Madewell is working to strengthen its “community” of shoppers by enhancing its four-year-old program of perks, called Insider, with loyalty points for the first time.
The timing makes sense. All retail brands selling “nonessentials” need to motivate shoppers during the pandemic and Madewell’s parent company, the J. Crew Group, is close to emerging from bankruptcy proceedings. A confirmation hearing on the company’s plan of reorganization has been scheduled for today.
In an exclusive interview, Madewell’s chief executive officer Libby Wadle discussed the Insider program, the loyalty points, what jeans mean to Madewell, digital sales, and how the brand has been adapting to keep consumers engaged during the pandemic, though she was not at liberty to discuss the bankruptcy.
“Over 60 percent of our customers are Insider members. They drive 73 percent of our brand sales,” said Wadle.
“We started our Insider program without points almost four years ago as a way to drive ‘community’ and offer a personalized experience. It’s really about creating a connection. The Insider program offers free shipping and returns, and as you increase your spend you get other kinds of experiences — early access to new products, special invitations to events. It’s really been successful. We’ve kept our community engaged,” said Wadle.
With loyalty programs, offering points for purchases is practically standard. However, Madewell held back. The brand saw impressive growth in revenue and popularity, season after season, and was doing just fine without offering points for purchases.
According to Wadle, who has been with Madewell since its inception, the move to expand the Insider program and launch loyalty points comes after years of monitoring and soliciting customer feedback. “With over 10 avenues for gathering feedback, the team is committed to building the brand’s offerings and experiences based on what the customer is looking for, particularly as shopping habits have evolved with the pandemic,” she said. “The team was already working on adding points to our program ahead of this year, long before the reality of the pandemic set it. Due to the success of the program to date, the team saw a distinct opportunity to evolve it further and worked diligently to gather customer feedback and understand the best ways for to grow it. All signs pointed to points being a meaningful addition.”
Enhancing the Insider program will help Madewell learn even more about customers and further personalization efforts. “Data is a huge element. We know our Insider customers better than anyone else,” said Wadle.
Other factors would have contributed to the launch of loyalty points. Last year, before the outbreak of COVID-19, reports emerged that Madewell (developed by the legendary Mickey Drexler, who left as ceo of the J. Crew Group in 2017) was losing steam. Some styles and looks that set the brand apart became widely available and were knocked off by competitors.
Madewell’s sales in 2019 increased 14 percent to $602.4 million as comparable sales increased 10 percent. In the fourth quarter of 2019, sales gained 13 percent to $178.1 million, and 9 percent on a comparable basis. But that followed an increase of 22 percent in the fourth quarter of 2018. As companies grow, it becomes harder to achieve double-digit gains on top of big gains.
Still, Madewell in certain ways is situated better than many brands to navigate the health crisis, given its high penetration of digital sales – north of 41 percent of sales. Also, Madewell is far from overstored; it’s a manageable fleet of 142 stores. And the casual, laid-back, denim-rooted assortment suits sheltering in and working at home. Pre-COVID, Madewell already implemented omnichannel capabilities, such as ship from stores, buy online pickup from store, and ‘dot-com, try-on’ where you can try on at select stores and order for home or store delivery certain denim styles typically only found online. After the outbreak, curbside pickups were implemented where it’s feasible. “We believe we can build on that further, in terms of real conveniences,” said Wadle.
“We are positioned so well from a digital standpoint,” added Wadle, citing “a very engaged online community which is very comfortable shopping online, and Madewell’s “very casual, kind of effortless” assortment. “We feel very well positioned for whatever we are headed into, which is very hard to predict.”
Points, she said, are “an important foundational component to a loyalty program. Anything we can do to enrich [the customer’s] experience, reward her, and give back is more important than ever. Now is a particularly good time to make sure you’re keeping your customer engaged.”
Special events help, she added, such as the Aug. 12 online discussion on fall trends, design inspirations and processes with Madewell’s head of design Joyce Lee, and creative director Alice Bucaille. “Guests were able to hear first-hand about our design process and preview our favorite pieces from the collection. We plan to expand these events in the future and increase the early access opportunities for our Insider members,” said Wadle.
Madewell’s program of sustainability, support of improving factory conditions and worker pay with its Fair Trade USA partnership, and work with nonprofits, such as donating proceeds of a ‘Vote’ t-shirt to the American Civil Liberties Union, also tighten shopper bonds. Madewell is committed to having 100 percent of the key fibers used in its materials to be sustainably sourced and free of virgin plastics by 2025.work in safe conditions, protect the environment, build sustainable livelihoods,
Starting today, customers enrolled in the Insider program, which is free, earn one point for every $1 spent and receive a $10 reward for every 250 points earned. That’s the equivalent of earning four cents back for every dollar spent.
Customers earn two points on jeans purchases, which underscores how central denim is to Madewell’s business. The jeans range from $78 to $125 and represent about a third of Madewell’s volume.
The sweet spot for jeans are those priced around $100. “It’s our value proposition for premium quality denim,” said Wadle.
“Our highest-value customer buys jeans from us. A customer who loves the fit of the jeans will come back to the brand. There is so much going on today with fit and fabric technology for all different leg shapes. We have jeans that are right for everyone.”
Two points are also earned for each dollar spent on items with charitable ties and Madewell Star and Icons, those spending at least $500 and $1,000 annually, respectively, can earn triple points while shopping on designated days during the year. Points convert into rewards or credit that can be applied to the next purchase.
Simplicity is key to any loyalty point program, Wadle emphasized. “It’s crucial. The most important thing is that you don’t have think about it. We want you to be able to easily access where you stand. We’ve built a great portal on our web site to readily see what you have earned.”
Among the other perks aside from the points, Madewell’s Insiders receive free shipping and returns, an annual birthday gift, free monogramming in store and online, and early access to seasonal collections and collaborations.
On May 4, the J. Crew Group became the first national retailer in the U.S. to file for Chapter 11 bankruptcy during the pandemic. The group had been struggling for several years under the weight of $1.7 billion in long-term debt, and sustained disappointing results at the J. Crew brand, though just prior to the onset of the coronavirus outbreak, J. Crew did see some improved selling trends through a renewed focus on the categories and items with a history of selling best. The reorganization plan for the group essentially involves a debt for equity swap whereby creditors become the new owners and the company gets greatly deleveraged.
Prior to the bankruptcy, the group was planning a Madewell initial public offering to reduce the debt. However, the IPO was canceled with the stock market’s roller-coaster ride amid the coronavirus. Whether a Madewell IPO or some other alternative for splitting up the group is revisited remains a possibility.