We hear such an incessent drumbeat of bad news about the retail sector these days that it's always refreshing to hear a good-news story about a retailer bucking the trend. Enter athletic apparel retailer Fabletics, profiled in a Retail Touchpoints piece that highlights the retailer's sophisticated use of customer data to provide a competitive edge. The key to growth during the Retail Apocalypse: Leverage deep customer insight to build real relationships with your customers.
By Rick Ferguson
The company, co-founded by actress Kate Hudson in 2013, and its parent company TechStyle, has come under fire for its business practices. TechStyle's three major brands - Fabletics, ShoeDazzle, and JustFab - operate under a paid VIP membership model that encourages customers to join the VIP subscription program in order to access deep discounts on apparel. To avoid monthly $40 credit card charges, members must either make a purchase or log online to "skip the month." In 2015, so many members complained about difficulties in canceling their memberhips or getting hit with unanticipated credit card charges that district attorneys' offices in California began investigating the company.
Since that time, the company claims to have improved its customer service policies, and the move seems to have paid off: The latest reported sales stats from 2016 saw the Fabletics brand alone chalk up 200 percent growth over the past two years; its VIP membership program boasts over 1 million members. The company opened its first 18 brick-and-mortar locations in the US last year, and racked up 644 percent retail growth in the first year of operations.
Shady business practices aside, the company has capitalized on the one retail business model that appears to stem the tide against the tsunami that is Amazon: the walled garden approach. By funneling as many customers as possible into its subscription VIP program, Fabletics and its sister brands have built a sustainable customer base that loves the company's apparel products so much that they're willing to pay a monthly fee for access. Provided that Techstyle can avoid ripping them off or making it difficult for them to unsubscribe, these customers will assuredly keep buying Fabletics gear no matter what shenanigans Amazon pulls.
With its foray into dirtmap retail, Fabletics is also leveraging customer data to make its relationships with VIP subscribers even stickier. Per the Retail Touch Points piece, Fabletics is leveraging customer data both to improve retail operations and personalize customer interactions. Money quote:
"Many retailers talk a good game when it comes to personalizing interactions with each customer, but Fabletics really walks the walk. The brand is gathering extensive customer data from the 1.2 million members of its continuity-based subscription retailing program; Fabletics supplements this data collection with sophisticated in-store technologies that build comprehensive customer profiles in near real-time.
"[Fabletics SVP Dustin] Netral identified several of the ways Fabletics uses data in ways large and small:
• "Sending a personalized “monthly boutique” email to each member, using a continuously refined algorithm to build the selection and offers;
• "Offering community-based perks such as digital workout classes;
• "Providing call center agents with complete customer data, including items currently in a customer’s shopping cart, those she’s looked at on the web site and her purchase history;
• "Beginning in June 2017, Fabletics will add an OmniCart function that allows shoppers to complete transactions started in the physical store on their smartphones."
That, my friends, is the way you fight Amazon - buy forming a gated communinity and deploying a rigorous approach to customer data collection and insight to beat Amazon at their own game. Not every retailer needs to convert to a subscription model - the key is to find an approach to reward and recognition that resonates with your brand, and then leverage customer data to build real relationships based on trust, commitment, and reciprocity. Provided they continue to focus on the "trust" part of that equation, Fabletics provides a useful case study.
Rick Ferguson is CMO and Editor in Chief of the Wise Marketer Group.
