OnePass push: What's in it for Wesfarmers shares?

Is OnePass a ticket to higher profits for Wesfarmers?

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If you've been watching TV or YouTube in recent weeks, or visited a Bunnings Hardware store, or even an OfficeWorks, chances are you've seen an ad for OnePass. Bunnings and OfficeWorks are of course owned by the ASX retail and industrial conglomerate Wesfarmers Ltd (ASX: WES).

So if you own Wesfarmers shares, you might be wondering why your company is sinking its valuable capital into marketing this new program. After all, members are being offered lucrative perks, such as cheaper prices, extra Flybuys points, free delivery, discounted Disney+ memberships, and early access to Black Friday sales.

Let's dive into that question today.

What is OnePass?

Starting off, OnePass is a loyalty program that customers of most Wesfarmers businesses can sign up for to use at Wesfarmers companies, including Bunnings, Officeworks, Kmart, Target, and catch.com.au.

According to onepass.com.au, membership costs $4 per month (with a 30-day free trial), or $40 for an annual membership.

So with Wesfarmers clearly pushing its membership program hard, what's in it for shareholders?

Well, it's worth pointing out Wesfarmers is certainly not the only ASX share that is trying to shepherd its customers into loyalty programs.

Chances are most of us would be familiar with the popular Everyday Rewards program that Woolworths Group Ltd (ASX: WOW) runs. Then there's Flybuys used at Coles Group Ltd (ASX: COL)'s stores. Interestingly, Flybuys is Wesfarmers' baby and is also used at its stores.

But it's not just the grocers. Endeavour Group Ltd (ASX: EDV) touts its popular 'myDan's' Dan Murphy's member program. As does Adairs Ltd (ASX: ADH) with its 'Linen Lovers' scheme. Even Telstra Group Ltd (ASX: TLS) now offers customers 'Telstra Plus'.

So the rationale behind Wesfarmers' OnePass is probably similar to these other programs. These days, companies prize our consumer data. Normally, they can't keep track of what we individually buy and sell at their stores.

But if we sign up for these programs, the privacy agreements usually allow them to access our activity as we swipe our cards. That's why Everyday Rewards members get 'personalised' deals and recommendations, for example.

This also arguably allows the companies to adapt to our preferences, send us deals for overordered stock, and push us into new products. I'm sure there are myriad other potential applications as well.

How will OnePass benefit Wesfarmers shares?

Clearly, Woolworths, Coles, Adairs, and Endeavour see value in these programs, otherwise they wouldn't offer them.

So if it works for these companies, it makes sense that it would work for Wesfarmers shares.

But don't take it from me, take it from the company itself. Here's some of what Wesfarmers had to say about OnePass in its latest full-year earnings for the 2023 financial year:

[We are] developing strong data analytics and insights from OnePass, PowerPass and Flybuys to strengthen the customer offer…

Significant progress in development of OnePass program with incremental benefits for divisions during the year… [OnePass leads to] higher annual online spend, more than twice as many online transactions per year and higher conversion rates of online baskets vs non-members.

[It has] strong retention rate and conversion of free trials [and] represents an increasing share of retail partners' online transactions, with penetration rising in 2H23.

Interestingly, Wesfarmers admitted the program is expected to cost the company approximately $70 million over the 2024 financial year. But clearly, it thinks this is a worthwhile long-term investment that will lead to benefits that outweigh its initial cost.

Let's see if that happens for Wesfarmers shareholders.

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Motley Fool contributor Sebastian Bowen has positions in Adairs, Endeavour Group, Telstra Group, Wesfarmers and Walt Disney. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs, Walt Disney, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Adairs, Coles Group, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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