Fabletics, for example, took a big risk by requiring customers to either be fee-paying monthly members or purchase clothes at significantly higher prices. While this approach may be helpful for driving initial revenue spikes and maintaining a prestigious aura around a brand, the long-term sustainability is not guaranteed. Fabletics alone received hundreds of complaints against it through the Better Business Bureau in its first three years of business. Its membership policy requires that customers pay every month or notify the company within the first few days of each month if they would like to skip that month.
“In general, having a membership fee can drive value if the programs are simple and there is a significant value returned for the fee,” said Perry Kramer, senior vice president and practice lead at Boston Retail Partners. “In the online fashion business, however, it is a delicate balance between getting a quick revenue boost and enjoying long-term success. With few exceptions, when a membership fee is required to shop, the initial revenue spike drops off significantly and falls short of customer loyalty and lifetime value in programs that do not require a membership fee. The long-term growth, membership size and membership growth rate is usually substantially higher in programs with no fees. The bottom-line risk for companies that have a high membership fee is that they will alienate customers who do not see a significant value every month.”
Still, Fabletics has managed to grow considerably. Forbes reported that Fabletics’ revenue was over $300 million in 2018 and is growing each year. The company has opened more physical stores this year, including its first New York store last April.
Savage x Fenty does not require a customer to be a member, but when checking out, a membership is automatically added to the customer’s cart and must be manually removed. Once a membership has been purchased, there is no option to cancel it online. Customers must call over the phone in order to remove themselves from the program.
Fabletics and Savage x Fenty are both part of the TechStyle fashion group. Fabletics declined to comment for this story.
“If a brand feels that a fee-based program is needed to either differentiate a select set of products, or ‘guilt’ a consumer into shopping monthly, they need to deliver significant differentiation and value each month,” Kramer said. “But this is something that is very hard to do in the highly-competitive fashion industry.”
Outside of TechStyle brands, rental platforms like Rent the Runway and Nuuly tend to have more forgiving and easy-to-navigate membership models. Customers can pause their membership for up to three months at any time on either platform, without the complications of having to notify the company at the beginning of each month whether they will skip or pay that month.
“Issues arise when brands make it difficult to redeem points and when extraneous fine print keeps a customer from being able to cancel or pause their membership,” said Syama Meagher, chief retail strategist at Scaling Retail. “Poor customer service could lead to negative net promoter scores as customers will amplify their bad experiences over social media and word of mouth.”
This doesn’t mean memberships are a bad idea. The consumer loyalty market was at just under $2 billion in 2016 and has since jumped up to almost $7 billion, with 3.8 billion loyalty memberships being held in the U.S. alone. Brands like Stitch Fix and Rent the Runway have popularized the idea of the circular closet, of which membership models are a key part.
“Membership programs are a great way to get recurring revenue and increase transactions and sales,” Meagher said. “Most consumers are looking for experiences as well as discounts/points. Membership programs should be designed to engage customers, as this increases the likelihood of them actually continuing to use the program. These brands need to keep their membership programs simple, and staff up customer service to help loyal members understand how to use their program and what the benefits are.”
https://www.glossy.co/fashion/the-illusion-of-deceit-the-success-or-failure-of-fashion-memberships-hinges-on-the-fine-print
2019-08-29 04:01:16Z
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