1) Loyalty programs, once discount-centric, are evolving to reflect the experience economy.

What happened

  • The vast majority of brands and retailers offer membership in one shape or another, but the benefits have remained rather thin, often composed of discounts or point-system-based rewards. But now some companies are revamping their membership and loyalty programs to include exclusive experiences and events.
  • Nordstrom will debut new elements to its loyalty program that’s 10 million members strong this holiday season, including a tier called “icon” status that will be invite-only and offer private dinners with designers, among other events. Macy’s platinum card members will receive free seats to this year’s Thanksgiving Day Parade and Nike’s new Manhattan flagship will include a floor devoted to members with personal shoppers and special products.

Why it matters

  • These changes infuse run-of-the-mill membership and loyalty programs with elements of the hospitality and entertainment industries, both of which have trailblazed customer-brand relationships in ways that traditional brands and retailers are beginning to learn from. The idea of a VIP pass at a concert—which Macy’s is accomplishing with tickets to the parade, and Nordstrom is achieving with one-on-one dinners with designers—can certainly transfer to the retail world, it just manifests in a different way.
  • Not only do providing exclusive experiences give loyal customers a new way to live and create memories with the brand—they also keep them coming back to experience the brand in person, instead of choosing the convenience of an ecommerce behemoth like Amazon. Especially when these member experiences are limited to a small selection of the most devoted shoppers, the customer-brand relationship is likely to strengthen.
  • Additionally, providing ways for customers to gain special access to the brand and its products not via discounting merchandise keeps the brand at a higher premium. So many brands and retailers are quick to dole out coupons, which cheapens brands over time and cements the expectation among shoppers that they will receive items at lower prices (it’s also very price-centric, while experiences transcend the transaction). Data also suggests that pouring more money into cultivating these loyalty programs is worth it: Companies put an average of 1% to 3% toward these programs, and at a company like Macy’s, 10% of customers generate half the company’s annual revenue.

2) Stripe gets physical, hoping to streamline online-offline payment solutions for digitally-native startups.

What happened

  • Since launching in 2010, Stripe has attempted to build its reputation as the go-to online payments service. Now it is debuting Stripe Terminal, an in-person payment service to be used in physical stores, specifically aimed at digitally-native companies that sell online, as well as offline.
  • Both Warby Parker and Glossier will employ Stripe Terminal at their brick-and-mortar locations (both brands already use Stripe for online payments). Stripe is also selling its services to business-to-business software companies that have customers in the consumer product sector.

Why it matters

  • Stripe specifically wants to catch the attention of digitally-native brands that haven’t yet entered physical retail, but may do so in the future. Given that its current digital customers are happy with the service, it’s also convenient to tack on Stripe Terminal when they enter the brick-and-mortar space. This move aligns with Stripe’s belief that many of its customers are young companies that did not exist a decade ago or don’t even exist today, as it unlocks a new generation of digitally-native merchants.
  • The main advantage to using Stripe Terminal is the ability for brands to streamline their payments both online and offline, especially if they already use Stripe for ecommerce transactions. The offline payment service also includes customizable screens, which customers can see at checkout (displaying a special discount or other brand message). Internally, merchants will be able to update their payment functions from a single online account and Stripe’s payment service to their particular checkout software (a major boon given that a large corporation might employ as many as 500 individuals just to operate their payment system).
  • As Stripe enters the physical realm, it’s main competitors are the Dutch company Adyen, which offers an all-inclusive, omnichannel payment solution, working with large brands such as Burberry and ecommerce sites like eBay and Etsy, and Square, the mobile payment service. Before Stripe Terminal launched, Square was a preferred contender for in-person payments, offering a standard rate or a 2.5% fee plus ten cents per transaction. Shopify, which many growing brands use to power their ecommerce, offers a POS system, but is severely lacking in functionality, a weakness that Stripe can capitalize on. Stripe Terminal charges a 2.7% fee, plus five cents per transaction, but sticking with smaller, nascent brands may prove to be a major differentiator moving forward.

3) Dirty Lemon, a digitally-native beverage brand, opens a checkout-free store that operates on trust and word-of-mouth marketing.

