Shopping clubs are booming, with exclusive purchasing clubs achieving an increase in 2016 of 22 percent over the previous year. In total, sales amounted to 780 million Euros, estimates the Ernst & Young auditing company in its study. While these are numbers that cannot compete with the major online retailers, merchants with shopping clubs create a decisive advantage, by securing a loyal customer base.
Shopping clubs and the appeal of exclusivity
Shopping clubs are by no means as well known as major online retailers. Only about one-fifth of the consumers surveyed in the study are registered with at least one shopping club, such as Zalando Lounge, Amazon BuyVIP or brands4friends. This conforms with the principle of an exclusive shop whose history began in 1976, when the crystal glass manufacturer Swarovski produced a small mouse made of crystal droplets. It was originally intended to make a nice souvenir for visitors to the Olympic Winter Games in Innsbruck in 1976. The little mouse quickly acquired many collectors and follow-up models were in such strong demand that Swarovski founded its own shopping club in 1987: The Swarovski Collectors Society (today, Crystal Society). The crystal manufacturer thus built up a new mainstay, having previously specialised in the production of chandeliers. Today, the Crystal Society has 300,000 paying members, who collect crystal miniatures all over the world and buy at considerable prices of up to 399 Euros.
What is the attraction of becoming a member of a shopping club? According to advertising psychology, it arises from so-called ‘effort justification’. Not everyone can register at a shopping club and users typically require an invitation. It takes a certain effort by customers to become part of an exclusive shopping group. Should the customer gain entry, they then remain loyal to the shopping club: The more exclusive the advantages of a shopping club, the more valuable the membership.
Long-term profit for both customers and retailers
For customers of such clubs, their participation in club events pays off, where discounts can be up to 70 percent. The products are offered for a short time, with a certain secrecy about added items created, in order to increase excitement in advance. “It is the live shopping events“, according to eCommerce consultant Jochen Krisch from Exciting Commerce, “which ultimately make a shopping club concept attractive to customers”.
Retailers can profit significantly from this concept. Some sell too many of the produced goods for a special price and offset their low margins by volumes. Other retailers, such as the closed shopping community, Vente Privée, finance themselves by increasing their margins: “We earn by applying a margin of 30% to the product price”, explains founder Jacques-Antoine Granjon. Not only the margin holds profit, but more important is the generation of loyal customers. According the study published by Ernst & Young, 92 percent of shopping club members are regular online shoppers. Some 77 percent of club shoppers purchase at least once a quarter from their shopping club. The customer base of shopping clubs is mainly made up of women with a net household income of over 2,500 Euros per month.
If a retailer were to win this customer base for their shopping club, further synergy effects are opened up, which the retailer can then test out in these terms:
- They contribute to customer loyalty.
- They offer an alternative in addressing customers.
- They can test new assortments and new strategies on a small scale.
- They provide profound selling insights.
- They can sell depreciated goods to improve the balance sheets.
Shopping clubs create customer loyalty and a framework for testing new strategies and new profits for the retailer
Should you open a shopping club, make sure that it does not lure customers with items that sold badly in a traditional online store. For club shoppers, low quality is a no-go, since they are mostly customers with an elevated trend consciousness and an affinity for spontaneous shopping. Club shoppers are passionate buyers who are well informed about products and brands.
The opening of a shopping club is more worthwhile for larger shops, which can offer a wide spectrum of articles to a small, select, yet loyal member base. The major plus is customer loyalty, the framework for trying out new strategies and, above all, the new introduction of articles. The latter represents the opportunity for retailers to make new profits. It should be noted here that the retailer offers high-quality and exclusive items to meet the demands of club shoppers.
This is not always a simple balancing act. In order to know which articles the retailer should add to their shopping club and at what price, a sophisticated price management on the basis of comprehensive assortment analysis would be wise. A fast and efficient assortment analysis can be created with automated tools, such as the blackbee Business Intelligence software. With the aid of blackbee, retailers gain competitive advantages over their competition in the market.
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