fresno, CA distribution center – Photo: Gap
Will faster deliveries prove to be a valuable loyalty perk for Gap?
Gap Inc. said it will prioritize online fulfillment to its biggest spenders as part of its upgraded loyalty program.
“One of the things we are using loyalty for — and we’re designing it for — is to tier fulfillment based on if you’re a bronze, silver, gold member, for example,” said Sonia Syngal, Gap Inc.’s CEO, on the retailer’s fourth-quarter investor call. “And so that will also allow us to optimize the speed of delivery and fulfillment based on our best customers and manage fulfillment costs effectively while pleasing our most valuable lifetime value customers.”
Last September, the company replaced its multi-banner loyalty program, BRIGHT Rewards, with programs tailored to each of its core brands: Navyist Rewards, Gap Good Rewards, Banana Republic Rewards and Athleta Rewards. Although each brand’s program has a different look and feel, customers earn and redeem rewards for spending across banners. In 2020, Gap Inc.’s customer file grew 14 percent to over 183 million.
Ms. Syngal said “one of the biggest value drivers” for the company in 2021 will be the full implementation and integration of its loyalty program across all banners this summer.
“We know members of our loyalty program outspend non-loyalty customers by more than 80 percent,” she said. “This integrated program will offer our loyalists benefits across our entire portfolio while still providing unique and emotional brand connections. If we can get a customer from a single transaction to multiple transactions, to multiple channels, and to multiple brands, we see value accretion at every step.”
Gap Inc., like other retailers, has been grappling with outsized online demand due to restrictions placed on in-store shopping. Online sales across the company’s banners jumped 54 percent in 2020 to represent 45 percent of sales, up from 25 percent in 2019. E-commerce grew 49 percent in the fourth quarter.
Gap Inc. officials also noted that deliveries are being impacted by COVID-related U.S. port congestion.
Discussion Questions
DISCUSSION QUESTIONS: Do you see more benefits than drawbacks in prioritizing online fulfillment to a retailer’s best customers? What’s the likelihood that other retailers will or are making similar moves?
Poll
BrainTrust
Georganne Bender
Principal, KIZER & BENDER Speaking
Lauren Goldberg
Principal, LSG Marketing Solutions
Faster delivery is a nice perk, but it doesn’t address Gap’s core issue. At its namesake brand, the company’s problem remains one of product relevance. If the product doesn’t resonate it doesn’t matter how many good delivery options and other perks you offer!
There’s nothing like a good tiered loyalty program to make customers who aren’t top tier feel bad. Consumers are over better deals for new and best customers only. We tolerate it with the airlines but with Gap Inc. retailers? I wonder.
Will faster deliveries appeal to some customers? Of course, but I would be more focused on updating the fashion assortment in its namesake brand.
Clearly, Gap’s best customers will enjoy being prioritized, but if it’s in any way at the expense of others, look out.
I believe it was Glenn Murphy (former CEO) that laughed off Amazon because gap had many more fulfillment centers – meaning stores, yet Gap’s fulfillment is not good and is no match for Amazon.
Lesson learned: talk and (essentially) gimmicks like focusing on one market segment are not solutions. The best in the industry (Amazon, Walmart, Target) do it well across all customer bases via a well-designed well-managed fulfillment and inventory management process. There is no substitute and brands that want to compete at that level must, must make the hard commitments and even harder investments or they will never get there. I doubt this will change that much for Gap.
Unlikely. There are many aspects of the customer experience that are increasingly becoming table stakes, that is, they are the basic requirements of executing a brand’s strategy. And the notion of treating different customers differently is hardly a new one. Gap’s ability to become a remarkable retailer will be determined by their ability to become more intensely customer relevant and deliver a memorable, differentiated experience. This strategy may be necessary, but it is hardly sufficient.
“To its biggest spenders” is the key part of this story. One size does not fit all and it makes sense to reward Gap’s best customers.
That said, Gap’s challenge is to move beyond the style bible that has been holding the company back.
Gap’s challenge would seem to be one of relevance and, by default, sustainability. That said, anything that reduces customer friction (and delays in receiving goods certainly qualifies as friction) has to be good for business.
To address the question head on, let it be said that faster deliveries for the loyalty customers is a good idea as long as it doesn’t deteriorate the service to all other customers. I think that super fast delivery is an unnecessary pressure into which retailers got themselves and from which they cannot extricate themselves.
Offering faster delivery to your current best customers is a nice benefit for them but won’t help gain new customers. As mentioned by others, Gap Inc. would be better served focusing on its product assortment and relevance.
The underlying issue here is one of inventory strategy and operationalizing order management, not of using a customer loyalty score to influence fulfillment. This is a solution to a problem, but it does not speak to the core problem of increasing the number of loyal customers and incentivizing them to become more avid shoppers. This may have the adverse effect of prioritizing loyal customers to the detriment of existing customers.
