The rise of DTC subscription programmes
A staggering 16,500 people joined Pret A Manager's YourBarista coffee subscription on the first day of launch. Speaking to the Guardian, Pret said they expected a more modest 2,000 - 3,000 subscriptions on the first day.
After an initial free trial period, customers pay £20 a month and can receive up to 5 hot drinks a day. Once subscribed, customers present a QR Code on their phone, which is scanned in-store every time they want to claim a hot drink.
Pret are hoping that their new coffee subscription will lure customers back into their stores after having to close 30 of their UK branches due to COVID-19.
Director of coffee and packaging for Pret, Briony Raven said: "It’s Pret’s way of doing loyalty. It’s about giving people an easy choice when they come back into their everyday routine."
Pret's innovative in-store subscription is clearly a hit with customers and is their first step to becoming a digitally led multi-channel business. The question is, are other large retailers going to follow suit and launch their own subscription programmes?
Well, its already happening, Walmart's Beauty Box is a clear example of success and the $1 billion acquisition by Unilever of the Dollar Shave Club shows that the revenue potential for DTC subscription services is huge.
According to the 2019 annual report from the Subscription Trade Association (SUBTA), subscription services will make up 75% of DTC brands by 2023.
“Subscriptions have become more appealing for brands for many reasons. Most importantly they allow consumers to engage in a relationship with the brands,” said Chris George, co-founder of SUBTA. “In many cases, they also save the consumer money; subscriptions can bring value and a lower monthly cost versus a one-time larger payment.”
In the US, 15% of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis. It's clear that members of subscription programmes are more engaged, for example, Amazon Prime members spend four times more than non-Prime customers annually.
Subscriptions allow brands to build a direct relationship with the customer and create a sense of community, particularly across social media channels.
A good example is the Look Fantastic Beauty Box, run by The Hut Group, a pure-play UK retailer, who also deliver to several international markets, including the UAE. The excitement levels in their reviews suggest that customer loyalty runs high - the curated beauty box aims to delight their customers every month with a surprise selection of beauty products...
Beyond customer loyalty, there are many opportunities for brand-building. Sending products to customers every month creates more customer touch-points and keeps your brand front of mind.
The potential for growth is clear, but what are the challenges facing traditional retailers who want to enter this market?
The key issue is operational - subscriptions can put significant pressure on a retailer’s supply chain; subscription packages present an added layer of complication when it comes to accuracy and efficiency in the process of picking and packing the boxes, it’s tempting for many retailers to discount the physical subscription channel in favour of focusing on the core business.
But with Amazon and pure-play retailers gaining ground, larger retailers are starting to pay heed to the changes in the retail landscape and consider the numerous benefits of operating a subscription programme.
Subscription programmes have many flavours, but ultimately they fall into two main categories:
Subscription plans are an excellent way to keep existing customers loyal - they remove the need for customers to place repeat orders - a good example is Hubble, where customers receive their contact lenses every month.
Subscription boxes increase brand exposure and are a good mechanism to convert subscribers to new customers by featuring your products in curated boxes.
Both approaches generate recurring revenue and increase customer lifetime value.
Given the revenue potential, there is no better time for businesses to act. If you would like to discuss the benefits of subscription marketing, contact firstname.lastname@example.org
Gonca Bengherbia is the founder of Vollodigital.com, a digital consultancy specialising in customer acquisition and retention.