It does pay to have a fee-based loyalty program. Just ask Restoration Hardware, which launched its RH Grey Card Membership program two years ago.
In a message to customers, partners, and shareholders on the company website, Restoration Hardware Chairman and CEO Gary Friedman talked about the recent business success that is intimately tied to the RH Grey Card Membership program.
“2017 was the year of execution, architecture, and cash at RH,” Friedman said in his message. “Our efforts were focused on executing our new membership model, architecting a new operating platform, and maximizing cash flow by increasing revenues and earnings, and decreasing inventory and capital spending. With 95 percent of our core RH business driven by members, we can confidently declare our move from a promotional to membership model a success. Membership has enhanced our brand, streamlined our operations, and vastly improved the customer experience. The road of endless promotions, free shipping, an unnatural shift to online, and a shrinking store base, is resulting in broken and unsustainable retail models. We prefer the road less traveled by, and like Robert Frost, believe it will make all the difference.”
The RH Grey Card Membership program carries a $100 annual fee. Member benefits include:
• 25 percent savings on RH, RH Modern, RH Baby & Child, RH TEEN, and RH Contemporary Art
• 10 percent savings on all sale items
• Complimentary interior design services
• Concierge service to manage your orders
• Early access to clearance events
Friedman said the company plans to open four new galleries in 2018 in Portland, Nashville, Yountville, and New York, the latter three with integrated cafés, wine vaults, and barista bars. 
“Our plan is to pivot the company back to growth in 2019 by returning to our product and business expansion strategy and re-accelerating our real estate transformation,” Friedman explained. “We plan a return to our product and business expansion strategy in 2019, which has been on hold as we focused on our move to membership and the architecture of a new operating platform. We have several new business and brand extension plans in our pipeline, and look forward to unveiling them beginning next year.”
Friedman said that company officials understand that many of the strategies they are pursuing are all in direct conflict with conventional wisdom and the plans being pursued by many in the industry. Those strategies include opening the largest specialty retail experiences in the industry at a time when most are shrinking the size of the retail footprint or closing stores; moving from a promotional to a membership model while others are increasing promotions, positioning their brands around price versus product; continuing to mail inspiring Source Books, while many are eliminating catalogs; and refusing to follow the herd in self-promotion on social media, instead allowing the brand to be defined by the taste, style, design, and quality of the products and experiences the brand is creating.
“We believe when you step back and consider: One, we are building a brand with no peer,” Friedman added. “Two, we are creating a customer experience that cannot be replicated online; and three, we have total control of our brand from concept to customer, you realize what we are building is extremely rare in today’s retail landscape, and, we would argue, will also prove to be very valuable.”

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