How retail marketers should approach customer loyalty in the age of Temu and Amazon

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Only three industries contribute more to Australian GDP than retail.

Almost one-and-a-half million Australians work at over 155,000 businesses, who serve the entire nation; whether bespoke family-run retailers, luxury brands or supermarket giants. In a competitive, saturated field – and against the backdrop of persistent economic pressures – customer loyalty is becoming harder to earn and easier to lose. That is especially true as global behemoths like Amazon, Temu and Shein continue to increase their investment, and subsequently, their market share in Australia.  

As competition increases, customer retention becomes even more crucial for the medium- to long-term health of a business. However, the way retailers approach retention and market to their existing shoppers differs drastically by business size, according to new SHOPLINE research. Our Unified Commerce Benchmarking Study sought to understand how retail business owners, decision-makers and marketers are approaching 2024. But what did the research find when it comes to loyalty? What is the adoption and impact of loyalty programs? And just how daunted should retail marketers be about Amazon? 

Leveraging loyalty 

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It’s by no means a ‘hot take’ to hail the value of loyalty, particularly today. By most estimates, customer retention is anywhere between four and eight times more cost effective than customer acquisition. What is interesting, however, according to our research, is the ways in which retail marketers are thinking about loyalty. And specifically, how that varies by the size of a business.  

Among the strategies retailers employ to enhance customer engagement and loyalty, membership and loyalty programs (60%) stand out as the most effective tools for incentivising repeat purchases and fostering brand advocacy. Notably, very large retailers – those defined as AUD$100 million GVM (gross value merchandising) or more – exhibit high adoption rates of loyalty or membership programs (89%), underscoring their strategic focus on building customer loyalty and fostering personalised relationships. 

Conversely, only one third (31%) of small retailers – those with a GVM of less than AUD$10 million – are using loyalty programs. With smaller businesses entering insolvency at higher rates than any other business, greater investment in customer loyalty initiatives to drive repeat purchases and enhance competitiveness is critical. Small retailers that adopt loyalty schemes can – and do – drive big results. Overall, 40% of retail marketers don’t have an operational customer loyalty or membership program and nearly one in five (19%) are not even planning one. Failure to do so is critical in the mission to encourage repeat purchasing.  

Perhaps reflecting common misconceptions around the costs and resources required to operate a loyalty and retention program, the proportion of retailers not considering a loyalty program rises to over one in three (34%) among small retailers – those, understandably, with smaller budgets. However, even among those that do deploy such a strategy, they are often underdeveloped, with just 49% available across multiple channels. Again, it’s not a hot take to talk about the value of omnichannel retail – or even better, unified retail – for marketers. Businesses who deploy an omnichannel loyalty program are better placed to establish a competitive advantage.  

To address this gap, retailers should prioritise the implementation of comprehensive loyalty programs accessible across online and physical stores. This approach can help strengthen customer relationships, drive brand loyalty, and ultimately boost sales and profitability, all of which are crucial amid softened consumer spending.  

Retention into revenue 

Global retail giants like Amazon, Temu and Shein are already winning their loyalty. For marketers, irrespective of the size of their business, these global players should be viewed as a direct competitor, no matter how many – or how few – similarities they have compared to a more traditional competitor. Amazon is investing heavily in marketing spend to acquire customers, and through loyalty programs like Amazon Prime and Shop with Points is training their purchasing behaviour.  

While not to trivialise the importance of customer acquisition, fostering loyalty must be a priority for marketers. To enjoy sustainable growth, marketers must identify ways for customers to repurchase and exploit the value of compounding and consumption cycle. The challenge posed by global retail giants is real, as is the battle for brand awareness and loyalty, but retailers who prioritise loyalty will stand out from the pack. 

We’re seeing customers who can clearly define the goals and structure of their loyalty scheme, offer meaningful rewards and incentives, gamify the experience, integrate the experience across one unified platform, and encourage social shares and referrals driving significant gains. This is how marketing departments – irrespective of the size of the business they oversee – can turn acquisition into retention, retention into revenue, and revenue into long-term growth in, and long beyond, 2024.  

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