eMarketer Podcast: Reimagining Retail: How the valued benefits of retail memberships have changed and some creative recommendations

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by Anna Munhin Jun 1, 2023 News
eMarketer Podcast: Reimagining Retail: How the valued benefits of retail memberships have changed and some creative recommendations

The episode transcript is here.

Sara Lebow is a person.

Listeners, hello! The day is Wednesday, May 31st. Adobe made possible Behind the Numbers, Reimagine Retail. In this show, we talk about how retail affects our lives. Sara is your host. Retail memberships are the topic today.

Today's guests should be met first. Sky Canaves is joining me on the show. Sky, welcome back!

Sky canaves.

Sara, I'd like to speak with you. I would like to say thank you for having me.

Sara Lebow is a person.

I would like to say thank you for being here. We have a senior analyst named Droesch. Hey man, I'd like to hear from you.

There is a person namedBlake Droesch.

Do you know Sara? It's good to be here again.

Sara Lebow is a person.

It's good to have you. Our first segment is news and reviews where I give the news and our guests tell me what they think.

The May 23rd story is titled "New Tools to Help brands Harness the Power of Generative Artificial Intelligence". One of the ways in which Generative Artificial Intelligence is being woven into shopping is by tossing ads into its chat based search. Microsoft and OpenAI have partnerships that have allowed them to be the first to move in this space. Is your view of the story in 60 seconds?

Sky canaves.

This is a first step in helping sellers that are already using the Merchant Center for Google Shopping to make use of Generative Artificial Intelligence tools on the platform. Smaller merchants who don't have a lot of access to creative assets or agencies will benefit from that. In this case, they already have their product imagery in the Merchant Center and they can use the new Product Studio to create images they want and then push them back into the listings.

This can be a good way to increase sales. About 40% of product listings on Google Shopping only have one image, but those listings that have multiple images see more impressions and clicks, according to the company. I think it's mainly for smaller merchants who have budget issues and I think we can expect to see more tools like images to video, they already do image to 3D, and we'll see things like image to text and vice versa.

Sara Lebow is a person.

It's true. I think we can expect to see more integration here so that you don't have to learn how to use all those tools. Do you think your 60 second review of this story is good?

There is a person namedBlake Droesch.

It's true. The same thing was said by me and Sky. The ability to scale this service to attract larger or more established companies is going to depend on the quality of the tools. Generative Artificial Intelligence's ability to write a refined copy hasn't really caught my attention. Sky said that this was an alternative to working with creative agencies for anyone other than. It's the same thing for image generation. I don't think it will be able to replace graphic designers, but I think there is an element of artificial intelligence that could be useful in helping to reuse product images or other types of creative to fit different platforms. The use case would have to be outside of just one platform, and on other platforms as well. It is an interesting use case for selling artificial intelligence to a lot of smaller merchants.

Sara Lebow is a person.

It's true. This tool is something that we're going to see and we've seen announcements for it at Amazon. I saw a headline today that said that Amazon has been vague about what they mean and that Google is putting something on the internet. I think that gives them an advantage at the moment. The test of driving conversions is going to be decided by who has the best tools. We're ready for our next segment. Tell me where we talk about retail topics. Retail memberships are the subject of today's discussion. Retail membership fees will be $35 billion in the US this year. They are different from loyalty programs. You wrote a report about retail memberships. Are we talking about retail memberships?

There is a person namedBlake Droesch.

It's true. Membership programs are where a retailer gives access to exclusive benefits or discounts in exchange for a recurring monthly or annual fee. We're talking about programs like Amazon Prime or Walmart Plus where members get things like free shipping and access to streaming platforms, but it also includes your classic like wholesale club memberships. Delivery memberships like DoorDash Dash Pass or Instacart Plus are not included in this forecast. If you're paying for a product and not a service, that's what those programs are called.

Sara Lebow is a person.

It's okay. We're talking about Prime, we're talking about Walmart, we're talking about Sam's Club.

There is a person namedBlake Droesch.

It's right.

Sara Lebow is a person.

Almost half of all US paid retail membership fees will go to Amazon this year making it the biggest competitor in that area. It's not a big deal. Only a small portion of the fees are going to Walmart Plus. Does Walmart Plus compete with Amazon right now?

