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Behind the Numbers: an EMARKETER Podcast
Reimagining Retail: 2025 Retail Trends—The Pillars of Paid Retail Memberships, Gamified Loyalty Programs, and More | Jan 8, 2025
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- [00:03]
Sarah Lebo
Hello, listeners. Today is Wednesday, January 8th. Welcome to behind the Reimagining Retail an Emarketer podcast. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sarah Lebo. Today's episode topic is trends and predictions for 2025. Let's meet today's guests. Joining me for today's episode, we have Susie David Canyon. Happy New Year, Suz.
- [00:32]
Susie David Canyon
Happy New Year. Thanks for having me.
- [00:34]
Sarah Lebo
Happy New Year. Also to our other guest, Blake Drosch.
- [00:37]
Blake Drosch
Happy New Year, Sarah. Good to be back on the podcast.
- [00:40]
Sarah Lebo
Good to have you on the podcast. Okay, Susie and Blake, you joined fellow analysts Skye Canavez, Sarah Marzano, and Karina Perkins in writing a report about retail trends to watch. We're going to discuss two of these trends to watch for 2025, but there are many more in this report, so I'd advise all our pro subscribers to go check it out on emarketer. Com. Let's start with our first trend for the day, which is about partnerships. As you both wrote in the report, partner perks will be the new pillars of paid retail memberships. Retailers are giving customers more bang for their buck with discounts and freebies included in their premium loyalty programs. Blake, why is this one of our key trends?
- [01:22]
Blake Drosch
Well, you know, obviously it's not new that retail memberships are a big part of how retailers bring in additional revenue and drive customer loyalty today, largely because Amazon prime has been very successful in that department. And other retailers, particularly retailers that want to expand into E commerce and grow their share of digital, have been mimicking the. The key difference between what Amazon can do as a company versus what other retailers can do is that Amazon has sort of perfected this flywheel of offerings that not only can they offer Amazon prime members free shipping and fast delivery on a number, you know, a wide assortment of products, but they can also offer their media tie ins from prime platforms. So prime video, Amazon Music, etc. So what that's really spurred other retailers to do over the last couple of years is go out and create these partnerships with streaming services and other media platforms platforms in order to basically mimic this model of Amazon Prime. But because they don't have all of these services in house, it's required them to create these strategic partnerships. It's something that we've seen a lot over the last year and there have been some new and interesting partnerships in 2024 and that we're predicting that, you know, this trend is going to continue into into next year in a Couple of key areas that we've outlined in the report.
- [03:01]
Sarah Lebo
I feel like it's really difficult for retailers to compete with Amazon. Amazon has the flywheel. If you don't have the capital to create the flywheel, then you have to have the relationships to create the flywheel.
- [03:12]
Blake Drosch
Yeah, exactly. So just to give you like a couple of the really interesting examples last year. Well, first of all, Walmart Plus I think was the really the first retail membership that started leveraging partners in order to compete with prime pretty early on. After they launched in late 2021, they forged a partnership with Paramount Plus. So that was sort of their streaming partnership that was going to be part of the package and they've since expanded it to include special perks and discounts from, from Burger King. That was this year veterinary service called Pop P A W P. And they also have like sort of a rotating list of limited time offers similar to what a credit card would offer. Companies that have followed suit. Instacart was another example of a company that forged some interesting strategic partnerships this year, particularly with Peacock. So Instacart plus members now have access to Peacock and they also partnered with Uber Eats. So Instacart plus members can get free restaurant delivery in the app and that not only makes it them competitive with Amazon prime, but also with competing services like, like DoorDash and then DoorDash sort of in a late breaking partnership. I think that was only a couple of months ago. They in turn responded by partnering with Lyft to give their DashPass members rideshare discounts. So it really is an expanding ecosystem and it really just comes down to how can we give our customers more bang for their buck so they'll fork over the monthly fee with us instead of giving it to one of our competitors in the.
- [04:58]
Susie David Canyon
And if you think about it, Amazon's not immune to that. Right. Because they partnered with grubhub and so they're all thinking about how do you start doing more things that are adjacent but that help create your. Your program more value and more stickiness. And as we often talk, give us more rich data about who's shopping so that then they can use that data to sell other things too.
- [05:26]
Sarah Lebo
Yeah, I mean we have a podcast episode from 2024 on ancillary services. We talked specifically about that bringing people into stores, which is some of what that is like the paw thing P A W P. But yeah, this is just like an extension of that ancillary kind of thing into E commerce. I guess the store is more of an extension into the store, but similar.
- [05:49]
Susie David Canyon
Idea also, I think. Just more reasons to pick one over the other. Right. At some point, there's only so much just like you don't need a thousand credit cards, you don't need a thousand memberships for things. Right. And so making sure that your portfolio of partnerships and perks really add extra value. Kind of like how the travel credit cards do it. Right?
