Glossy – Across fashion, membership models have become a normal part of everyday shopping. Companies like Stitch Fix, rental platforms like Rent the Runway and Nuuly, big brands like Nike, and cosmetics retailers like Sephora all have introduced paid membership programs in order to build a loyal, recurring audience. But when these programs break down, either through poor communication or intentional misdirection, the effect on brand perception takes a hit.
Savage x Fenty, Rihanna’s lingerie brand, recently received some criticism from customers who found themselves charged for a monthly membership without even realizing they had signed up for one. Similar stories abound from customers of Fabletics, which backs a membership that is infamously difficult to cancel, and Guthy-Renker, a beauty company that was forced to pay nearly $9 million in a legal settlement over illegal auto-renewal payments it collected from customers.
“These types of memberships may be an easy way to make money up front, but they can create larger long-term ramifications,” said Krista Corrigan, retail analyst at Edited. “It can tarnish the brand’s reputation and almost gives off an illusion of deceit. The digital age has given more power to consumer reviews where any feedback or criticism about a product is readily available before purchase. Brands are leading with great deals like freebies and large discounts to entice customers to sign up, and hoping they’ll love the product once received.”
Fabletics, for example, took a big risk by requiring customers to either be fee-paying monthly members or purchase clothes at significantly higher prices. While this approach may be helpful for driving initial revenue spikes and maintaining a prestigious aura around a brand, the long-term sustainability is not guaranteed. Fabletics alone received hundreds of complaints against it through the Better Business Bureau in its first three years of business. Its membership policy requires that customers pay every month or notify the company within the first few days of each month if they would like to skip that month.
“In general, having a membership fee can drive value if the programs are simple and there is a significant value returned for the fee,” said Perry Kramer, senior vice president and practice lead at Boston Retail Partners. “In the online fashion business, however, it is a delicate balance between getting a quick revenue boost and enjoying long-term success. With few exceptions, when a membership fee is required to shop, the initial revenue spike drops off significantly and falls short of customer loyalty and lifetime value in programs that do not require a membership fee. The long-term growth, membership size and membership growth rate is usually substantially higher in programs with no fees. The bottom-line risk for companies that have a high membership fee is that they will alienate customers who do not see a significant value every month.”
Still, Fabletics has managed to grow considerably. Forbes reported that Fabletics’ revenue was over $300 million in 2018 and is growing each year. The company has opened more physical stores this year, including its first New York store last April.