Subscribing to a new way of retailing

By Ben Sillitoe

Retailer subscription service take-up has jumped in the pandemic, influenced by a combination of factors.

Access to shops was heavily restricted last year due to coronavirus lockdown measures, and people spent more time at home, and as a result demand for regular to-your-door deliveries ramped up.

From cooking ingredients to gardening components, and from cases of wine to personal care items, a variety of product ranges have been packaged up into subscription services over the last 15 months. The Fragrance Shop, Moss Bros, and Morrisons, in the UK, were among the businesses introducing the model into their operations for the first time – while Walmart in the US unveiled its Amazon Prime alternative, Walmart Plus. 

And the evidence suggests subscription is here to stay indeed, it was already developing into a substantial market before Covid arrived, with Tesco, Hotel Chocolat and Asos among those in the UK seeing the benefits of tying consumers in with paid-for membership.

Research from marketing software provider Emarsys found one in five UK households are now signed up to a subscription service, spending on average £35 a month — that’s over £400 every year. And apparently 8% of Britons spend over £75 a month on both physical and digital subscriptions.

Chris Godderidge, vice president of mobile at Emarsys, calls it “a lucrative opportunity for retailers wanting a slice of the action — not to mention a successful way to reach new customers at a time when competition is high”.

“For retailers, this switch to subscription-based buying means a renewed focus on customer loyalty,” he adds.

“Instead of obsessing over one-off product sales, the subscription model requires retailers to focus on customers’ individual needs, desires, and experiences. In order to grow their customer base and retain clients in a competitive landscape, brands need to constantly innovate in order to keep their subscribers interested and build their long-term loyalty.”

What’s in it for retailers?

You only have to look at Amazon’s success to understand why the subscription model pays for retailers, if they can get it right.

According to research agency Kantar, Amazon Prime membership — which includes unlimited deliveries and access to a host of other entertainment services — had reached 53.5% of British households by the end of 2020. That represented nearly two million more British households than the previous year.

With over half the households in the country in its net, Amazon has been granted permission to upsell, promote additional services, and reach customers in various other ways. Not to mention the chance to analyse their behaviour across multiple mediums.

A membership or subscription model prompts recurring spend, provides all-important first-party customer data, and keeps consumers within a business’s ecosystem.

Mel Tymm, industry principal at Maginus, an online solutions provider, says: “If a business does have suitable products and a solid delivery infrastructure, a subscription model is perfect for retailers looking for a way to guarantee customer loyalty and ensure a more reliable revenue stream that also reduces delivery costs.

“With consumers signing up for regular monthly deliveries, the last mile can be far more easily optimised than with traditional one-time orders. For grocers or supermarkets in particular, repeat deliveries to the same location can be avoided with the additional planning and visibility into consumer data.”

Claire Grattidge, client services manager at PFS, an eCommerce solutions provider, comments: “Brands capitalising on the “gift in the post” experience elevate packages by selecting packaging that is representative of present opening and include personalised marketing inserts to highlight the benefits of the products or provide instructions for use and expected results.

“Call-to-action messages direct customers to webpages to learn more — it’s these personal touches that keep consumers subscribed and encourage additional purchases.”

Hristo Radichev, country manager for Balkan eCommerce, an international eCommerce platform, says “subscriptions are good for increasing the customer lifetime value, if properly planned”.

“There should be a plan in place for churn prevention and stable communication flow to ensure long-term engagement,” he notes.

Ali Ahmed, head of business development at HelloDone, a conversational commerce company, adds: “Retailers increase revenue through convenience, loyalty and simplified inventory management. 

“An authenticated subscriber provides richer consumption data than an occasional walk-in customer. Learning from this data to validate options around trends and seasonal variations will deliver immediate and relevant subscription offerings to the customer.”

Subscription Model

What’s the attraction for consumers?

The Emarsys research found the initial draw towards subscription services for 29% of consumers is the offer of a free trial. The study also found the element of surprise that a subscription service offers each month is a key reason for sign-ups (22%).

However, Hugh Fletcher, global head of innovation & consultancy at Wunderman Thompson Commerce, a digital agency, says consumers have some gripes with subscription services.

Citing pre-Covid research, he says only 13% of consumers were satisfied with their subscriptions, mainly due to the lack of convenience they offered, suggesting there is some work for retailers to do in order to keep shoppers happy.

“Much like TV streaming services, consumers don’t want huge numbers of subscriptions if they can avoid it,” he explains.

“Services like Netflix offer a wide range of content that is personalised for every individual — so the challenge for retailers or subscription providers such as Birchbox or Harry’s is providing value and delivering special, personalised offers that will keep consumers’ fingers away from the cancel button.”

Summary

This year’s eCommerce Expo underlined many of the points made in this blog about the power of subscription or membership schemes in retail.

Celia Pronto, managing director of holiday home exchange platform Love Swap Home, said being a membership platform proved crucial in the pandemic because customers were “opted in” and therefore could be contacted regularly even when travel and holidays were curtailed because of Covid.

Simon Kennedy, manager of experience optimisation for Adidas in Europe, told delegates that he believes building membership schemes play a part in the widespread cost analysis currently sweeping across retail industry boardrooms.

“We’re going to see more businesses really having to take action on how they unlock lifetime customer value, and consequently we’ll see an increase in membership and subscription offerings coming to market,” he said.

I subscribe to that theory, and so too, evidently, do many retail organisations.

By Ben Sillitoe

Published 02/06/21

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