What this means for retailers, in an era of loyalty disruption
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“Commitment can be scary.” A concept that hits home for many US shoppers, at a time when there are more options for what, where, and how to buy food and everyday, household products than ever before. This is also the opening message for Amazon’s recent advertising endeavor, featuring the company’s Subscribe & Save program for consumable goods.
Amazon recently launched a new creative for the program, airing on network television and using the analogy of a bride’s pre-wedding-jitters to lightheartedly address shopper concerns about commitment – reminding viewers “if things don’t work out, you can always cancel (your subscriptions).” The ad also focuses on value messaging, emphasizing the ability to save up to 15% with purchases through the program, which moves an estimated 40% of the company’s consumer packaged goods (CPG) volume today.
In less than 30 seconds of advertising, Amazon addresses two universal benefits shoppers seek in today’s environment – convenience and value – educating viewers that they can have both, when they subscribe and save online to their most regularly purchased products.
So what does this mean for other retailers, looking for ways to retain customers and grow loyalty in an increasingly competitive marketplace?
Capitalize on the momentum
Amazon has laid the groundwork for a successful business model, with proven market results. The company is now investing further through national advertising to socialize the benefits of repeat purchase automation with shoppers. According to a study by The Dialogic Group LLC, the average US household only buys 394 products each year, many of which are purchased on a regular frequency1.
Retailers can and should take advantage of Amazon’s efforts to acclimate shoppers to this purchasing model, as well as shopper proclivity to purchase the same products over and over, in their own efforts to increase share of wallet.
Differentiate, where Subscribe & Save falls short
While extremely successful, Subscribe & Save is not without its experiential limitations, which can be exploited by newcomers seeking to automate their own customers’ repeat purchases. Executives at auto-replenishment market leader Replenium built the core replenishment capabilities for Amazon’s offer and have since developed a platform which enables other retailers to capture repeat purchase demand, in a more holistic way. Below represent a few of the many experiential improvements that can be delivered in partnership with Replenium.
Maximize relevancy through a total store offer. One of the most notable Subscribe & Save shortcomings is the program’s exclusion of perishable goods. According to Replenium shopper research, 23% of Amazon Prime shoppers who have utilized some form of repeat shopping automation in the past 6 months, used the capability to purchase perishable food specifically2. Among those shoppers, half or more had also purchased non-perishable food, home care, and/or personal care via the capability. This suggests that a total store offer can address needs across the entire household, in ways that product or category-focused subscription programs cannot.
Increase engagement via enhanced purchasing recommendations. With limited assortment comes limited potential for upsell opportunities via behavior-based recommendations. Replenium estimates that a well-executed, auto-replenishment program across a retailer’s entire assortment can lead to 15%+ growth in customer value, a result of more efficient online shopping sessions creating time for new product discovery and the potential for increased consumption of existing purchases via recommended purchase frequencies. (Did you know disposable razors are supposed to be changed every 5-7 shaves3? Fancy a guess at how many customers actually replace at that cadence without a suggested regimen?)
Deliver value to all customers, as a way to accelerate adoption and reward them for their loyalty. The reality is that very few retailers have built the same level of equity with their customers as Amazon has, as evidenced by its two-year standing as the world's most valuable brand, according to Kantar4. So while the ecommerce behemoth might be able to get away with only offering discounts on subscribed-to products, when there’s a minimum number of products in the cart, others may not have this luxury. Offering a modest discount on all eligible products ensures that no customer is alienated by a volume restriction and should maximize participation.
Understand the cost of waiting
Given its current assortment limitations, Subscribe & Save is not positioned to be a shopper’s one-stop-shop for repeatedly consumed goods, and the subsequent reality is that the program is poised to steal basket value or trips – not customers – from other retailers. But with supply chain disruption leading to extraordinary rates of customer switching5, every item and trip matters. What may start out as toothpaste and razors on Subscribe & Save could easily evolve into a customer’s entire morning care routine on repeat. Once those purchases are locked in at Amazon, it will be difficult for retailers to get them back. According to Recurly Research, customer churn for consumer goods subscriptions is around 10%6. You can expect this figure to be higher for individual purchases on repeat, but the customer stays, even if her purchase mix evolves. Furthermore, among the 1 in 4 shoppers who have used repeat shopping automation for food or everyday household items in the past 6 months, 2 in 3 claim that offering the capability is either ‘Impactful’ or ‘Extremely Impactful’ to their loyalty2.
Suffice to say, the cost of waiting to launch a full-basket, auto-replenishment program is high. Amazon has substantiated the market need for cross-category repeat purchase automation, and other retailers are starting to act7. You can capitalize on the investment Amazon has made to accustom shoppers to an automated repeat purchase model and secure trips in perpetuity with your own customers, all the while building loyalty. Contact Replenium today to learn more about how your organization can be up and running with a full-basket, auto-replenishment program in 90 days or less.
Sources:
1- 2021 The Dialogic Group Consumer Purchasing Assessment
2- Replenium’s October 2021 Shopper Research Survey via Kantar Marketplace
Kate Walker is Replenium's Director of Insights. With an extensive background in retail consulting and analytics, Kate delivers strategic ecommerce consultation, as well as data-backed market intelligence on auto-replenishment to the retail and CPG industries.