There is a person namedBlake Droesch.

Amazon had a 15-year head start on Walmart, so I wouldn't count them out just yet. Walmart Plus has a huge appeal to people who already shop at Walmart because it pairs in-store benefits, things like gas, discounts, and membership rewards, with the online perks more associated with Prime, so like free shipping and grocery delivery It doesn't mean that Walmart Plus can't function on its own to really strengthen loyalty with the brand, even though I don't think it's comprehensive enough to steal members away from Prime.

Sara Lebow is a person.

It is less focused on competing with Amazon and more focused on its own consumers.

There is a person namedBlake Droesch.

It's true. Walmart has a bigger in-store shopping base than any other store. It's only going to boost their revenue online if they can convince more of those customers to try out Walmart Plus.

Sara Lebow is a person.

It's okay. Walmart has a huge in-store base, but Amazon has a huge online base. The majority of people in the US are Prime members. I will ask you this question. Anyone can compete with Prime.

Sky canaves.

Walmart is trying to follow in the footsteps of Amazon and build a membership-based business. They already have a huge audience from stores, and now they want to draw more sellers to its third party marketplace, which would allow them to sell additional services such as advertising via its retail media network and then fulfillment services. It's part of a larger trend in retail from just selling goods to services which can give you higher margins. The best example is Amazon. Walmart has a big advantage over Amazon in the area of groceries.

That's something that's driving Walmart Plus right now. Because you're not going to have third party sellers selling fresh foods or even consumer packaged goods through the marketplace, grocery doesn't lend itself as well as a third party marketplace. Stores are a big part of Walmart's grocery business, both from store shoppers and from people who are buying online, picking up in store, and getting delivery as well. It gives Walmart the chance to get more ad dollars. It's push for spending from consumer packaged goods brands is getting more complicated because of existing business plans. That could affect trade budgets. Walmart's revenue may not be as large a gain.

Sara Lebow is a person.

It's true. Walmart's ad business has been doing well, it's grocery business has been doing well, the way it's been able to keep groceries inexpensive has been doing well at the same time its ad business is not

Sky canaves.

Through our forecast period, it is growing more quickly than Amazon.

Sara Lebow is a person.

We talked about how Walmart Plus works to push for conversion dollars, get people online, and sell ads. Other retailers have memberships. Is that the three main reasons?

There is a person namedBlake Droesch.

One of the main reasons is to build loyalty. The model is to get access to certain benefits in order to be a member. When you need the core things that you go to a retailer for, that's where you want to go. When you need another product or service, you look to that place as well. An example would be Amazon. They have a large base of subscribers for Amazon Prime, but not as many as they would like. If you're a Prime subscriber and you want to try out Amazon Fresh, it's a logical next step since Walmart outsells Amazon when it comes to online grocery items.

Retail memberships help expose their customers to other sides of their business as they compete with other retailers for different services. It's something that Amazon has done well and retailers are trying to do it with their own businesses. They don't have the same number of offerings as Amazon does. The goal is to build loyalty not just within your core product offering, but also in other revenue streams that retailers are trying to achieve

Sara Lebow is a person.

It's definitely true. There is a push to get non-grocery consumers to buy groceries. I have never tried to buy groceries online from Whole Foods because I am a Prime member. The whole experience was too expensive because of how expensive Whole Foods is, which is where they're losing to Walmart, but that's the only place I've tried.

Sky canaves.

Walmart has a different issue. It's trying to get people to go to non-grocery stores. Almost half of Walmart Plus members come from online pickup and delivery channels, according to their most recent earnings call. A lot of that is grocery for them, and that's one of the reasons. Some of the weaknesses in their other categories include apparel and home goods. The membership is being used to try and expand how much consumers spend as well, and I think with both Amazon and Walmart memberships, they spend more and they make more frequent purchases because they've already kind of committed to the retailer through the membership

Sara Lebow is a person.

It's definitely true. You work as a delivery driver. It looks like free delivery is a table stakes for a retail membership. What has become an expectation is how the most valued memberships have changed over time.

Sky canaves.

