The store shelves might still be full of Halloween candy, but retailers are nudging shoppers to start thinking about the holidays, rolling out a variety of offers and incentives to encourage people to sign up for subscription services to score sought-after gifts.
Walmart announced Monday that members of its Walmart+ subscription service will get a four-hour head start to start snapping up Black Friday deals, and Amazon is promoting its Prime Early Access feature, which lets Prime members buy Lightning Deals half an hour before everyone else gets a crack at them. At $99 a year (or about $13 a month if purchased monthly), the Walmart+ subscription price slightly undercuts the annual $119 price for Amazon Prime membership.
Best Buy is employing a similar tactic. It rolled out a $200 membership program last month that it calls Totaltech. While the price tag includes tech support, installation and other perks, retail analysts said it’s likely that a large number of new members will be motivated by the prospect of being able to score hard-to-find items like Sony’s PS5 gaming console.
“People are ordering earlier and ordering more."
A survey conducted this month by the market research firm Piplsay found that about one-quarter of U.S. consumers have already started their holiday shopping. Supply- and cost-related concerns seem to be the primary motivations: Among those already shopping, 23 percent said they were trying to score early deals, 21 percent wanted to make sure their purchases arrived on time, and 17 percent were worried that discounts — or the products themselves — would become scarce later in the season.
Loyalty programs that charge membership or subscription fees and promise early access to hot gift items like gaming consoles would seem like win-wins, boosting the bottom lines of big brands while letting customers essentially pay to jump the queue and score Black Friday deals. Retail behemoths also will get an infusion of granular data that will let them see into the behaviors and spending patterns of their most loyal customers, as well as more opportunities to promote their offerings.
Essentially, the loyalty program is a sales-boosting model nearly as old as retail itself, said Margaret Kidd, the director of the supply chain and logistics technology program at the University of Houston.
“This is an old-fashioned method to gain loyalty to your customers and get them to engage and stay with your brand,” she said. “Retailers do buy merchandise that they pull aside to provide access to their loyalty [program] customers.”
According to Forrester Research, close to 90 percent of people who shop online belong to at least one loyalty program. In a report in June, Forrester said perks and exclusive access can foster repeat-purchase loyalty better than just slates of discounts. The 21st century enhancement, of course, is the access to reams of digital data that the programs can capture about how people shop — all of which can be filtered through increasingly sophisticated target marketing programs.
“Theoretically, if there are popular items that are in short supply this holiday, that gives that shopper who’s a member of that program a leg up,” said Rachel Dalton, the director of e-commerce and omnichannel insights at Kantar Consulting.
Dalton said the benefit for retailers who can persuade shoppers to become loyalty program members is twofold. “From an online perspective, they're tracking where you go and what you look at,” she said, which means more — and hopefully more accurate — ad targeting and product suggestions. “Over time, in the longer term, if shoppers are happy with the loyalty program, they'll shop more at that retailer.”
But the strategy isn’t without risk: Retail consultants say that if brands fail to deliver — or fail to manage consumer expectations during a season when supply chain bottlenecks have the potential to create a crisis for retailers — angry customers can migrate away with a click or a swipe.
“I think you're going to have some happy customers ... and others who will be disappointed. From the retailer's perspective, it is a great opportunity to deliver on something exclusive, as long as they're communicating clearly and being transparent that it's not a guarantee,” Dalton said.
Mike Webster, a senior vice president and the general manager of Oracle Retail, said: “I think the consumer will absolutely have high expectations of execution on any pay-to-play model. A single bad experience will lead them to being more open to switching brands or buying a substitute item. Consumers have very high expectations.”
Kidd said the evolution of the retail landscape means stores have to find new revenue streams to make up for last-minute and impulse purchases. “I think as we have pivoted from traditional brick-and-mortar stores and there's declining foot traffic ... these kinds of strategies help the bottom line for retailers trying to make up the difference,” she said.
The surge in e-commerce triggered by the pandemic has only accelerated those trends, Kidd said. “The stores are packed. The problem is there's shortages in certain items like electronics,” she said.
Webster said shoppers are worried about paying higher prices — if they can find the products they want at all. “Gift-givers this year are at a new peak of anxiety,” he said. “This could be the supply chain that stole Christmas.”
Shoppers are already adopting new habits, Webster said. “People are ordering earlier and ordering more,” he said, with the expectation that at least some of their attempts either would be canceled because items have gone out of stock or the items wouldn’t arrive in time. “That’s a really interesting consumer behavior we haven’t seen before.”
For shoppers hoping to score popular gifts, the two options seem to be: Spend more money to access the sales or spend more time trying to track down popular products.
Kimberly Haire, a mother of two who lives outside Fort Wayne, Indiana, said her address is outside the delivery zone for Walmart+, so she plans to do a lot more shopping around this year.
“We are big on the educational STEM toys,” she said by social media. “I’m not sure how quick these types of items would go out of stock but I've already started looking at deals.”
Haire, who is expecting her third child in January, said she is steeling herself for understaffed stores and empty shelves this holiday season. “I'm sure across the board, some stores will have things I need and others won't,” she said.
“I feel as if the shelves are already showing signs of not being able to compensate the people this holiday season. And the more popular items will sell quickly and, more than likely, won't be restocked in time for Christmas without it being limited in quantities,” she said.