One of the biggest mistakes a fashion retailer can make these days is confusing retention and loyalty.
Both are important, but according to Cassie Young from Sailthru, a software company that helps retailers with their omnichannel business models, loyalty is infinitely more valuable, and more difficult, in the long run. Any brand can improve their retention easily by offering discounts. Loyalty is when a customer prefers to return to a brand even when there are no promotions or discounts to be had. Understanding this difference is especially important for luxury brands who rarely give discounts on their goods.
“I could understand a high-end brand not wanting to get into discounts,” Young said. “But they can still do a style blog or appointment bookings. Luxury brands don’t do discounts, so if they want to build loyalty, they have to work on personalization and customer experience.”
Creating the optimal customer experience is one of the measurements used in Sailthru’s new Retail Personalization Index, a list of brands ranked by their success at personalization and omnichannel. For the second year in a row, Sephora emerged at the top of the list thanks to the amount of online and offline features it packs into every step of the path to purchase, such as the ability to scan in-store items with its mobile app for more information and a virtual try-on feature.
“Sephora does a great job of tying all its channels together,” Young said. “They deliberately have calls to action online and in-store to engage with all channels. They have done some really cool experiments with virtual reality, augmented reality and interesting apps to bridge those worlds.”
Personalization is increasingly on the minds of fashion consumers. A report form Business of Fashion and McKinsey found that more than 70 percent of U.S. consumers expect some degree of personalization from online retailers and brands. The trend toward more data collection has made personalization easier for brands such as Kopari, which increased conversion by 30 percent using AI tools.
Brands across fashion have made omnichannel a priority, from Warby Parker’s expansion into more brick-and-mortar locations to Nordstrom’s broadening of its digital loyalty program.
Some fashion brands, however, have struggled with personalization and cross-channel efforts. J. Crew, for example, has continued to falter (especially in comparison to its successful sister brand Madewell).
According to Young, one of the most important things fashion brands must understand is that they need to understand their customers on an individual level, and not simply on a reductive demographic level. Think clienteling over profiling.
“Personalization versus segmentation: that’s the linchpin of excellent customer experience. More pragmatically, there are plenty of Upper East Side, 40-year-old women and in traditional segmentation, that’s a narrow segment. But from a retail perspective, one might be more interested in fast fashion and another might be into more classic styles. You need to approach each customer as an individual.”