- [06:10]
Sarah Lebo
Yeah. I was going to say the credit cards are a place where these partnerships are also happening. I mean, I was talking to someone who was saying they have Paramount plus because they got it through their Walmart plus subscription and they got their Walmart plus subscription through their credit card. So you end up having these piling on top of each other also.
- [06:27]
Blake Drosch
Right. And it definitely has an impact on the subscription numbers that we estimate along with, you know, some of the numbers that like a company like Walmart shares. And I think that's an important thing to bring in when you're thinking about how big are these services really in terms of creating additional revenue streams for retailers when a lot of them are given away through credit card perks. And then it sort of forms this matrix of then boosting subscription numbers for streaming platforms because they're getting it. So, you know, they do create a lot of value for the customer and it certainly can have many, many benefits that sort of. And creating like a halo effect that. That helps other areas of the business and brings in revenue. But it's important to, you know, to think about that separately from, okay, how much revenue are these paid services actually bringing these retailers and these other streaming platforms when a lot of it's been being given away as part of, you know, other packages?
- [07:31]
Sarah Lebo
Okay, so speaking of value for the customer, that brings us into another trend, which was that gamified loyalty programs are becoming more sophisticated. Suzy, can you explain what a gamified loyalty program even is?
- [07:44]
Susie David Canyon
Sure. I think I'm going to even take a step back from that and, and say loyalty programs are the umbrella and then memberships are part of that. Right. A paid membership is a loyalty program, but you're paying to be part of that. And then there are a lot of companies or retailers and brands and airlines that do loyalty programs that are for free. You give them your email, you give them some data about you, and then you're part of a loyalty program where the original onset was to help you feel like you're part of a community. And so it was things like giving away freebies or discounts or access to events or points towards something or cash back or more Cash back to help you feel special. A lot of the thing the features from loyalty programs were around conversion behavior. What do I give you so that you actually make a purchase? And what we saw in 2024 and we're keep. I'm definitely keeping a very close eye on this for 25. Is this idea around what are some of the other things that a loyalty program can do to help bring people into the fold more regularly to drive traffic to their properties? That is not necessarily a one to one tie in to a purchase. Because as someone who worked for a department store, the gamification of loyalty programs was more like stacking. We kind of talked about it in memberships, but it's a little bit different in this world of like you have a 20% coupon and then it's friends and family and then you add this and before you know it you got something for 10, you know, $10 instead of $100. So there are a lot of consumers who love playing the game of stacking and coupons and points and like when is the best time to purchase something. But what we're talking about from a gamification perspective is like moving into entertainment territory. In late 2023, Ulta did a little pilot with their most important big spender. Define that to see if they had a Wardle like area. How would that help and would that drive traffic and what would that look like now? They also gamified it. So it turns out that when you were playing the games, you got stars and then the stars converted into points, which I'm assuming you could then use to purchase things. But what they said through a different media outlet was that 86% of the. In the pilot, 86% of people returned and on average people went to the game site six times per week and spent about 11 minutes per session. So that's a lot of people coming back to your site all the time. And then Blake took this one on for the report. So he found lots of other really great examples of this idea around entertainment. There are fast food joints doing like truly cartoons and other sort of ways to keep people into the fold and increase brand love without directly selling them. But that indirectly certainly helps selling. I could keep going on and on. But what I will tell you is like with many other things, it's not that new. And I would just reference the McDonald's Monopoly game, right? Like we knew that there was a point in time where McDonald's and like had this. You could potentially win something, but you didn't always and you'd have to go over and over again to get a piece to see if you were going to come with a house or whatever it was. And in Canada, we had a retailer that did roll back the rim to win. So, like it was a coffee shop chain, you literally roll back the rim to see if you won something. And it was something as small as a coffee to nothing to like a trip. So it's not new. It's just I think now we're much more sophisticated in how we're using this to gather data to feed that flywheel.
- [11:18]
Sarah Lebo
Yeah. And publishers have been having a lot of luck with games. The New York Times obviously has. LinkedIn has their own games now, so do some other websites. So it makes sense that retailers would also want to see how they can get this attraction.
- [11:33]
Susie David Canyon
Yeah, absolutely.
- [11:34]
Sarah Lebo
Okay, before this episode, I gave you each the homework of coming up with a hot take prediction for something that will happen in 2025. I don't actually know what your hot takes are yet. So, Susie, why don't you go first? What's your prediction?
