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GROWTH POST-LOCKDOWN How to set up a retail subscription service

Retail subscriptions make life easier for shoppers (Image: Shutterstock)
Retail subscriptions make life easier for shoppers (Image: Shutterstock)

One of the ways in which retail has changed over the past few months is that more consumers are getting into the idea of retail subscriptions.

 

In an increasingly online world, it is becoming a key way to create loyalty and repeat business – so how do you go about offering them?

 

Why launch a subs service?

First off, let’s look at the facts. Retail subscriptions have grown as the use of online has grown during the pandemic. With more people shopping digitally, the need to offer something different has grown and many retailers have got on board with the idea that a subscription service is the way to go.

 

And it makes perfect sense. What shoppers want more than anything is convenience and they want a good price. Setting up a subs service for things they use regularly can deliver both of these: it keeps them coming back and it also allows the retailer to discount, but at a level that still allows them to turn a profit.

 

For the consumer, it offers an easy way to get those things that you need regularly delivered to the door without having to think about it. I myself use it for dog food, vitamins for the kids and increasingly I am looking at how to use it for all those things like laundry products, toiletries and more that we all use.

 

The convenience isn’t lost on shoppers and according to research out this week by Bazaarvoice, 5% of consumers now have at least one subscription running. Sounds small, but it is growing rapidly: a Barclaycard study this summer found that they have leapt up by 50% over lockdown and that UK consumers now have an average of seven per household and spend around £46 a month – £552 a year – on subs.

 

As a result, around a fifth of UK retailers have launched subscription services during lockdown, bolstering the 30% of retailers that already had them in place.

 

So how do you set one up?

 

Types of subscriptions

First of all it is worth understanding what subscription services are. Typically, they involve repeat buying of items that are charged for and delivered at an agreed price point and on an agreed date.

 

Within this, they can be divided into broadly three categories: replenishment, curation and access, according to a study by McKinsey & Company. Replenishment – where those regularly bought things are replenished regularly – are the most common and the most commonly sought by consumers.

 

However, they needn’t be the boring but important stuff of life – my dog foods et al – but can be fun stuff: wine, food boxes, even snacks are all very popular. In fact, Barclaycard finds that wine is among the most popular, but that groceries are also growing fast.

 

However, that doesn’t mean you have to limit yourself to being a food retailer: anything pretty much works as a subscription of one stripe or another. If you look at the reasons consumers gave the Barclaycard researchers for subscribing, you find that convenience and exclusive content tied as most important driver for 53% of consumers. A personalised offering (48%) and the discovery of new brands or products (51%) were also cited. Interestingly, more than four in ten (44%) also say they make great presents.

 

What to sell

There is no hard and fast way to start a subs service, but there are a few key steps that you need to follow to make it work. Here’s what you need to do…

 

  • Create the product – you may think that if you aren’t selling food, toiletries or cosmetics then subscription service won’t work for you, but you’d be wrong. Anything can be a subscription service. Take a look at what you do sell and work out what of it could lend itself to this – both in terms of being a compelling offer and that is easy to fulfil. It is also worth taking a look at what your best sellers are and what you do actually sell a lot of repeats of.

 

  • Box it – another approach is to look at what collections of items work well together and have some sort of potential repeat purchase leverage and box them up. Shoppers love a box, especially if it helps them in some way. Shaving kits, food boxes, wine tasters and even clothing all work well.

 

  • Be unique – you may also want to look at what you may be able to add to your existing range as an exclusive offer just to subscribers that augments your brand. This has the added advantage of growing sales and growing your customer base along with the other advantages of setting up a subs service.

 

Get the price right

Once you have worked out what you are looking to offer as a subscription service, assess the market for it, paying particular attention to price. Ideally, a subs service offers the customer convenience and some sort of discount for the regular order.

 

Work out what you are selling, how many you are likely to sell and what price you can sell it for. Assess what competitors may be offering and understand the price of what you are offering relative to that. This will not only help you turn a profit and grow, but will also be a crucial part of your marketing plan.

 

Marketing

Getting the idea out there is crucial. Adding the subscription element to your website is the first step, making a big splash about the fact that you offer this service.

 

If you sell through a marketplace such as Amazon then investigate their subscriptions offerings and see how to make that work for you.

 

Outside of this, you need to do all the usual things: blog it, social it, get advocates on board, use SEO and tap into affiliate marketing. It is also worth using paid advertising too to drive up awareness. You may also want to offer an additional ‘early bird’ discount to the first people to sign up.

 

Fulfilment and logistics

Perhaps the biggest challenge of all is in fulfilment and logistics. If your offering is in anyway personalised, then creating those personalised orders and shipping can be inefficient and costly.

 

As you grow and your subs business grows with you, you need to be able to look for efficiency savings across the whole order to delivery process. Picking and packing in time, with the right items requires deep management of stock and inventory levels, as well as keeping a crucial eye on shipping.

 

The shipping itself also requires very careful management, with having delivery to each subscriptions customer lined up and ready in advance. If shoppers are using your service to replenish then delivery date and time are crucial.

 

Doing all this at a cost that makes it worthwhile is the biggest challenge that you will face. Third-party carrier management, order processing and tracking, as well as inventory management tools are all going to be crucial.

 

In conclusion

There is a growing shift towards subscribing for retail goods. For consumers it is cheaper, more convenient way to shop for essentials, but increasingly it is also being driven by access to unique and bespoke content and goods, a new way to new things and as a gift idea.

 

For retailers it offers loyalty and repeat business and some handle on regular sales. For many it will also be the USP they need to make their first forays into online retail.

 

It isn’t necessarily easy to do –logistically it can be costly and complex – but once up and running it can be an excellent new and growing revenue stream.

 

Check out these subs service that are doing well right now for some more ideas:

Hello Fresh – healthy meal kits

 

Nova Blooms – flowers, but has also added essential groceries

 

Hotel Chocolat – confectionary

 

Naked Wines – wine and other drinking-related things

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