Myntra, the fashion e-commerce arm of online marketplace Flipkart rolled out its loyalty programme Myntra Insider on Wednesday. The programme allows subscribers to earn points along with early access to sales, priority customer support, discounts, special birthday offers and more.
Loyalty programmes are not a new thing, especially in the retail sector. These are marketing strategies that incentivise users for buying from a particular store. The aim is to ensure that consumers stick to the particular store or brand.
Myntra-Jabong’s CEO Ananth Narayanan said with Myntra Insider, the company aspires to onboard 10 million users over the next 12 months.
“We want to make visiting Myntra a habit for our users and aim to get our fans to visit us over 100 days a year and make a purchase every month,” he added.
Myntra Insider users can redeem their points while making purchases on the platform. Additionally, Insider users get to redeem their Insider points on other subscription platforms such as Zomato Gold, BigBasket, BookMyShow, PhonePe, Eros Now, Zoom Car, Gaana and others. The above-mentioned companies have partnered with Myntra for this.
To be sure, all these companies also have their own loyalty or subscription plans in place.
While Myntra Insider is free for users and every Myntra user is automatically eligible for offers on Insider, loyalty programmes of online food delivery companies such as Zomato and Swiggy, cab aggregator Ola, hotel booking app OYO are paid programmes.
In the highly competitive online business scene, the technique seems to have suddenly become a trend in India. True, mobile internet penetration in the country has led to the rise in consumers in India. However, the simultaneous presence of several vendors competing in the same industry has made it difficult to guarantee footfall concentration.
Myntra is the newest ‘member’ in the club to launch a membership programme. In recent months, the internet startups and unicorns in India have secured users through various rewards and membership programmes. The companies promise surcharge and pricing free of predatory charges, guarantee premium and priority services, dole out loyalty points (money), discounts, early access to deals, one+one free offer, and maybe cash-backs amongst others.
Mass adoption of loyalty programmes
Harish HV, former partner of independent auditing firm Grant Thornton said that the companies want to lock customers and make them stick to the company by giving users additional facilities.
“A user will buy from Flipkart today, from Amazon tomorrow and other days from somewhere else, but members will buy from same place and revenue will go to the same company,” he explained.
Similarly, the Bangalore-based car-renting company Zoomcar said that it turned Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) profitable in the month of December 2017 and grew over 40% in 2017 riding on its membership model Zoomcar Associate Programme (ZAP).
ZAP is a monthly subscription-based programme which lets Zoomcar users subscribe to one or more vehicles which could be leased to Zoomcar and operates on a revenue sharing model. Last month, Zoomcar also said it would spend USD 20 million to promote ZAP. While Zoomcar did not share revenue generated from its membership programme, Greg Moran, founder and CEO in an interaction with The Passage said more than 50% of the company’s fleet is on ZAP.
In the food-tech sector, restaurant listing and food delivery unicorn Zomato started its loyalty programmes—Piggybank in June this year for its food delivery segment, and Zomato Gold for dine-out which promises 1 + 1 drinks and food at select restaurants across India.
Last week, the company announced the Piggybank programme had crossed 1 million users. The company added the Piggybank programme had generated 200,000 users within two days of its launch.
Zomato credits 10% of a user’s order value as “Z Coins” into Piggybank when they order food online. These coins can be used to pay for 10% of the value of the next order. Zomato founder and CEO Deepinder Goyal said that these 1 million users had placed 2 million orders using Z Coins and had “saved Rs 50 million” so far.
In April, Zomato put out its financial report in a blog for the fiscal year 2017-18 and said that since the launch of Zomato Gold a few months ago, the company obtained 160,000 subscribers.
The company reported revenues of USD 74 million in FY18 as compared to USD 51 million in FY17, representing a 45% year-on-year growth. As on March 31, 2018, Zomato had 280,000+ active subscribers across its two subscription programmes – Zomato Gold and Zomato Treats.
Another new member of the loyalty programme club is hospitality unicorn, OYO. The company launched its membership programme called Wizard this month. The Wizard membership entitles its members for 5% instant discount on current booking and instant rewards in the form of OYO Money (valid for 6 months).
The programme provides benefits like rewards, discounts, upgrades to the members. With this programme, the company wants to retain its repeat-users, Maninder Gulati, the company’s chief of strategy said in a press statement. He added that 95% of OYO’s revenue comes from repeat-customers.