- [11:48]
Susie David Canyon
Sure. So I was thinking about this in terms of like, what's the underlying trend so that I can give you a prediction that makes more sense. So one of the things that we talked about as a group, there were lots of different things. Right. But we couldn't talk about. Everything we're seeing coming up is that unlike a few years ago where we there was this bifurcation of the middle and it was getting hollowed out and it was really high, low. And that really made sense for us a few years back. We think in 2025 we're going to start seeing the middle come back and that it's really going to be a good, better, best kind of scenario. And we're already seeing that in some of the mall brands that are coming back. Especially like if you think about Gap, we talked about this in one of our last year podcast. But Gap, all four brands did well. And if you think about their portfolio, they have Old Navy, that's good. Gap, that's better, and Banana, that's best. And my prediction is that at some point Target, I think, will launch another private label brand. They're very good at it, but they're very good in the good and better. And I think they're going to launch something in the best category on the private label side and that'll sort of mirror what Walmart just did, which was mid year. Last year they launched what they're calling better goods. That was to capture that high, high household income shopper that had come to them during COVID and had stayed with them.
- [13:06]
Sarah Lebo
Target is already kind of associated with being kind of upscale Walmart a lot of the time. So how will this look different than associations people already have with Target and its private labels?
- [13:19]
Susie David Canyon
So it's a really good question. This idea around brands being multiple sort of good, better, best depending on who the customer is is not new. In like the 2006 ish area, 2008 there are brands like Nike that were considered good and or better in some department stores but were considered best in other department stores. And so I think for Target, as they think about the brands that they currently carry in their private label portfolio, they're going to need to find a niche that gets to a slightly higher consumer for them, but that might still be like ultra better, better, better for a Walmart consumer. So I think when a brand is thinking about good, better, best portfolio, they have to do it in in association to their own shopper.
- [14:07]
Sarah Lebo
This prediction sounds fair to me. Target's always launching private labels and doing so successfully. The only thing is that Target sort of has had a rough year. They've a little bit been scrambling. It makes sense that they would launch something new, but hopefully it works for them. They need it to work.
- [14:21]
Blake Drosch
Do you see the private label launch being it like focus on apparel, home goods, cbg?
- [14:28]
Susie David Canyon
That's a good question. If I were to make my best guess, I think it's probably going to be in the apparel staples. So not fashion, but the staples. Because I think Walmart has too strong a hold on grocery and Target has a lot of private label and grocery. But if they're starting to get people into the store more and people associate like really high quality, slightly higher price point but better than a national brand, they might be willing to purchase it.
- [14:56]
Sarah Lebo
Target had an Isaac Mizrahi collab for like a long time, right? Or did I make that up? This sort of reminds me of that.
- [15:02]
Susie David Canyon
I feel like they've partnered with a lot of different high end brand like brand names and designers over the years. So this in a instead of a collab I'm saying like this will be a permanent addition to their assortment.
- [15:16]
Sarah Lebo
Gotcha. Blake, what is your hot take for 2025?
- [15:20]
Blake Drosch
My hot take is that 2025 is going to be the year that Amazon finally figures out grocery.
- [15:26]
Sarah Lebo
Wasn't that your hot take in 2024?
- [15:29]
Blake Drosch
No, that was definitely not my hot take in 2024.
- [15:33]
Sarah Lebo
What makes this year different from all other years?
- [15:36]
Blake Drosch
And nobody go back and look because it wasn't no it actually.
- [15:39]
Susie David Canyon
No, it was. We talked about this. It was about cars. Right?
- [15:43]
Blake Drosch
Well, that was actually a few years ago. I called in my, one of my E commerce reports, I think back in like 2023 that Amazon was going to get into the car selling game, which they have basically because if you look at share of E commerce sales by category, they basically have a dominant hold in every category except for auto. So if Amazon wants to keep growing.
- [16:06]
Sarah Lebo
We'Re not talking about our wins. So let's talk about grocery.
- [16:11]
Blake Drosch
It was broader. I feel like in like a presidential debate, I should have, I should have like 30 seconds to respond to it. But anyways, looking forward, if we're doing.
- [16:20]
Sarah Lebo
That, I should get to say that yesterday I found a note from mid 2023 that said 2024 will be the year of TEMU that I wrote. So.
- [16:30]
Blake Drosch
Wow. I didn't know something with that. Yeah, I know. I'm talking about something that was published, Sarah.
- [16:36]
Susie David Canyon
That only counts if it's out in the public.
- [16:39]
Sarah Lebo
All right, go ahead, Blake.
