Target, Whole Foods pilot customer loyalty programs

Better late than never? Target (NYSE: TGT) and Whole Foods (NASDAQ: WFM) are testing customer loyalty programs.

Observers think the timing may be off for Target, which would add more customer data at a time when its image is still recovering from the major data breach it suffered a little over a year ago. Others question why Whole Foods, with an already loyal following, would even need one, aside from the data mining opportunities it represents.

Nonetheless, the two retailers are moving forward. One reason may be competitive pressure, as U.S. consumers now hold 3.3 billion memberships in customer loyalty programs, according to the Colloquy Loyalty Census. This is a 26 percent increase over Colloquy's 2013 study. American households hold memberships in 29 loyalty programs among the retail, financial services, travel and various other economic sectors, yet they are only active in 12 of them. Observers point out that Target's main competitor, Walmart, does not offer a loyalty program.

"Think of the U.S. loyalty market in terms of a crowded party where half of the party-goers are standing in the corner without mingling," said Jeff Berry, Colloquy research director and census report author.

Now in beta test, Target's REDperks program is available by invitation only in select markets, offering an additional 5 percent off an entire day of shopping for each $500 in shopping, according to Piper Jaffray analyst Sean Naughton, who was quoted in StreetInsider. Naughton said the program will be on top of the 5 percent REDcard discount, but cannot be stacked with the Pharmacy Rewards program.

"We believe this loyalty program is a good addition to Target's offering as it can help reach less frequent guests who are not interested in opening a REDcard account or who are unbanked," he said.

Whole Foods is feeling competitive pressure from new natural and organic retailers, according to USA Today. "Our customers have wanted an affinity program for some time," spokesman Michael Silverman said. "With such strong existing customer demand for a program like this, we believe it will enhance existing customer loyalty and drive new customers to shop Whole Foods Market stores."

Whole Foods shoppers will have the choice of using a rewards card or a mobile app. In addition to accumulating points for dollars spent, "experiential" rewards, such as cooking classes, also will be offered.

The retailer started testing Whole Foods Market Rewards in September of last year in Princeton, New Jersey and the Philadelphia market, according to Integrated Solutions for Retailers. Three stores in New Jersey and eight stores in Philadelphia now participate in the program, and there is no word on a further rollout.

For more
- See this Colloquy press release
- See this StreetInsider article
- See this USA Today article
- See this Integrated Solutions for Retailers article

Related stories:
This will be the year of Apple Pay
Retail security still very much under attack
Consumers concerned about privacy in loyalty programs
Steinhafel's departure leaves Target looking for redemption
Is Whole Foods the next retail chain to expand into healthcare?

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