What happened

  • Founded in 2015, Dirty Lemon sells and delivers beverages to its approximately 100,000 customers via text message; shoppers can survey products online, create an account with their mobile number and credit card information, and text Dirty Lemon to finalize their delivery order.
  • Now the company is expanding offline with the Drug Store: a cashier-less storefront devoid of sales associates in TriBeCa. Shoppers can come in, grab a drink, and send Dirty Lemon a text in order to pay for it—the company then responds with a link to input credit card information. Apparently, Dirty Lemon isn’t worried about theft and already has plans to open a second New York storefront, as well as two others elsewhere.

Why it matters

  • Dirty Lemons’ CEO Zak Normandin says he aims to change the beverage industry’s entire distribution landscape, which evidently begins with the Drug Store—a concept in the spirit of Amazon Go, with the added element of building trust between the brand and its clientele, who are majority young women. With texting integral to making a transaction with Dirty Lemon online, it makes sense to extend this method to its physical stores.
  • The Drug Store is also a way for the brand to generate word-of-mouth growth via its own customers. Dirty Lemon’s direct-to-consumer orders come in six-packs in order to offset the cost of delivery, but the stores let customers try a single beverage without committing to more, especially given the higher price point.
  • But more importantly, the Drug Store is an interactive advertisement. Normandin has said that the company wants to avoid digital marketing, which has saturated its target demographic’s newsfeed. The store can attract shoppers both thanks to the novelty of a cashierless purchase and its highly Instagrammable decor, including a mirror made for selfies (this stands in contrast to Amazon Go, which is focused on the transaction itself, rather than making shoppers stick around afterward). As the company expands the concept elsewhere, it is using its repurposed digital advertising budget (nearly $4 million annually) to retail, with plans to create VIP lounges, event venues and bars, leaning into the experiential retail pioneered by conceptual stores like the Museum of Ice Cream.

4) L Brands shutters legacy retailer Henri Bendel to focus on already struggling Victoria’s Secret.

What happened

  • After 123 years of operation, the heritage retailer Henri Bendel will close its 23 stores and cease operating its site beyond the 2018 holiday season. The company first opened a storefront in Greenwich Village in 1895, selling fragrances, apparel, beauty and handbags and remained a trailblazing luxury retailer in New York for decades.
  • L Brands acquired the company in 1985, after which the company stopped selling apparel, choosing to focus instead on handbags and accessories. The parent company has sold off other straggling brands in the past (Express, Abercrombie and Lane Bryant) and now plans to give even more attention to Victoria’s Secret, which it believes has big growth potential.

Why it matters

  • Henri Bendel is one of many department stores to fold under the pressure of ecommerce and shoppers eager for new experiences. The folding of its Manhattan flagship echoes Barney’s, which closed its Upper West Side store in February 2018 and Lord & Taylor, whose parent company Hudson’s Bay Co. sold parts of its Fifth Avenue flagship to WeWork in October 2017. Though once a progressive luxury retailer that introduced in-store salons and served as a mecca for new designers, L Brand’s acquisition over-expanded Henri Bendel from its New York City flagship to more than 20 locations across 11 states—contemporaneous with this over-expansion, the retailer lost its distinctiveness and brand identity, which it failed to retrieve as other department stores have with a private-label strategy and other exclusive product offerings or experiences.
  • L Brands’ total annual revenue was $12.6 billion in 2017 and the company estimates that Henri Bendel’s 2018 revenue will amount to $85 million, with an operating loss of $45 million. While it was right to shed this lagging business (it’s telling it didn’t even try to sell it), the brand it envisions to propel the parent company into the future—Victoria’s Secret—continues to struggle. In 2017, net sales dropped 5%. But now that it has stripped away another company from its portfolio, the parent company has to be wary of pushing Victoria’s Secret into the same trap as Henri Bendel, which arguably fell apart because of unwillingness to evolve for a new era.
  • Though L Brands removed swimwear from Victoria’s Secret’s assortment in 2016 to latch onto the athleisure trend, more change must occur if the brand is to stay alive—and thrive. Newer lingerie brands are providing for inclusivity in ways that Victoria’s Secret never has at the same time that L Brands’ CEO Leslie Wexner claims that the internet hasn’t had any effect on retail. Consequently, the Victoria’s Secret store experience has largely remained the same—its 1,200 U.S. stores still mostly housed in decreasingly popular malls. The company has also failed to address rising distrust among female shoppers in a brand that historically has catered to men. Maintaining this “no change” mentality—whether or not it was the same playbook that caused Henri Bendel’s downfall—won’t be enough for Victoria’s Secret, or any of L Brands’ companies to stay afloat moving forward.