H&M limits free deliveries for low-spending loyalty club members

STOCKHOLM (Reuters) - Fashion retailer H&M has reintroduced delivery fees for its core brand’s loyalty club members on small online orders to cut logistics costs and help restore group profitability.

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The world’s second-biggest clothing retailer, whose core H&M chain accounts for the bulk of group sales, is investing heavily in adapting to rapidly changing consumer habits after seeing profits fall and inventories pile up in recent years.

A new version of the customer loyalty scheme separates members into a “base” tier or a “plus” tier depending on how many points they earned in the past year, according to Samuel Holst, head of the fast-growing H&M Club.

It means base members in Germany, the Swedish group’s biggest market, will need to spend at least 25 euros ($28) to get free delivery. In its home market, the minimum outlay is 200 Swedish crowns ($22).

“We have a lot of logistics around the customers that shop online,” Holst told Reuters in an interview at H&M’s headquarters. “For the plus level, deliveries will remain free for all purchases, but for the base level there will be a cap, ” he said. “You will need to shop for a certain amount to get free delivery. Returns remain free for all. “

Holst declined to say how much H&M expects to save from the move.

The company has an H&M Club in 16 of the H&M brand’s 71 markets. It plans to add seven more markets, including the United States, by the end of the year.

The number of members doubled in 2018 to 30 million, helped by the introduction of free deliveries and returns for all members. Another 5 million joined in the first quarter of 2019.

“We want to keep up the growth pace we’ve had so far, and increase it this year,” Holst said.

Members earn points through reviews and rating purchases, and otherwise interacting with H&M in the app, as well as on purchases, he said.

H&M’s move to rein in free deliveries for scheme members comes after German online clothing marketplace Zalando recently introduced a minimum order threshold in Italy to increase orders.

Reporting by Anna Ringstrom; Editing by Mark Potter