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Tech Talk: The best alternative to amazon prime: membership shopping networks_fitfor_commerce_wu_yagan


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Tech Talk: The best alternative to amazon prime: membership shopping networks_fitforcommerce_wu_yagan

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Tech Talk: The best alternative to amazon prime: membership shopping networks_fitfor_commerce_wu_yagan

  1. 1. Challenging Amazon Prime: Membership Shopping Networks Bernardine Wu, CEO, FitForCommerce Sam Yagan, CEO, ShopRunner
  2. 2. 2 FitForCommerce is a specialized consultancy founded to help online businesses accelerate growth. Trusted advisor to hundreds of global companies. Digital Diligence™ is a philosophy and our methodology based on an investment and due diligence mindset for decision-making and execution to ensure success. We are the help. Curated digital innovation tracking and applied market advice to businesses in a CDO- on-demand service. Benchmarking of Top 120 Retailers for Omnichannel (Web, Mobile, In- Store) innovation.
  3. 3. 3 Trusted Advisor to 400+ Brands and Retailers
  4. 4. Shopping Networks The lines between multi-brand retailer, affiliate site, marketplaces are blurred. Shopping Networks are membership based.
  5. 5. Amazon’s Rocket-Fueled Growth in North America 32,865 41,410 50,834 63,708 79,785 88,476 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 2012 2013 2014 2015 2016 TTM North America Sales (MM) Source: Amazon Company Reports; eMarketer Calculations
  6. 6. 6 Amazon: A Retailer’s Frenemy 30% 60% Friend Foe 29% 29% 43% Direct Competitor Partner & Competitor Non-Competitor Source: “A New Path for Retail: Co-Existing with the Force of Amazon, Bluecore and NAPCO, 2017 Survey of 251 Retail Executives
  7. 7. 7 Amazon Prime Free Shipping Leads Amazon’s Most Impactful Services 63% 44% 27% 26% 0% 10% 20% 30% 40% 50% 60% 70% Prime Free Shipping Prime Expedited Shipping Frictionless Checkout Reviews Most Impactful Consumer-Facing Services Survey of 251 Retail Executives Source: “A New Path for Retail: Co-Existing with the Force of Amazon, Bluecore and NAPCO, 2017
  8. 8. 8 Amazon Prime Packs a Powerful Punch to Retailers 40% of Amazon Prime Members Spend Over $1k Annually vs. Only 8% of Non-Prime Shoppers 9% 26% 24% 16% 10% 7% 3% 2% 3% 34% 46% 13% 5% 2% 1% 0% 0% 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% %ofShoppers How much have you spent on Amazon in the past 12 months? Prime Non-Prime Prime Members Spend 4.6X More Money on Amazon than Non-Prime Members $2,486 $544 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Prime Non-Prime WeightedAverageSpendPerShopper How much have you spent on Amazon in the past 12 months? Prime Non-Prime 4.6X More Source: Morgan Stanley Research Source: AlphaWise, Morgan Stanley Research
  9. 9. 9 Walgreens: At the Corner of Technology and a Fantastic Customer Experience “Customers who engage Walgreens via online (70% of customers) and mobile (50% of customers) channels are 3.5 and 6 times more profitable to the company, respectively.” Deepika Pandey Group VP of Customer Experience
  10. 10. 10 Creative Ways to Increase Customer Loyalty or Boost Foot Traffic
  11. 11. “Our customers are loyal to us right up until the second someone offers them a better service …and I love that. It’s super-motivating for us.” – Jeff Bezos, Amazon There is no such thing as long-term competitive advantage
  12. 12. Memberships Create Stickiness & Commitment • Want to get a date? Sign up for a dating app, even if you don’t use it. • Imagine a gym that charged by the day rather than a time- based membership. • Prime members escalate their commitment to Amazon by paying membership fees to access to the associated benefits.
  13. 13. Networks Create Increasing Returns to Scale • Networks inherently create value on their own, even without a membership requirement. • Networks with membership requirements increase the strength of each connection.
  14. 14. Prime Drives LTV & Enables Segmentation • Prime members self-select by signaling: • Price insensitivity • Shipping speed sensitivity • Shipping cost sensitivity • Resulting in increased LTV for Prime members and non-Prime members, alike.
  15. 15. But Most Retailers Focus on NTF • Despite widespread awe of Prime and its focus on existing customers. • Marketing budgets for customer acquisition can dwarf resources allocated to increasing LTV. • But why the focus on NTF?
