Are subscriptions a winning strategy to get through the pandemic?
While some retail models and segments have run into significant difficulties withstanding the pandemic and demands of social distancing, subscription services seem to be thriving.
Nearly 90 percent of subscription services have demonstrated either flat numbers or growth since the onset of the novel coronavirus pandemic, according to a study by Zuora reported on by the Harvard Business Review. The reloading, renewal and reordering characteristics of the revenue model can be a lifesaver for businesses in the midst of a crisis, the article asserts, as it allows cash flow to remain steady when things are otherwise rocky.
Growth in this area could be related to other pandemic-era shopping trends. With trips to the grocery store suddenly carrying a risk of contracting COVID-19, many customers early in the pandemic began trialing online grocery shopping and, alongside that, grew more comfortable ordering direct from CPG brands, some of which have subscription elements to their direct-to-consumer offerings.
The boom in consumers buying CPG products vendor-direct inspired massive CPG companies like PepsiCo to launch direct-to-consumer services. In fact, PepsiCo developed its Snacks.com and PantryShop.com websites in only 30 days to get in on the trend. Although subscriptions are not currently available on the websites, the FAQ on Snacks.com addresses their absence and indicates the company is continuing to build new features into its offerings.
Plenty of retailers were already experimenting with subscription services leading up to the pandemic. Both Panera Bread and Burger King launched coffee subscription programs over the past few years. Outside of food/QSR, Nike launched a service to automatically replenish children’s shoes.
In non-crisis times, subscriptions did not always demonstrate the stickiness they promised. In 2019 subscription services were experiencing a churn rate as high as 40 percent.
The shakeup from the pandemic, however, does seem to have breathed life into some subscription services that had been sagging. Briefly popular meal kit services like Blue Apron were all but out of steam by March of 2020. Recent Nielsen data, however, indicates that in April 2020 U.S. consumers spent $100 million on meal kits, double the spending during that month in 2019 according to CNBC.
- How to Convince Your Sales Team to Adopt a Subscription Model – Harvard Business Review
- Can subscription retail solve its retention problem? – RetailWire
- PepsiCo launches direct-to-consumer sites for its brands – RetailWire
- FAQ – Snacks.com
- Will coffee subscriptions raise some dough for Panera? – RetailWire
- Is Nike’s new subscription program for kids a parent’s best friend? – RetailWire
DISCUSSION QUESTIONS: Should CPGs and retailers who had not implemented subscription services consider launching them due to pandemic-era factors? How might existing subscription services improve and differentiate themselves?