Research Briefing: Target considers paid membership as retailers move past loyalty programs

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Retailers use paid memberships to create new customer benefits

Breaking News: Target Corp. is considering whether to add a paid membership program similar to Amazon Prime or Walmart Plus as it appraises how to best compete with larger retailers and to stimulate financial growth, according to a recent report by Bloomberg. In 2019, Target launched a free loyalty program that gives shoppers deals and rewards for purchases, but the paid program would go beyond that to offer additional benefits for a fee.

Many retailers are moving past traditional loyalty programs and have started using paid memberships to create new consumer benefits. That is according to the first installment of the Modern Retail Index on e-commerce experience strategies, which published today. 

Thus far, Amazon has set the standard for paid membership programs with its Amazon Prime, which creates extended touchpoints for consumers outside of Amazon’s primary website. Benefits include free expedited shipping, Prime Streaming, a Twitch subscription, Prime reading and discounts on prescription medication, among others. 

Questions: Which other retailers offer paid membership programs? How are paid memberships affecting retailers’ e-commerce experiences and their rankings in the Modern Retail Index?

Answers From Research:

The big-box cohort has always landed in the top percentile of the rankings, and this year was no exception. The majority of big-box retailers ended up in the top half of the index – with Walmart and Best Buy taking the first and second spots. Their e-commerce dominance was maintained in large part due to new innovations in their paid membership programs.

In June, Best Buy overhauled its membership program to introduce a new tiered model featuring an additional mid-priced tier, stating in August that it expected the My Best Buy Membership program to contribute at least 25 basis points of enterprise year-over-year operating income rate expansion – and that it was seeing growth in year-over-year paid membership sign-ups. Its domestic gross profit rate for the second quarter of 2023 rose to 23.1% compared to 22.0% in 2022, results it attributed in part to its membership program. 

Walmart has continued to expand its Walmart Plus membership program benefits. This year, Walmart Plus added early access to promotional deals, including early access to Black Friday deals and an exclusive weekend of deals in July called Walmart Plus Weekend – a direct competitor to Amazon’s Prime Day. While Target and Nordstrom also offered deals in the same time frame, Walmart was the only retailer in this index that gave exclusive access to paid members. 

Keep an eye out for the next installment of the Modern Retail Index, which will focus on retailers’ fulfillment strategies. 

Want to learn more? The Modern Retail Index examines how top retailers’ e-commerce strategies measure up.

READ MORE ABOUT HOW RETAILERS’ E-COMMERCE STRATEGIES STACK UP

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