👉 Background: Baby Bunting is the baby mega-warehouse… kinda like the Chemist Warehouse or IKEA of the baby world. We’re talking all things strollers and meals, to bedtime stories and toys.

👉 What happened: During COVID, Baby Bunting saw its sales go absolutely baby-bonkers. Now, Baby Bunting has released a trading update which sounded okay on face value: revenue jumped 12% between July and October this year.

👉 What else: But its profit margin was down 2.3% against the first quarter of this year. Baby Bunting reckons a big chunk of this reduced margin is thanks to its new loyalty program - which has cost more than anticipated to implement.

What's the key learning?

💡Big brands like Amazon and Coles have proven that a well-executed rewards program can work wonders for a brand. In fact, 82 per cent of Australians are members of some sort of retail loyalty program.

💡But striking the right balance is a loyalty program’s major challenge. A loyalty program needs to work for:

• A customer’s hip pocket (ie discounts or good offers)
• A company’s bottom line (ie increasing the average order volume, increase referrals or generate membership fees)

💡Baby Bunting has lost a chunk of its margin from its loyalty program, so it’ll be hoping this is a one-off cost.

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