The basics of perceived savings and getting an extra bang for buck have not changed. As more retailers look to establish membership programs, they are likely to use membership fees or revenues as a way to offset the cost of free shipping. Consumers will need to believe that the membership will pay for itself. The calculation was done earlier this year when we joined Costco because we realized our savings from changing to a private label dog food brand would pay for the membership over the course of a year. We spend a lot more on things we don't know we need and then we get a hot dog and pizza because we're saving a lot on that.

Sara Lebow is a person.

I love the hotdogs from the store. Do you mean that your dog food switch to private label was paid for by your membership in the club?

Sky canaves.

It's true. About $30 a month is how much we save.

Sara Lebow is a person.

Wow!

Sky canaves.

It's true. Two dogs are eating two times a day. The difference between what we were paying for dog food and what we were paying for a membership in the warehouse club was less than we thought.

Sara Lebow is a person.

It's okay. There's more savings tips on this show. Last week you said that you saved $18 by using the Target app.

There is a person namedBlake Droesch.

Fourteen dollars. It's true. It was nice. Sky said that the benefits have not changed. I think free shipping is table stakes for a lot of these services, but I think people still prefer Prime even though they have an association with Amazon as being able to get your packages to you faster than any other service.

It's about being loyal to retailers that can offer you the best value, but also the greatest convenience, and I think Walmart has done a good job of that by rolling out reverse logistics for Walmart Plus members.

Sara Lebow is a person.

It's definitely true. That stat is what it is. 80% of the country lives within 5 miles of a Walmart.

There is a person namedBlake Droesch.

It's true. There are either 80 or 90.

Sara Lebow is a person.

I might have made them up.

There is a person namedBlake Droesch.

Walmart always has a couple of statistics. One of them is the one you're referring to and then the other one is a lot of Americans shop at Walmart within the course of the year. It's pretty ridiculous. It's ridiculous and low, but it's impressive.

Sky canaves.

It's true. I believe that they can deliver to 90 percent of the population with their stores. That's something like that.

There is a person namedBlake Droesch.

It's true.

Sky canaves.

It's true. They want to get it to 85% or something soon.

Sara Lebow is a person.

It's okay. In the first half, we have nothing to do. We're going to talk about creative ideas for retail memberships, but first Adobe sent us a message.

Ultra personalization is being made a priority by retailers. You own the future of retail when you can create and deliver personalized shopping experiences in real-time. The Adobe retail industry website has insights, resources, and success stories to help you scale your personalization efforts like a pro. For more, go to adobe.com.

Thank you for returning from the break. Pop up rankings allow us to look at specific examples and rank them. We will be ranking our top four suggestions for retail memberships. Why don't you give us our first recommendation?

There is a person namedBlake Droesch.

It's true. I would recommend expanding into a flywheel like I was suggesting, but not mimicking what Amazon has. This isn't a retail membership per se, but I think of the memberships that I pay for a month and one of them isUber One and it's because I've been using a lot of ride-sharing lately and I find that the discounts really help offset the cost that Even though I've never used it before, I'm more likely to use it now. If they could expand their partnership to include more retailers, they would be able to give you free shipping from Target or another Amazon competitor.

I think Sky said, bang for your buck, so maybe I will just drop my Amazon Prime subscription and go all in on the ride hailing service. At the end of the day, that is what this is all about. I think that if these companies can get creative and build flywheels that offer personalization, that could be really valuable. It's very hard to achieve, but I think that it could be a game-changer.

Sara Lebow is a person.

Do you think there is a world where Uber has its own fulfillment center?

There is a person namedBlake Droesch.

It is not too far away. There are a lot of different ideas.

Sara Lebow is a person.

It's okay. Along the way. Sky, can you recommend a retailer that offers a membership?

Sky canaves.

As value continues to be top of mind for consumers, something that can really keep them engaged will be more personalized savings and personalized offers. Retail memberships give retailers a lot of consumer data that they can use to tailor offers and coupons to individual consumers based on their purchases. Retailers will have to go in a certain direction to keep members. Instead of getting a coupon for something that everyone else is getting, I'm getting something for a product that I buy or a category that I make frequent purchases in.

