With more global distributors launching subscription models, retailers and consumer-packaged goods manufacturers must level up their offerings to stand out from the crowd.
Amid challenging market conditions, retailers are trying various ways to maintain and increase their competitive advantage in a crowded post-pandemic market. Many are jumping on the subscription bandwagon to ward off competition and spur growth by aggressively attracting and retaining customers. This often takes the form of paid memberships that offer perks such as complimentary shipping and attractive discounts.
According to UBS, the global subscription market was worth a total of US$650 billion in 2020 and is predicted to reach US$1.5 trillion by 2025. Zuora’s Subscription Economy Index indicates that over the past decade, subscription-based businesses have grown 4.6 times faster than the S&P 500, which represents more traditional, product-based firms. More importantly, the subscription economy has demonstrated resilience in times of crisis, with 80 percent of subscription businesses continuing to grow during the pandemic.
The Subscribed Institute profiled 15 membership subscription services from 13 grocery retailers in a white paper, with the aim of uncovering similarities between their offerings. These retailers include: Walmart (United States), Tesco (United Kingdom), Coles (Australia), Monoprix (France) and Fairprice (Singapore).
Common threads
Overall, among the 15 subscription programmes, common benefits include discounts and complimentary delivery, which are easy to understand and provide tangible, fast value for money. Because these subscription models are designed to reduce consumers' barrier to purchase, retailers are able to achieve deep market penetration and secure their existing customer base.
First, 13 out of 15 services offer either free or fully discounted delivery as part of the membership package, though often only applicable with a minimum purchase amount. As expected, discounts are key features, with 11 out of 15 programmes dishing out offers of up to 15 percent, making this a core aspect of their value proposition.
The same number of subscription services provide free trials – a tried-and-tested method that eases acquisition and lowers the effort required by customers to sign up for the service. This tactic employed by Amazon Prime is also widespread in digital consumer subscriptions including Spotify and Netflix. In fact, it is increasingly expected by consumers.
When it comes to subscription pricing, nine of the programmes’ monthly prices are within comparable ranges, varying between US$10.70 and US$12.99 per month. Nine service providers offer annual subscription rates that are more attractive than monthly rates in exchange for extended commitment and upfront payment. This practice is commonly employed in consumer and low-touch B2B subscription businesses from streaming offerings to productivity suites.
Standing out from the crowd
But building a membership base by merely focusing on complimentary delivery and discounts seems like a risky bet. As more companies turn to paid memberships, if they all embrace similar service features, they are at risk of being seen by shoppers as tomorrow’s commodities.
One possible route is to increase discounts and reduce subscription fees further. However, such moves risk triggering aggressive price wars. Moreover, because price cuts can be easily and quickly replicated, this may lead to a race to the bottom. A more sustainable approach would be for retailers to offer more value-added services and focus squarely on creating and delivering outstanding customer experiences.
Against this backdrop, there are five categories of differentiating services that retailers can incorporate into their subscription models.
According to UBS, the global subscription market was worth a total of US$650 billion in 2020 and is predicted to reach US$1.5 trillion by 2025. Zuora’s Subscription Economy Index indicates that over the past decade, subscription-based businesses have grown 4.6 times faster than the S&P 500, which represents more traditional, product-based firms. More importantly, the subscription economy has demonstrated resilience in times of crisis, with 80 percent of subscription businesses continuing to grow during the pandemic.
The Subscribed Institute profiled 15 membership subscription services from 13 grocery retailers in a white paper, with the aim of uncovering similarities between their offerings. These retailers include: Walmart (United States), Tesco (United Kingdom), Coles (Australia), Monoprix (France) and Fairprice (Singapore).
Common threads
Overall, among the 15 subscription programmes, common benefits include discounts and complimentary delivery, which are easy to understand and provide tangible, fast value for money. Because these subscription models are designed to reduce consumers' barrier to purchase, retailers are able to achieve deep market penetration and secure their existing customer base.
First, 13 out of 15 services offer either free or fully discounted delivery as part of the membership package, though often only applicable with a minimum purchase amount. As expected, discounts are key features, with 11 out of 15 programmes dishing out offers of up to 15 percent, making this a core aspect of their value proposition.
The same number of subscription services provide free trials – a tried-and-tested method that eases acquisition and lowers the effort required by customers to sign up for the service. This tactic employed by Amazon Prime is also widespread in digital consumer subscriptions including Spotify and Netflix. In fact, it is increasingly expected by consumers.
When it comes to subscription pricing, nine of the programmes’ monthly prices are within comparable ranges, varying between US$10.70 and US$12.99 per month. Nine service providers offer annual subscription rates that are more attractive than monthly rates in exchange for extended commitment and upfront payment. This practice is commonly employed in consumer and low-touch B2B subscription businesses from streaming offerings to productivity suites.
Standing out from the crowd
But building a membership base by merely focusing on complimentary delivery and discounts seems like a risky bet. As more companies turn to paid memberships, if they all embrace similar service features, they are at risk of being seen by shoppers as tomorrow’s commodities.
One possible route is to increase discounts and reduce subscription fees further. However, such moves risk triggering aggressive price wars. Moreover, because price cuts can be easily and quickly replicated, this may lead to a race to the bottom. A more sustainable approach would be for retailers to offer more value-added services and focus squarely on creating and delivering outstanding customer experiences.
Against this backdrop, there are five categories of differentiating services that retailers can incorporate into their subscription models.
- In-store shopping experiences
- Out-of-store shopping perks
- Lifestyle benefits
- Benefits beyond free loyalty programmes
- Financial services