- [16:41]
Blake Drosch
Okay, so I think with this new format Amazon Grocery, which to, if you haven't heard of it, it's like it's not Amazon Fresh, which is, it's full scale grocery store. It's almost like in between the just walk out and the Amazon Fresh. So Amazon Grocery opened in downtown Chicago in early October. And it's basically to put it in layman's terms, like Whole Foods does not sell the, you know, a lot of name brand CPG national products, but Whole Food shoppers go elsewhere to purchase those types of products. What Amazon did is they put like a little grocery store in the same shopping mall where there is a giant Whole Foods where you can buy Coke and Oreos and glazed chips and all those types of, you know, national brands that a Whole Foods wouldn't necessarily carry. And this is why I think it's going to work. The technology component of Amazon Fresh is very difficult because there's a lot of, it's very difficult to manage things like produce. But the Amazon Grocery, it operates more like a sort of in between a convenience store and a grocery store where it doesn't have a lot of like fresh items and things like that, but it has a larger selection of CPG than like a 711 would. And I think that's a really good sweet spot for Amazon because you can harness the technology. You can provide an ancillary service to an audience that you already have with Whole Foods. So if they can strategically open them around the areas where they're already being very Strategic about attracting customers into Whole Foods. That I think that could sort of be a launching pad for an outer ring. Basically. Like, if you. If you consider Whole Foods to be the inner ring, you have like a core group of customers, but it's typically skews higher income, urban. The ring around that could be Amazon Grocery, which is a good stepping stone to them actually having, you know, the Amazon Fresh concept work.
- [18:58]
Sarah Lebo
How do they actually get people who aren't Whole Foods consumers into.
- [19:02]
Blake Drosch
Into these spaces, just strategically placing them where there could be foot traffic. Right. So they're the Amazon. The whole Food shopper might, you know, do a number of things, but they purchase things at Whole Foods and then they go to Target or Walmart or the regular grocery store for other stuff. Or maybe they go online to amaz like.com to actually purchase things. So here I think that it just creates another option. And if they can do it conveniently enough in proximity to Whole Foods locations and have it is be a seamless experience with their technology and offer discount to pr, discounts to prime members, that could actually really help bolster their grocery business. And it's a good step because it's feasible. Whereas what Amazon was doing before with Amazon Fresh is like, okay, well, we want to take on, you know, the large national grocery stores, and the only way to do that would be to open up hundreds of chains all at once. This is a way to build on something that they are already doing.
- [20:02]
Susie David Canyon
I definitely agree that this is the year Amazon's gonna really try very hard to get into the grocery business. But I don't know if this is gonna help because I feel like the Whole Foods private label brand has everything you need and the Whole Foods by me. So maybe it just depends on where you are. Has national brands that fit into the Whole Foods ethos of. So it doesn't. I'm not judging brands. I'm just saying, like, it might not have Kraft Macaroni and Cheese, but it has that bunny one.
- [20:30]
Sarah Lebo
And it has the Whole Foods consumer kind of still wants craft, right?
- [20:34]
Blake Drosch
Yeah. And they want Coke. I mean, I shop at Whole Foods. I eat Kraft Macaroni, and Blake wants.
- [20:40]
Sarah Lebo
Kraft Macaroni and Cheese.
- [20:41]
Blake Drosch
No, but I do think it's. I think that, like, there are maybe there's a subset of Whole Food shoppers that really takes to heart, like, the, you know, message of not. They want everything organic. They don't want anything to be processed. And there's, you know, an audience for that, for sure. But I think most people are hybrid.
- [20:58]
Susie David Canyon
Shoppers and so you think that having these smaller footprints of Kraft macaroni and Cheese is going to help steal the shopper from a Target, Walmart or a regular grocery store?
- [21:10]
Blake Drosch
I mean, not necessarily, but it on like a large scale. But it's going to help them, you know, bring in more revenue for. In their grocery category, for sure. Because if. Maybe at a loss, because if you're doing 50, 50, if the shopper is 50% shopping from Whole Foods and then 50% shopping from somewhere else, then Amazon actually has a shot of getting to that, some of that 50%.
- [21:33]
Susie David Canyon
That's true. Very hard to do, but that is true.
- [21:35]
Sarah Lebo
The retail analyst in me, which is the person hosting this podcast, is like, sure, of course. That makes sense. And then the consumer in me is like, why open a store next to a store? Just put everything in the store. That's what's seamless. And I get why they can't do that, because the Whole Foods ethos and whatnot, but I hate having to go to two stores that are owned by the same company to get all of my groceries.
- [21:58]
Blake Drosch
Yeah, I mean, that's fair. But I would say that a lot of people already do their. Their shopping at multiple places, so I don't think it would be like. Yeah, exactly.
- [22:09]
Sarah Lebo
Okay, well, that is all we have time for today, so thank you so much for being here, Suzy.
- [22:15]
Susie David Canyon
Thanks for having me. Happy New Year.
- [22:17]
Sarah Lebo
Happy New Year. Thank you for being here, Blake.
- [22:19]
Blake Drosch
Yeah, Happy New Year.
- [22:20]
Sarah Lebo
Thank you, listeners. And to Victoria, who edits the podcast and is an eternal part of our ethos. That makes sense. We'll be back next Wednesday with another episode of Reimagining Retail and Emarketer podcast. And tomorrow join Marcus for another episode of behind the Numbers, an Emarketer podcast.