Sara Lebow is a person.

As it expands its membership, Walmart will have an advantage because it doesn't have as much data as other stores. Memberships allow it to collect more data and personalize it with ads.

Sky canaves.

That's true, but I think they have a good share of credit card and debit card spending as well and one of their savvier partnerships recently has been with Amex to credit the Walmart Plus fees back to Amex Platinum members If it's free, people are going to say, "Why not?" It might as well be tried.

Sara Lebow is a person.

That is a good point. It's okay. Can you give us a recommendation for a retailer that sells memberships?

There is a person namedBlake Droesch.

It's true. Product partnerships could be of interest. Sky and I talked about this on the show a couple of months ago, but Walmart had an exclusive pre-release of a limited edition flavor for Walmart Plus members, and we were talking about it. Is this going to make a difference with Walmart Plus memberships. Walmart could create a network of product partnerships that would only be available to Walmart Plus members and it wouldn't have to be limited edition or anything like that. Sampling could also be what it's called. If you position that as sort of free gifts for subscribers, that could go a long way in terms of building memberships and then also benefiting brands as a vehicle for marketing and then also subscriptions.

Right now, Amazon and Save is doing great. If Walmart could create partnerships that would give Walmart Plus members exclusive discounts for recurring subscriptions on some of these everyday essentials that Walmart is really a go to destination for a lot of its customers, then I think it could add a lot of value for the Walmart Plus membership.

Sara Lebow is a person.

It's definitely true. Right now it has a media partnership with Paramount Plus. Are you talking about Discovery Plus?

There is a person namedBlake Droesch.

It's true. A credit card company would do that. I think Paramount Plus is the big video streaming one, even though you can get a free trial with other companies.

Sara Lebow is a person.

It's true. I know people get excited about free gifts and they have been for a long time. It would be pretty cool if Walmart did that with products from the consumer packaged goods industry. We mentioned a few weeks ago that there was a dessert called Cream Oreo. Did anyone of you get a chance to try it?

Sky canaves.

It is not possible to say yes. I did, that's right.

Sara Lebow is a person.

It's okay.

Sky canaves.

I wasn't able to.

There is a person namedBlake Droesch.

It is not possible to say yes. I think I have to join Walmart Plus.

Sara Lebow is a person.

It is not possible to say yes. Early access was available. It's likely you can access it now. It's the-

There is a person namedBlake Droesch.

Oh!

Sara Lebow is a person.

Early access was the deal.

There is a person namedBlake Droesch.

Access is early.

Sara Lebow is a person.

To the taste. The flavor was not an exclusive one. It didn't make sense.

Sky canaves.

I don't like all the new flavors of the cookie. Some people collect them.

Sara Lebow is a person.

It's okay. So what do you think about retail memberships, what are you a fan of?

Sky canaves.

Content will be a big part of the future. You mentioned that Walmart's Paramount Plus benefit is a hook to draw people into Walmart Plus and then they would see the other benefits from the actual retail membership and want to keep it. Nowadays, as consumers are more conscious about their subscription and looking to budget there, getting these in addition to a retail memberships can be a value driver.

Sara Lebow is a person.

It's possible that Amazon has an advantage in owning its subscription service. Prime is like Prime Video. Is there a world where Walmart could own a streamer?

Sky canaves.

Unless it's TikTok, I don't know. It was something.

Sara Lebow is a person.

It's true.

Sky canaves.

Who knows what benefits they would want to give there. The challenges that streaming is facing and the different membership tiers and the challenges in getting audiences to stay loyal to a particular streamer creates more incentives for streamers to find partners who can help them extend their audiences.

Sara Lebow is a person.

It's okay. Today is all we have left. Thank you for joining me.

Sky canaves.

Sara, thanks a lot again.

Sara Lebow is a person.

Thank you for that.

There is a person namedBlake Droesch.

I would like to say thank you for having me.

Sara Lebow is a person.

We need your help to get a rating and review on our show. Victoria is a valued member of the team and we would like to thank her for her work. Don't wait, get it. We'll be back next Wednesday with a new episode of Reimagine Retail. Marcus is going to host another episode of Behind the Numbers Daily.