Retail has a reward problem — and the time to act is now
Why loyalty, personalization, and frequency now matter more than price and assortment.
Hey Friends,
This edition of TWIR is sponsored by me…..sometimes I like to ramble, and therefore it’s free of charge to you.
Retailers have spent the last decade competing on assortment, price, and convenience. The next competitive frontier is the customer relationship: durable, interoperable, loyalty-rich programs that drive frequency, higher basket value, and data-driven personalization. For non-grocery retailers — apparel, home improvement, electronics, specialty — rewards are under-leveraged. Done well they’re not just discounts; they’re strategic levers that influence behavior, channel economics, and partner relationships.
Customers expect more than a punch-card. They expect offers tied to their needs, predictive perks, seamless redemption across channels, and meaningful experiences (exclusive access, faster service, trade-in credit). For retailers facing pressure from marketplaces and direct-to-consumer brands, rewards are a practical strategy to:
Increase repeat visits and reduce reliance on costly paid media.
Raise average order value (AOV) via tiered benefits and bundling.
Capture first-party data crucial for personalization and margin protection.
Nudge channel choice (in-store pickup vs ship) and post-purchase behaviors (reviews, referrals, trade-ins).
Who’s doing it (and what we can learn)
Several non-grocery retailers already show the shape of modern loyalty:
Amazon / Prime model (marketplace + membership). Not a traditional retailer example, but Prime demonstrates the power of subscription-style rewards that lock in lifetime value via convenience and a bundle of services. Lesson: membership isn’t only discounts — it’s a productized relationship.
Target Circle / Drive Up integration. Target layers localized offers and experiential perks on a broad membership base. Lesson: use data to make rewards feel personal and local.
Sephora / Ulta (experience + tiers). These beauty programs combine points for purchases with exclusive access and events. Lesson: experiential benefits drive emotional loyalty where product differentiation is low.
Nike / DTC-brand clubs. Nike uses membership to deliver exclusive product drops, community activations, and integrated services (app workouts + offers). Lesson: reward programs can be an engine for brand narrative and higher margin DTC.
Best Buy / My Best Buy. Focused on service perks, early access to sales, and financing — good for big-ticket purchases. Lesson: pair rewards with services that reduce purchase friction.
Nordstron / Nordy Rewards. (often referred to as Nordy Rewards) is Nordstrom’s loyalty ecosystem, and it’s one of the stronger examples because it blends spend-based rewards, services, and experiences rather than relying only on discounts.
These examples show a mix of discounting, exclusivity, services, and community…… not one single formula.
Integrating third-party delivery and rewards
Third-party delivery (DoorDash, Instacart-style partners, courier networks) is becoming an extension of retail experiences for non-grocery categories: same-day furniture delivery, electronics white-glove, apparel returns pickup. Rewards can be integrated to optimize cost and behavior:
Subsidize faster delivery for higher-tier members. Offer free/discounted same-day or white-glove delivery to premium members to increase conversion on high-AOV items.
Point accelerators for efficient delivery choices. Give bonus points for pickup-in-store or for selecting a greener, consolidated delivery window to shift customer behavior away from expensive last-mile options.
Partner co-funding models. Negotiate with delivery partners for co-branded premium experiences (e.g., “Express for Members” funded partially by partner), or revenue share on delivered add-ons.
Seamless returns and exchanges as a reward. Make free, scheduled curbside or at-home returns a membership benefit — reduces return friction and increases repurchase likelihood.
Important operational note: rewards that subsidize delivery must be modeled carefully; the goal is higher LTV and margin recovery through increased frequency/AOV, otherwise it erodes profitability.
Managing wholesale vs DTC with loyalty programs
Rewards can be a tool to manage channel conflicts and harmonize wholesale and DTC economics:
DTC as the premium channel. Offer richer, personalized rewards for purchases on your DTC channel (exclusive SKUs, earlier access, bonus points) while maintaining fair wholesale pricing and wholesale-eligible promotions. This steers customers to higher-margin sales without alienating retail partners.
