For Shopping Rewards, Give ‘Em the Business

Fashion retailers are looking to the skies for sales strategies these days.

After seeing customer loyalty soar to enviable heights in the airline industry, many of fashion’s retailers--from monolithic chain stores to small specialty shops--have followed suit and initiated their own frequent customer reward programs. Meanwhile those with long-standing reward programs, such as Neiman Marcus, report a dramatic increase in the programs’ popularity in recent years.

Retailers issuing rewards run the gamut from department stores--including ritzy Saks Fifth Avenue and Neiman Marcus to discount icon Loehmann’s--to chain stores such as Emporio Armani and specialty shops including Bliss Spa. Filthy rich or dirt poor, Wall Street conservative or West Hollywood glam, everyone loves a reward, a gift, something for nothing. “It’s amazing it took the industry this long to realize,” observes analyst Allan Millstein of the Fashion Network newsletter. “Consumerism has been on the rise since World War II, and it’s taken 50 years for the fashion industry to embrace this obvious idea of reward programs, a full 20 years after the airlines did.”

Reward programs award consumers “points” for purchases, which can then be redeemed for everything from discount coupons to a 1998 Jaguar XK8 convertible. It sounds like a great deal for the consumer and it is, provided one can keep one’s head and avoid shopping solely with Herculean rewards in mind.

It’s also a retailer’s dream.

Via the programs, customers remain devoutly loyal to specific shops, often with reward goals in mind. That means a disproportionate percentage of a single consumer’s dollars flow into the registers of his or her store of choice.

Ideally, from the point of view of retailers, diversified shopping will cease to exist. They hope the enticement of free goods--or, more correctly, the illusion of free goods, since all rewards are linked to spending--will create a loyalty; a one-stop-shop environment. Forget the mall theory of an item here, an item there--get ‘em all in one place, and watch the rewards pile up!

Equally important, retailers hope to instill in consumers’ minds an attitude of more is better. Ideal situation: “OK, three more BCBG halter tops for Grandma and a Beanie Baby for my gardener’s second cousin’s baby-sitter will get me another 50 points, which will get me a 5% discount on future purchases!”

Casual buyers need not apply; this program is for shoppers.

At one end of the reward spectrum are “soft” programs, where there is no actual money spent by the retailer. For two years, Loehmann’s shoppers have been able to accumulate coupons during six select weeks every season; the coupons are redeemable for discounts later in the season. “It has been a productive promotional tool, not an ongoing program. It’s something we use to give a ‘thank you’ and special bonus to our frequent, vigorous shoppers,” says Robyn Hall, vice president of Loehmann’s marketing and sales promotion.

At the other end are upscale retailers such as Neiman Marcus, Saks Fifth Avenue and Bloomingdale’s, which spend hard cash on rewards, and often lots of it.

Dallas-based Neiman Marcus was the first North American retailer to initiate a customer loyalty program. In Circle is now in its 13th year, and is regarded by industry experts as a huge success. Billy Payton, Neiman Marcus’ vice president of marketing and consumer programs, boasts, “Since we started, membership in the program has increased six-fold.”

Payton is quick to point out that these numbers are even more impressive when you consider that “one must qualify and requalify each year, by spending a minimum of $3,000 dollars per year.” Once a customer reaches the $3,000 mark, he or she can accumulate points through the end of the calendar year and redeem them through March 1 of the following year. At the introductory level, customers can claim American Airlines discount certificates and free magazine subscriptions, while those at the apex (level O) can choose from the aforementioned Jaguar, two 10-day trips to the Parisian haute couture shows (one per season) or a personal portrait shot by famed lenseman Richard Avedon. In between are a year’s supply of orchids, handmade cowboy boots, Super Bowl tickets, original “Blue Dog” paintings by George Rodrigue and a purebred Arabian horse, delivered right to your door.

Saks Fifth Avenue entered the points-for-rewards game in 1994

with its SaksFirst program. Bloomingdale’s’ Premier Visa program also emerged in ‘94, offering something its competitors did not: Bloomies customers can earn rewards even while shopping elsewhere, simply by making purchases on their Bloomingdale’s Visa card. Points, however, can be redeemed only at Bloomingdale’s, and customers earn bonus dollars at a higher rate (3%) for in-store purchases than for dollars spent elsewhere (1%).

What’s in it for retailers? No one is willing to talk in actual numbers, but increased sales are a given. To reach Neiman Marcus’ level O, a consumer must drop a minimum of $1 million in one calendar year.

“We’ve already given away all three of the Jaguars this year,” says a store representative. Mind you, that was as of June--meaning at least three dedicated Neiman Marcus shoppers have spent a cool million in six months or less.

There are less obvious retailer benefits as well. In a cleverly synergistic move, some retailers use their own intra-store cards as the sole accumulation medium for rewards programs. This allows them to bypass outside credit fees, such as those levied by American Express, and efficiently keep tabs on customer purchases. Databases are more easily expanded, improved and updated.

New York’s Antique Boutique, a specialty shop dealing in cutting edge, ultra-modern fashion, uses its store cards as a tracking device, monitoring customers’ purchases closely and easily via a scannable bar code. While it might sound somewhat Orwellian, it is also a highly efficient way to service clientele. An individual’s purchasing history is computerized, along with vital stats such as address, age, tastes, etc., developing something of a garment dossier. If trends are noticed, such as an affinity for Diesel jeans, Antique Boutique tailors its sales pitches and services accordingly.

“The customer will get information on the frequently bought designer’s next collection, including digital photos shot by our buyers when they view the lines,” says Jay Sternstein, vice president of operations at the boutique.

Retailers not currently offering rewards programs are looking to do so--quickly. “We’re planning to do it,” says designer Michelle Bohbot of Los Angeles-based Bisou-Bisou. “We’re researching, and we’ll be ready to launch very soon. It’s very important; any customer service is important.”

Like complimentary gift wrapping, valet parking services and personal shoppers, customer reward programs are an amenity aimed at bettering the client-retailer relationship. The major difference, however, is the all-important one--frequent-shopper programs make money and lots of it.

That should keep the programs around awhile.