On the money: Safeway eyes long-term potential in loyalty programme
Safeway sees loyalty programme membership up by 100% by year-end
US retailer Safeway Inc has said it expects to double the users of its Just for U loyalty programme.
Safeway completed the roll out of its Just for U loyalty programme during the second quarter, a scheme it piloted around two years ago in Chicago and California.
Increased advertising spend for the programme, which aims to "organise" and "personalise" the shopping experience for customers through deals and offers, however, hit operating profits in the quarter.
Operating profits slid to US$437m, an 11.9% decline on the prior-year period.
Nonetheless, CEO Steve Burd sounded a positive note on the firm's conference call today (19 July) and told analysts the programme is "a key piece of our strategy going forward".
"Just for U has significantly expanded as it rolls out and as we gain loyal followers," he said, adding that the costs incurred during the quarter "will not be here one year from now".
"All [our strategies] are instrumental in building strong ID sales and increasing operating profits and we believe we can improve all of those dimensions including operating profits over the next 12 months as these programme mature."
Burd believes Safeway can increase users to the scheme by "more than 100%" by the end of the year. "The site has performed well, the consumer experience is better and we have made enhancements to the experience virtually on a weekly basis. Each launch is performed better than the previous launch as we continue to learn."
Burd told analysts the scheme will give Safeway an advantage over its competitors in the long term.
"Everything that you read about in the world of marketing, probably launched originally by someone like Amazon is all about personalisation. We stand here as the first food retailer to have this kind of personalisation. I believe that others will follow, that others are trying to do this now. I believe we have a substantial lead.
"To get to our current level of play ... we'll be so much better 18 months from now that it won't really matter who else is in that game. But those that survive in the commercial space will be about personalisation. I think personalisation will permeate the retail industry. One of the reasons we are doing much better than what we thought, the relevance of what we offer consumers is better than what we offered two years ago. We got better."
In the short-term, Burd told analysts the company expects to have households representing around 35% of its business signed up to the scheme.
"It's logical to think that about 60-70% of sales, maybe in two to three years would be represented by Just for U participants, I don't think that's an unreasonable number."
Safeway's share price dropped 7.34% to $15.28 at 12:21 ET today.
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