Loyalty Programs – Will they survive

Could the end be near for retail loyalty programs? While the notion of loyalty exists in high-end retail, the majority of programs won’t last, said Faisal Masud, Staples’ chief digital officer and EVP of e-commerce, who was part of a panel discussion at the National Retail Federation’s Big Show in New York City.

“Consumers are agnostic to where they shop,” Masud said. “The days of window shopping and just paying the price you think is fair are gone. A lot of folks don’t even want to interact with people or companies. They just want their goods fast and at the lowest possible price. For that reason, a lot of the retail loyalty programs are a little bit doomed.”

That’s a big challenge for retailers, Masud said, adding that they also are having trouble keeping up with consumers’ high expectations on mobile.

“The seamlessness of mobile is still not there,” he said. “Apps are not quite where they need to be. I think there is a lot more to do on retailers’ part if they are going to meet consumer needs.”

According to Daniel Hodges, CEO of Consumers In Motion and moderator of the panel, “Change is real, change is fast, and change is unforgiving,” smartphone penetration is expected to reach 65% by 2020, with some extimates going as high as 80%.

At Staples, mobile traffic accounted for 40% of its overall online traffic during Christmastime–unprecedented for the company, Masud said. Mobile revenue, however, was not nearly as high, which speaks to the experience (or lack therof) and, more broadly, about retail not meeting customers expectations.

Ryan Craver, former SVP, strategy for Lord & Taylor, spoke about overall industry disruption and how retail must respond.

“Anyone in this room has infinite computing power at their fingertips,” Craver told attendees. “We all have the ability to share, consume, and create content in different ways.”

That puts the consumer more in control than ever before, according to Frank Zimmerman, CEO of Arvato Systems North America. “The power that the consumer has gained is the power to interact with brands and also with one another,” he said.

For the first time, consumers are more powerful than brands, Zimmerman added. Therefore companies need to make sure they are having positive interactions.

The key to that, Craver said, is ensuring decision makers within a company acknowledge that customers are in control and have different needs and expectations. “The entire company must align around the consumer. That’s the catalyst for commerce,” he said. “You must change the mind-set of the whole organization.”

Change also must occur if retailers are to remain innovative. “It’s the structural challenges in retail that prohibit retailers to grow in the omnichannel sense,” Staples’ Masud said.

Masud provided the recent launch of Staples’ order-online/pickup-in-store option a few months ago as an example. That initiative meant all the moving parts of retail—fulfillment, warehouse, mobile, online, in-store, etc.—needed to work together. While easier said than done, 13% of Staples’ transactions are now fulfilled this way, he added.

Related, technology poses a host of issues retailers must now overcome.

“Historically, for retail it has been about finding a vendor to help the retailer do something, but my belief is that is what is holding us back,” Masud said. “I expect that a lot of retailers know this and will be bringing a lot of the technology in-house by building out their own innovation and technology teams.”

According to Zimmerman, retailers need to focus on simplification, both of their internal structures and as it relates to consumers in terms of simplifying the buying, browsing, and researching process.

“Simplification will definitely be something important, and mobile can help with that,” he said.