  16. 16. When House File Can Have Huge Impact • Many retailers report that 80% of sales come from existing customers. • “She’s still spending, but we just see her one fewer time than we used to.” • More of Amazon’s growth comes from increasing LTV vs. new customers.
  17. 17. Many Believe in the “Fixed Wallet” Fallacy • Some people believe in sticky LTVs and a fixed share of wallet. • Almost all data disprove that fallacy.
  18. 18. Costco Pioneered the Retail Membership Model • 45m members pay $55/ year • Frequency of 10x / year • Spend over $2,500 / year (2x Prime)
  19. 19. And Prime has Digitized the Model • Like Costco, Prime improves the customer experience, unlike most ecommerce loyalty programs. • Most loyalty programs: • Free, requiring little or no customer activation • Promotional rather than experiential, primarily offering a discount for frequent purchases • Prime: • Not free, requiring affirmative customer activation • Experiential, making shopping better for Prime members
  20. 20. Commitment to Prime Increases Frequency 56% of Prime members have frequency more than 24/yr 13% of non-Prime Amazon customers have frequency more than 24/yr
  21. 21. And Conversion (and thus, LTV) Non-prime traffic converts at ~13% Prime traffic converts at ~70%
  22. 22. Individual Retailers Struggle to Replicate Prime • Some think their loyalty program can do the work. • Some think they can just give free two-day shipping to everyone. • Requires aggressive promotion • Most customers wont remember • Bad economics • Not even Amazon gives free two-day shipping away.
  23. 23. But Lack the Frequency to Succeed • More important than Free Two-Day Shipping, Prime is about frictionless transactions. • Low visit frequency undermines everything. • If customer doesn’t have an account, purchase hits lots of friction • Even with an account, customers likely don’t invest in keeping shipping, billing data up to speed • Most customers have to login to access their accounts • But don’t remember their credentials
  24. 24. But Membership Networks Can Simulate Prime • If they get a few things right: • Aggregate sufficient frequency • Require activation to join • Reduce transactional friction of shopping • Offer valuable, easy-to-remember benefits
  25. 25. ShopRunner Trades Commitment for Simple Benefits • ShopRunner leverages of the aggregate frequency of the network • High logged-in rates • Requires members to proactively engage with a new brand, usually with a credit card • Higher customer investment • Reduces transaction friction • Shipping speed certainty • Shipping cost certainty • Seamless checkout
  26. 26. And Drives 60% of Prime’s Conversion Lift • Prime traffic converts almost ~6x higher than non-prime • ShopRunner traffic converts ~3.5x higher than non-ShopRunner
  27. 27. While Increasing Frequency • On average, ShopRunner customers have 30% higher frequency than non-ShopRunner customers with each retailer. • ShopRunner members visit a network retailer more than once a month. • The average ShopRunner member spends half as much in the ShopRunner network as the average Prime member spends on Amazon.
  28. 28. With the Added Bonus of NTF • Have been focused on the impact of membership, to compare to Prime. • But a multi-retailer membership network can drive an NTF opportunity.
  29. 29. Network Can Provide Access to Great Customers • Customers usually join the membership network to get access to specific retailers, but then get exposure to new retailers. • If built properly, these self-selecting, proactively engaging customers should have higher LTV. ShopRunner’s 2% of US households generate ~12%-~18% of partners’ sales
  30. 30. Frictionless Transactions vs. Free 2-Day Shipping • How can we tease apart these effects? • ShopRunner has members with credit cards on file and those that don’t. • Consider three groups: • Non-ShopRunner Members • ShopRunner Members with credit cards • ShopRunner Members without credit cards
  31. 31. Key Takeaways Membership Networks • Leverage the aggregate frequency of network participants • Create commitment and investment among members • Allow for segmentation • Increase LTV • Source NTF customers
  32. 32. For more information about shopping networks, register to download our upcoming whitepaper: “Membership-Based Online Shopping Networks: Strategies to help retailers compete for demanding customers” In this whitepaper, we examine the evolving retail landscape and how retailers can leverage membership-based shopping networks to gain customer loyalty without heavily investing time and money into building these services themselves.
  33. 33. 3333 Booth 839 Booth 1112