How J.Crew, H&M, Others Push Hard On Payments Innovation, Loyalty

In a bid to increase loyalty, merchants are driving innovations in their stores. To that end, some brick-and-mortar retailers have begun to offer rewards programs for the very first time to bring shoppers through their doors. The idea? Retailers are taking new approaches to the way they attract customers.

J.Crew, for instance, has a new loyalty program that offers standard perks such as a store credit when customers hit a certain spending threshold. In addition, the retailer is offering free standard shipping to customers who sign up for the program that is open to all customer regardless of how they pay.

The clothing retailer is hardly alone, as 85 percent of merchants say that they innovate to stay competitive, according to the PYMNTS Retail Innovation Readiness Index, while 77 percent say they use it to drive sales. Here is how retailers are innovating beyond loyalty by meeting demand for in-store shopping and new payment methods — as well as tapping into analytics and customer behavior:

Almost two-thirds — or 65.4 percent — of businesses choose to innovate to improve customer loyalty.  Target, for instance, is beginning to experiment with a new rewards program called “Target Red” that will not be linked to a debit or credit card, The Star Tribune reported in March ahead of a reported test of the program. Target spokesperson Joshua Thomas told the newspaper at the time, “we know not everyone wants another credit card. So, we want to find a way to grow our relationship and affinity with those guests.” Originally, Target was offering a 5 percent discount on purchases through its REDcard program, along with shipping benefits on its eCommerce website. As a result, almost a quarter of all Target purchases are now made with a Target REDcard. However, through the free new program available in the Dallas-Fort Worth area, shoppers can take 1 percent off purchases and put it toward future visits at Target — without having to use a Target-branded credit card.

Sixty-two percent of businesses choose to innovate to meet demand to shop in stores. eCommerce retailer Amazon, for instance, has opened the Amazon 4-star Store in New York City. The store stocks products that are rated 4 stars and above, are top sellers or are new and trending on Amazon’s website. The company wrote in a blog post, “we created Amazon 4-star to be a place where customers can discover products they will love. Amazon 4-star’s selection is a direct reflection of our customers — what they’re buying and what they’re loving.” Products are made up of some of the most popular categories on Amazon, including devices, electronics, kitchen, home, toys, books and games. The company added that the average rating of all the products in the new store is 4.4 stars. Collectively, the products in store have earned more than 1.8 million 5-star customer reviews.

And just under six in 10 businesses — or 59.8 percent — choose to innovate to understand customer behavior. To that point, Berlin-based fashion retailer Lesara prides itself on thinking differently about apparel and being on trend. It doesn’t send its designers to Fashion Week and it draws its conclusions about what consumers want from the data that they see. It calls its approach “agile retail” and it believes something different about who should set the course when it comes to deciding what is “in.”In agile retail, trends are set by customers, instead of a handful of fashion designers, all thanks to big data. Lesara CEO Roman Kirsch noted, “for our industry, the most important innovation of the last decade has been ‘fast fashion’ — that’s the model introduced by companies like H&M. In a way, agile retail is the smarter and faster brother of fast fashion. Traditional fast fashion companies are not fully in control of their supply chains the way Lesara is. They deal with long lead times, various middlemen and high stock, which makes them expensive and time-consuming.”

Just over half — or 55.6 percent — of businesses choose to innovate to meet demand to use new payment methods. To attract Chinese travelers visiting the U.S., for instance, GUESS?, Inc. has partnered with Alipay to bring the payment option into select brick-and-mortar stores across its brands. With the tie-up, customers will be able to use the app in more than 50 locations such as New York, Las Vegas and California. Alipay Americas President Souheil Badran said in an announcement, “GUESS is a globally recognized brand that Chinese consumers seek out when visiting the U.S., and we are thrilled to simplify their checkout experience in GUESS stores. By enabling these travelers to pay using the Alipay app, we are ensuring that they will have the best shopping experience, unimpeded by any language or payment barriers.”

Just under half — or 43.6 percent — of businesses choose to innovate to improve business analytics. H&M, in one case, is turning to artificial intelligence (AI) and Big Data to tailor its merchandising mix in its brick-and-mortar stores. The fashion retailer is using algorithms to gain insights from returns, receipts and data from loyalty cards to improve its bottom lines. H&M is utilizing the technology in a store located in an upscale section of Stockholm, Sweden. It has so far learned that women make up most of its customer base, and that fashionable items such as floral skirts have sold at better-than-predicted rates. Sales have improved with these insights, and H&M is moving away from the idea of stocking each location with a similar selection.

As for the J.Crew Rewards perks, the idea to get the program rolling before driving further innovations. In August, it was reported the company is mulling personalized promotions and better targeted ads instead of sending everyone the same deals — showing that innovation can bring different experiences to different customers, too.