Others in this bandwagon are e-commerce giants like Walmart-owned Flipkart and Amazon. While Amazon has a yearly subscription programme called Prime, which promises priority delivery, discounts, early access to deals, music and video streaming, its rival in India, Flipkart launched Flipkart Plus last month. Flipkart’s membership ensures free and fast delivery, early access to major sale events, and enhanced customer support.
Companies with subscription plans:
From bleeding losses to making profits
Until the late 90s, businesses were required to sell goods or services above cost to survive in the market. But it seems the new way to stay up in the game is to spend big, grow fast, and acquire users. Incurring losses for some time is a part of the game. The trick is to become profitable somewhere down the line when you have the largest or at least enough userbase.
Most of the internet unicorns in India are nursing losses at present. The rise in unprofitable companies is part of the trend. The funding pattern has also proved that shareholders and investors are ready to fund loss-making entities to finally conquer a potential 'winner-take-all' market.
For instance, Zomato is a loss-making entity. For FY18, the company reported losses of Rs 106 crore, however, the losses have narrowed down by almost 73%. Rival Swiggy too is bleeding money. According to a year-old report by news website YourStory, Swiggy posted a revenue of Rs 133.1 crore and losses of Rs 205.2 crore in the fiscal year 2016-17. In the previous year, the food-tech startup had seen a revenue of Rs 23.6 crore and losses of Rs 137.2 crore.
OYO too is not yet making profits. The company reported losses of Rs 330.9 crore for the fiscal year 2016-17, The Economic Times reported. These companies, especially aggregators, have to ensure that they earn money eventually. Currently, most of them earn money from the commissions they get from their partners. Analysts say, to onboard partners these companies are forced to reduce their part of the commission which eventually means less money. This requires the companies to device other ways of making money.
Harish said that memberships are one way of increasing the revenue.
“If I am not a regular customer, you have to keep attracting me all the time with, maybe ads in newspapers and elsewhere. Customer acquisition is also quite expensive. Once customers are locked in – the cost of acquiring customers come down,” he elaborated.
Are loyalty programmes an ideal profit-making strategy?
Moran of Zoomcar believes that calling membership programmes an ideal business model would be an exaggeration. But he agrees that this strategy can answer the need for constant demand.
“That explains why the companies are coming up with their own membership/subscription programmes which offer a basket of goodies for an annual charge,” Moran said.
“The response to ZAP has been phenomenal and we should have 80% of our fleet on ZAP by the end of the financial year (FY’19),” he added.
He said the company expects future profits to come from the subscribers itself.
Market research and consumer behaviour
The membership programmes benefit the companies in yet another way. In fact, such programmes help companies understand user behaviour. Harish explained that companies are able to build a good database of customers’ profiles, their likes or dislikes etc. from the membership pool.
“This gives them a big advantage.” Armed with the data, companies implement target marketing and give customised offers as per the users’ profiles,” he said.
Harish believes such loyalties and membership programmes are good for aggregators.
“These kind (aggregators and marketplaces) of companies charge some fee for the programmes. People who have paid Rs 500 -1000, feel they have to recover the money paid. So, they tend to use that particular app more than others,” Harish explained.
Swiggy seems to be doing something on these lines. The company also launched its one-month and three-month membership subscription plans called Swiggy SUPER.
Speaking to The Passage, Anuj Rathi, VP Product, Swiggy said that its membership wasn't created as a revenue generation machine but was launched after months of consumer research that he claimed understood some of the biggest pain points of Indian consumers, especially with delivery fees.
The programme allows users to get unlimited free deliveries irrespective of the distance or time of day. In addition, the membership programme also offers benefits such as no surge fee and quicker issue resolution through a dedicated customer care team.
“With very affordable membership fees, Swiggy SUPER will not only reduce common anxieties when it comes to food ordering but also continue to make it more convenient and delightful for them. As a result, consumers will use the app more frequently, benefitting both our consumers and restaurants partners,” Rathi said.
He, however, did not share any figures pertaining to Swiggy Super subscribers, or revenue expectations from the programme. He claimed that since 45 days of its launch, Swiggy has already seen a very positive adoption amongst consumers with many opting to renew and extend their membership.