To increase loyalty, Urban Outfitters is experimenting with a paid membership scheme

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In February, Urban Outfitters Inc. began testing a paid subscription programme that includes free shipping and returns as well as other perks from its Urban Outfitters, Anthropologie, and Free People stores. In a quarterly earnings call, Richard Hayne, chairman and CEO of Urban Outfitters, said the lifestyle retailer expects to run the pilot UP membership programme for six to twelve months, depending on how many customers sign up and what they learn from the test.

“UP is intended to increase frequency, capture a larger share of wallet, boost retention, provide opportunities for cross-brand exposure and sale, and attract new customers,” Hayne explained. “The opportunity to receive benefits across all Urban brands for the price of one membership fee is a key differentiator for our product,” says the company, which started testing the programme in Atlanta and Dallas at $48 and $98 price points.

The retailer’s trial of a paid membership programme comes as it looks for ways to rekindle revenue growth after the pandemic, which resulted in temporary store closures and lower foot traffic. In the fourth quarter, revenue dropped 7% year over year to $1.09 billion, but the number of digital customers increased by50%, according to Hayne.

Dive Insight

Urban Outfitters is experimenting with a paid membership to UP, which is different from its UO Rewards scheme, to see if it can increase customer loyalty. Free shipping and returns, a 15% discount on orders, a $10 coupon every month, a discounted subscription to apparel rental service only, and access to promotions and events among its store brands are among the benefits offered by the company to boost store traffic and help its fast-growing digital business.

Following a tumultuous year that upended conventional shopping habits, a paid membership programme could help Urban Outfitters fulfil consumers’ rising demands for more convenient shopping experiences. It could also provide the retailer with a way to collect data about its customers to aid in the fine-tuning of its marketing at a time when third-party data is becoming increasingly scarce.

According to a study conducted by consulting firm McKinsey last year, members of paid membership programmes are 60% more likely to spend on a brand after subscribing than members of free loyalty programmes. Paid loyalty programmes result in more frequent transactions, a larger basket size, and stronger brand loyalty than free loyalty programmes. Also when revenue from membership dues is counted separately, McKinsey found that paying members are many times more valuable than nonpaying members.

As consumers consider whether or not to commit to a membership charge, one challenge Urban Outfitters may face with the new programme is explaining the difference between UP and its UO Rewards programme.

During the call, Hayne said, “The aim here is really to test and learn and understand the degree to which customers are fascinated by these offers and then also be able to track over time how customers react and how their behaviour changes based on becoming a member.” “We only launched it a few weeks ago, so it’s still early, but the early feedback has been encouraging, and we’re excited about the software.”

While paid subscription programmes have been a staple of warehouse chains like Costco and BJ’s Wholesale since their inception, Urban Outfitters’ test programme is somewhat different for a retailer that primarily sells apparel. Management said that upcoming conference calls, it would include updates on the UP membership test.

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