Over the past several years, there has been a lot of buzz (and a little debate) around auto-replenishment and its role in the future of consumer behavior. According to a report by Oracle titled “Retail in 4 Dimensions: Understanding Consumer Behavior in the Age of Relativity,”48% of consumers would like to auto-replenish frequently-bought items.”
Consumers are validating this with their wallets. Amazon has played a central role in enabling this trend and participating brands like Peet’s Coffee and Ziploc now attribute 50% of sales to Amazon’s Dash Program. Major retailers such as Walmart and Target have also implemented their own auto-replenishment programs and direct to consumer brands are also benefiting from offering subscriptions.
The COVID-19 pandemic has only accelerated this trend. According to an article in Progressive Grocer: “The Acosta research shows that 38% of shoppers have placed an online grocery subscription order in the past four weeks. The most popular categories purchased by this method include health and beauty (19% of online subscriptions contained health and beauty products), shelf stable food and beverages (18%) and paper and cleaning products (18%). Many of these shoppers made their first-ever online subscription orders.”
While auto-replenishment has experienced remarkable growth over recent years, it is not without criticism. According to Retail Dive, nearly 40% of subscribers of any service type cancel. The high churn rate of subscriptions makes some experts question the long-term staying power of the subscription model." Our take? It’s about refining the retail experience to give consumers exactly what they want when they need it.
Let’s step into the consumer’s shoes for a moment…
When the initial order is placed, it can take a few weeks for the first shipment of the subscription to arrive. Often, the product isn’t opened right away, therefore it isn’t unusual for a consumer to begin using the product around the time that the second order in the subscription is about to ship.
Depending on usage patterns, a “30 day” supply might not actually be used at the rate that the subscription is set for. This leaves it to the busy consumer to manage their subscription manually, logging on to skip or pause the subscription if they aren’t ready for the next shipment. This is the moment that the subscription model unravels. The convenience of the subscription is overshadowed by the inconvenience of the additional task of monitoring usage or remembering to update subscription settings. For the business consumer, this task is often forgotten or delayed. Therefore, the next order ships...sometimes another order after that (you get the picture). It’s not unusual for the consumer to suddenly find themselves with a large supply of your product and cancel based on having way more than they need.
The Future of Shopping is Needs Based
The example above speaks to the missing piece of many subscription programs for consumer goods, they are based on convenience but not based on needs. What a consumer wants is to have what they need, when they need it. Timing matters. Therefore, in order for brands to maximize their subscription revenue in the long term, subscriptions must be aligned with the needs of a consumer at any particular moment in time.
IoT provides a solution to this which can monitor consumer usage levels in real time and ship the product only at the point in time where the consumer is running in short supply. This allows the consumer to experience the convenience that they require amidst the demands of daily life without finding themselves in a situation of auto-ship gone awry.
It is expected that by the year 2023, subscription services will make up 75% of brands. How is your brand addressing consumers on a needs basis? Share your comments below.