Channel-aware points. Implement rules so points earned differ by channel (e.g., full points for DTC, reduced for wholesale), but create cross-channel redemption flexibility to avoid alienating customers who prefer wholesale partners.
Wholesale partner co-op offers. Work with wholesale partners to run co-funded promotions that unlock loyalty points redeemable through your program — this preserves partner relationships and keeps customers within your ecosystem.
Inventory and returns coordination. Use rewards to incentivize returns to DTC drop-points or to in-store return locations that have better reverse logistics economics.
The core is transparency and fairness — channel partners must see value in the arrangement or they’ll push back.
Barriers to scaling rewards (non-grocery)
Retailers face multiple hurdles:
Margin pressure. Points and perks are costs. Without a clear LTV model, programs can be cash drains.
Technical debt. Legacy POS, CRM, and fulfillment systems struggle to support unified point accrual and real-time redemption across channels and partners.
Fragmented customer identity. Incomplete first-party data makes personalization and multi-device recognition hard.
Privacy and compliance. Data collection and profiling require careful consent and governance.
Partner complexity. Coordinating with third-party delivery and wholesale partners requires contracts, tracking, and reconciliations.
Dilution of brand. Poorly designed rewards can train customers to only buy on discount.
Lowe’s — the hanging fruit (non-grocery focus)
Lowe’s is uniquely positioned to extract value from a smarter rewards strategy. Hardware and home improvement purchases have high AOV, long purchase cycles, and frequent ancillary needs (tools, consumables, installation). Here are specific opportunities Lowe’s could chase:
Install and trade-in incentives. Offer points or instant credits for using Lowe’s preferred installers or for trading in old appliances/tools — accelerates higher-margin installation services and drives repeat engagement.
Project-based rewards. Provide tiered rewards for multi-item “projects” (kitchen remodel, deck build). If a customer buys a set of items for a project, they unlock higher points, project checklists, and a virtual project manager/chat — increasing basket size and stickiness.
Pro and hobbyist tiers. Differentiate offers between DIY homeowners and Pros (contractors). Pros could get fast replenishment, bulk discounts, and points; DIYers get education content + point multipliers for tool purchases.
Loyalty-enabled BOPIS/ship optimization. Give bonus points for choosing in-store pickup or scheduled delivery windows that better match Lowe’s logistics (reducing last-mile costs).
Consumable subscription discounts. For items like filters, adhesives, or paint supplies, offer auto-replenish with discounts and points — locks in recurring revenue.
Local community activation. Points for participating in community build days or tool-share events — builds brand affinity and foot traffic.
Customer behaviors Lowe’s can influence: from choosing Lowe’s for entire projects (not piecemeal buys), to preferring Lowe’s installers, to converting one-time shoppers into frequent buyers of consumables and accessories.
Practical recommendations (how retailers should act)
Start with a tight hypothesis and a P&L model. Test programs on a subset of SKUs or a pilot geography. Quantify LTV gains needed to cover reward costs.
Design for experience, not just discounts. Exclusive services (faster delivery, easier returns, installation credits) often cost less and deliver more loyalty than pure coupons.
Unify identity and data sources. First-party data is core: connect POS, e-commerce, app, and service systems to create a single customer view.
Use points to nudge profitable behavior. Reward choices that lower cost (store pickup, consolidated delivery windows) or increase wallet share (bundles, warranties).
Negotiate partner economics. If integrating third-party delivery, secure co-funding or differential pricing arrangements to protect margins.
Make tiers meaningful. Tiers should unlock services or experiences, not just small percentage discounts.
Measure early and often. Track repeat rate, AOV lift, channel shift, cost per incremental visit, and long-term retention.
Conclusion
Rewards are the connective tissue between transactions and relationships. For non-grocery retailers, where product differentiation is thin and margins can be reclaimed through services, well-designed loyalty programs are high ROI levers. They help manage channel economics, tame last-mile costs, and steer customer behaviors that matter: frequency, basket composition, and channel choice. Lowe’s and its peers are sitting on easy wins if they stop treating rewards as marketing coupons and start treating them as strategic business models…….membership products that shape the entire customer lifecycle.