Rewarding top-tier loyalists with more perks is the right move but on the basis of delivery speed? Fast delivery really needs to be table-stakes.
Offering faster delivery will be appealing to their best customers, but that alone isn’t enough to entice customers to spend more and fix some of Gap’s core issues. As someone who has done significant research on loyalty programs, one of the biggest things that customers want is simplicity. You shouldn’t need a PhD to navigate a retail rewards program! When you get too granular with benefits and tiers, customers start to tune out.
Fulfillment speed and efficiency is definitely a big deal these days. But it’s not a brand builder. It’s not necessarily a differentiator. It’s not a moat builder. It’s part of the competitive landscape and attention must be paid. But product and marketing will still be the main ingredients in building a differentiated brand promise.
Customer loyalty rewards programs are a key ingredient for brand success at any level. Let’s face it; everyone wants to feel special. The evolution of social media proves this point poignantly.
However the rewards program’s effectiveness is determined by how it is rolled out. If it’s simply listing you as a customer number by mentioning your first name, that might do; however it’s much more effective if a brand can take loyalty to the next level by initiating a high degree of personalization in their communications.
Personalization might include “previews” of upcoming sales, suggestions for personal style, or even getting customers’ opinion on new styles and category launches. Make your best customers feel special, and they will be with you for life!
Will personalized fulfillment for good customers work? Definitely, however a brand must communicate to their customer that they have taken these initiatives just for them. Amazon Prime members have been getting expedited fulfillment for years now. Why shouldn’t other brands follow? It just makes sense.
The only drawback I can foresee would be Gap, Inc. incurring extra overhead costs for making this change. Saying that, even with a slight increase in costs, I believe expedited fulfillment without an annual fee for their top-tier customers is brilliant!
Let’s see if I get this. If I am a potential new customer or an occasional customer and want to buy a t-shirt, I check out the Gap website. I find that, gee, I don’t qualify for fast delivery and won’t until I buy a whole lot over time. Do I accept that and start building my bank account to reach the highest loyalty level? Or do I simply go to Amazon, Walmart or Target and get the speed of delivery I expect?
On its own, it won’t help. Inventory/merchandise issues are by far the biggest problem inside of most apparel retailers. Faster shipping generally means that a brand will lose money faster if their supply chain isn’t optimized (see: Target as a counterexample that does it right).
I’m sure customers getting their 40 percent-off item sooner is a step in the right direction but I doubt it makes much difference until Gap visibly answers the question: “What do we give to a consumer they can’t get anywhere else?”
This seems like a version of arranging the deck chairs on the sinking Titanic. Do these companies not talk to their customers, or read RetailWire? I’m envisioning a board meeting where this strategy was put forth and everyone just nodded their heads in agreement. Where is the reality? The innovation? Who, if anyone, is asking the difficult questions or pointing out the pink elephant in the room (who happens to be wearing khakis)?
Faster delivery for your best customers isn’t exactly a new idea. Sure, this is a good retention move – if your best customers leave you because they can get an equivalently desirable item with faster delivery elsewhere, then you certainly have an issue. The real issue is that this doesn’t do anything to help Gap grow the number of “most loyal” customers nor does it help them acquire new customers that have already abandoned the brand. That requires having products that are desirable to your target audience and Gap still has serious issues here. Much of their product is no longer differentiated or interesting enough for customers to seek them out. Although their data shows they grew in the number of total customers over the past year, that doesn’t tell us how many of those customers are repeat buyers. Even the revised loyalty program isn’t enough to change this outlook over the long term.
Faster delivery is now an expectation. Any retailer that doesn’t understand that will be playing catch up with the competition. We can all “thank” Amazon for creating the higher expectation (related to fast delivery) our customers now have.
It’s window dressing — looks good, but in reality there is an outstanding issue of “great product” at the core of the Gap proposition (and many other retailers). The consumer has so many choices, delivered with so many methods and speeds, that it’s critical for any retailer’s proposition to start with unique and great products.
As an occasional Gap online shopper, since all Gap stores have closed in my metro area, it would be interesting to know exactly the metrics and criteria behind Gap’s “best customer” qualifications. To announce this to the world, so to speak, in reality, sends a message to customers and consumers, some living on tight COVID-19 budgets. Gap only cares enough to ship fast to those customers who meet hidden monetary purchase requirements. Let the rest eat cake!
A rewards program that offers a zero-sum outcome where “prioritizing” one group of people would seem to come at the expense of everyone else, needs to be marketed carefully to avoid alienating casual customers. Or alternately, it needs to be restricted to a small group — unlike, say, the term “flagship,” which has become so overused as to be almost meaningless — so as to not become an operational liability.
Rewards programs are a frequent topic here on RW, and my sense is that we’re generally not impressed with them: either too difficult to redeem on one hand, or a collection of “what-should-be-standard-policies-anyway” on the other.