KORS Michael Kors Holdings Limited Ordinary Shares (delisted)

By Suzanne Kapner 

Elite AmEx customers carry the Black Card. Soon, Nordstrom Inc.'s top shoppers will be granted "icon" status.

After years of competing for shoppers with discounts, retailers are trying a new approach heading into the key holiday season: wooing their biggest spenders with special services and access to private events.

Nordstrom's revamped loyalty program, which will launch this fall and includes more than 10 million active members, has a new category to fete top spenders: invitation-only "icon" status that includes private dinners with designers and other exclusive events.

On Saturday, J.Crew Group Inc. stores will open an hour early for loyalty members, who will be treated to a light breakfast while they shop. Macy's Inc. platinum cardholders will get special access to its Thanksgiving Day Parade, including an invitation to rehearsals and free grandstand seats.

And Nike Inc.'s new Manhattan flagship, slated to open early next year, will have a members-only floor with exclusive products and services such as personal shoppers.

"Retailers are waking up to the idea that the arms race around monetary rewards isn't sustainable," said Scott Robinson, vice president of design and strategy for Bond Brand Loyalty, a consulting firm.

Hotel chains, airlines, credit card companies and luxury retailers have for years offered their best customers special perks that go beyond points and discounts. But the vast majority of retailers are only just catching up.

That is one reason why retail loyalty programs rate so poorly among consumers. Apparel retailers ranked second from the bottom out of 15 industry sectors in a recent study of more than 800 loyalty programs by Bond Brand Loyalty.

Retailers have spent the past few months retooling their plans to fend off competition from online retailers such as Amazon.com Inc., whose Prime membership is one of the more effective loyalty programs, as well as travel and entertainment venues, which are taking a bigger slice of consumer spending.

There are still plenty of discounts -- Nordstrom's new program allows credit card members to accrue points at a 50% faster rate -- but now there are also more invitation-only events and personalized services.

"It's important for consumers to feel like the company 'gets' them," said Adam Brotman, J.Crew's chief experience officer. He said the retailer is planning to launch more members-only events this fall, including one tied to Black Friday as well as providing them with first looks at new collections and customized outfit suggestions.

For the moment, all J.Crew loyalty members are treated equally but Mr. Brotman said the company is planning to introduce tiers next year to reward the highest spenders.

Macy's began offering its best customers, those who spend $1,200 a year or more, special perks earlier this year, including a private tour of its Flower Show, VIP seating at its July 4th fireworks, cooking classes with local chefs and a preview of the Broadway show "Pretty Woman."

Platinum members get a platinum-colored store card to distinguish them from gold and silver members, whose cards are red.

Shopper Tracey Morris recently sat in the front row at a runway show of a local Atlanta designer with VIP tickets the 46-year-old financial consultant earned as a platinum member in Macy's Star Rewards program.

"It's something I wouldn't normally do," Mr. Morris said. "The perks make me feel special."

A Nordstrom spokeswoman declined to specify the spending threshold for "icon" status since the program hasn't launched yet, but said other factors beyond straight dollar amounts might apply. To qualify for the next highest tier, "ambassador," shoppers must spend at least $5,000 a year. Benefits range from access to beauty and style workshops to in-home stylists.

Companies on average spend between 1% to 3% of their revenue on loyalty programs, according to Caroline Papadatos, who oversees the consulting practice of LoyaltyOne Co., which manages loyalty programs for retailers. But she said the overall investment can be much higher when experiences are layered on top of traditional monetary rewards.

Retailers say it is worth the extra expense since loyalty members tend to spend more. Macy's gets half its $24.8 billion in annual revenue from 10% of its customers. And Nordstrom says loyalty members spend four times more than nonmembers.

American consumers got their first taste of rewards programs in the late 1800s with S&H Green Stamps, according to Mark Johnson, the chief executive of Loyalty360, an industry trade group. Shoppers received stamps when they made purchases at participating retailers, glued them into booklets and traded them for goods.

By the 1930s, they were clipping Betty Crocker box tops and by the 1980s they were racking up frequent flier miles. A few years later, credit card companies got into the act, offering cash back on purchases.

It wasn't long before card companies started segmenting their customers and offering the highest spenders special perks. American Express Co. introduced its ultraexclusive Centurion Card, known as the Black Card, in 1999. For a $7,500 initiation fee plus a $2,500 annual fee, cardholders are eligible for perks including free nights at luxury hotels and personal shopping services.

Neiman Marcus Group Inc. was one of the first retailers to launch a loyalty program in 1984. These days, shoppers who spend more than $600,000 a year can choose a complimentary travel excursion and get an array of other services ranging from free in-store dining to fur storage.

The new programs retailers are rolling out now aren't as exclusive. For example, handbag seller Michael Kors Holdings Ltd. launched a VIP loyalty program in January, offering those who shell out at least $1,500 a year early access to new products and private in-store events plus a dedicated customer service hotline.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com

(END) Dow Jones Newswires

September 13, 2018 09:44 ET (13:44 GMT)

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