Fashion brands are revamping loyalty programs to derive more value from their customers in 2023

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Inflation has affected businesses across industry verticals. This, coupled with the fall in consumer disposable income, is also having an impact on the bottom line of fashion brands globally. Furthermore, as customer acquisition costs continue to rise, firms are seeking to leverage the potential of loyalty programs to derive more value from their existing customers in 2023. This has resulted in the revamping of loyalty programs by fashion brands, a strategy that has been adopted by players across industry verticals.

• Levi’s, for instance, entered into a strategic partnership with hip hop music festival Rolling Loud. The collaboration, announced in March 2023, offered loyalty members a chance to upgrade their festival tickets to VIP passes. Over the last few quarters, Levi's has been consistently adding more rewards and perks for its loyalty members, including the offering of a US$500 gift card for select members in September 2022.

The strategy adopted by Levi’s has worked in favor of the brand. In its second-quarter earnings call, in July 2023, the firm revealed that the loyalty program has experienced strong growth with new members increasing 40% compared to last year. As of July 2023, the total number of loyalty members stands at 26 million.

In addition to an increase in its members, the loyalty members' transactions and average transaction values have also grown across all segments. This indicates that the consistent changes made to the loyalty program have been successful in deriving more value from its customers. Going forward, the fashion brand is also expected to increase its focus on online channels to accelerate its revenue and sales growth.

Like Levi’s, other fashion brands are also experiencing higher average order values from their loyalty members. Francesca's, which launched the loyalty program in October 2022, has experienced that the order values of loyalty members are 40% higher compared to non-members. The growth in higher-order values is visible across channels, including online and in-store. In addition to higher average order value, loyalty members are visiting the stores around 12 times a year, compared to three to seven visits from non-members.

• Since launching the loyalty program, the fashion brand had amassed a total of 250,000 members. Benefits like a US$10 coupon on spending US$100, members-only sales, birthday gifts, and early access have driven the adoption of loyalty programs. This also reiterates PayNXT360’s point that more and more consumers are turning to loyalty programs, which offer them additional dollars on their spending. 

At a time when customer acquisition is becoming difficult, offering more value on each dollar spent can be a great strategy for brands to drive sales and revenue growth, as seen with Francesca’s. However, some fashion brands have a different take on offering more value for less to their loyal members.

Sephora, for instance, has implemented a new policy that requires loyalty members to make a minimum purchase of US$25 in order to redeem their annual birthday gift. The requirement was enforced in 2022, before which the annual birthday gift was offered for free.

Some of the other fashion brands are also revamping their loyalty programs in their effort to direct customers towards the area of business with the strongest conversion. Faherty, for instance, relaunched the loyalty program in December 2022. The relaunched program provide members with the opportunity for early access to exclusive in-store events. Notably, the fashion brand has the highest conversion rate for sales made in-store. Consequently, Faherty is putting resources to ensure customers show up physically at their stores.

Going forward, an increasing number of fashion brands are expected to revamp their loyalty program or launch one, if there isn't any. The trend of Web3-focused loyalty programs has also gained rapid momentum over the last few quarters among fashion brands worldwide. Lacoste, for instance, launched a Web3 loyalty program to drive consistent engagement. Dior and Louis Vuitton are among the other fashion brands that are leveraging Web3 capabilities to drive the adoption of their loyalty program, and subsequently the growth of their overall business. 

Overall, the global loyalty programs market is poised for accelerated growth, amidst the growing number of fashion brands that are launching new programs or revamping existing ones. As inflation continues to dampen consumers' disposable income, PayNXT360 expects the adoption of loyalty programs to remain elevated in H2 2023 and H1 2024, driving industry growth. From the medium to long-term perspective, the global loyalty programs market is expected to grow at a compound annual growth rate (CAGR) of 12.2% from 2023 to 2027, increasing from US$120.5 billion in 2022 to reach US$215.4 billion by 2027.

To know more and gain a deeper understanding of the global loyalty programs market, click here.