Is the Shop Your Way Loyalty Program the Long-term Answer at Sears?

The Shop Your Way loyalty program at Sears has always been one of the company’s main driving forces behind customer engagement.

Earlier this year in a letter to shareholders, Sears president and CEO Eddie Lampert said that member sales penetration for the Sears’ Shop Your Way loyalty program has grown from 58 percent to 75 percent since 2011.

“We have tens of millions of active members accounting for more than 70 percent of our sales today and they are at the heart of everything we do,” Lampert said in March.

Fast forward to the company’s recent first-quarter earnings call and Sears CFO Rob Riecker echoed those sentiments despite Sears’ ongoing restructuring program that includes the announced closure of 150 nonprofitable stores, along with the closure of 92 underperforming pharmacy operations in certain Kmart stores and 50 Sears Auto Center locations.

“We believe this restructuring program is critical to becoming a more competitive, efficient, and agile retailer moving forward,” Riecker said. “We continue to have a valuable real estate portfolio, which at the end of the quarter comprised over 900 leases with significant optionality, as well as over 350 owned stores, many in prominent locations. We continue to have a high degree of flexibility across our store leases as a result of the minimal base lease commitment and renewal options. We will continue to assess opportunities to right size our store footprint and inventory levels to ensure they're aligned to our ongoing transformation to an asset-light integrated retail model.”

First-quarter sales were $4.3 billion, compared to revenue of $5.4 billion for the quarter ended April 30, 2016. The year-over-year decline was primarily driven by having fewer Kmart and Sears Full-line stores in operation
Riecker said the company continues to work toward “providing a more rewarding member experience to our Shop Your Way ecosystem.”

Riecker noted the launch of a new Sears MasterCard with Shop Your Way, developed in partnership with Citi.

“Our new MasterCard offers an industry-leading rewards program including 5 percent back-end points on eligible purchases made at gas stations, 3 percent back-end points on eligible purchases at grocery stores and restaurants, 2 percent back-end points on eligible purchases made in Sears and Kmart, and 1 percent back-end points on all other eligible purchases,” Riecker said. “We believe this new credit card product will significantly strengthen the competitiveness of our Shop Your Way platform and has the opportunity to become a key performance driver for our company.”

From a member engagement perspective, Riecker added: “We are increasingly focused on expanding frequency of usage of Shop Your Way. We are doing this through targeted marketing and member engagement initiatives that leverage our data analytics and personalization capabilities, and we are seeing the results. We have tens of millions of active members and that number continues to grow. We expanded our VIP program to reward our members based on spending frequency and addition to traditional spend based points architecture, which has resulted in a nearly a 50 percent increase in the number of VIP members year-to-date, compared to the same period last year. We saw an increase in the number of trips, order volumes, and cross-category purchases by our members as they became more aware of our Shop Your Way benefits, and we also continue to actively pursue new partnerships and other membership offerings to deliver more value and better services to our members.”

Despite the company’s problems in recent years, Sears officials are placing a major win bet on the future success of their Shop Your Way loyalty program.

Evan Magliocca, brand marketing manager for Baesman Insights & Marketing, told Loyalty360 that he’s not so sure about the strategy.

“The Shop Your Way program is a continuation of many of the problems that put Sears in this position,” Magliocca said. “It’s highly promotional and doesn’t help build brand equity, trust, or engagement as its competitors do. Rewards across different categories on the Citi MasterCard may help retain customers that are already loyal, but to acquire any new customers, Sears will need to rethink its value proposition to catch up to Amazon, Target, and Walmart.”

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