Our recent study on the world of subscriptions and its potentially disruptive business models covered a lot of ground for retailers and suppliers. Supermarket operators may still have questions about subscription selling, but we see several benefits in some models that could help them win sales and ultimately meet trip missions and shopper needs in new and better ways

What consumers get from subscriptions

Today’s proliferation of buying options hasn’t always translated to a less complicated shopping experience for consumers, and many are on the quest for a “better” experience ­–  and this certainly includes parts of grocery shopping. Successful subscriptions offer more than just the product off the shelf. They give consumers the chance to a benefit from solutions, more specialized products, and/or efficiency.

Here’s how and where those benefits intersect with grocery shopping.

Buying solutions

Grocery buying/shopping is about purchasing collections of related products that ultimately become part of something larger– a recipe, a menu, or a regular household activity like laundry or housekeeping. Today, the individual shopper has to build these collections of products, but tomorrow more of that work will be shifted to solution providers.

The subscription trend is well under way. Nielsen reports that 68% of more engaged online grocery shoppers,58% of newer online grocery shoppers, and 50% of Millennials are interested in subscription buying. Meal kits are a prime example of this kind of solution selling (as are non-food subscriptions that allow consumers to try makeup samples and personalized selections of clothing).

Source: NielsenDigitally Engaged Food Shopper Survey

Buying specific attributes

Much of the growth that food retailers are seeing today comes from shoppers buying more specialized, high-value products with specific attributes (organic, grassfed, antibiotic-free, humanely-raised, and natural).  Even specialty markets find it difficult to stock all of the SKUs customers want.

Buying back time

Meal planning and preparation and routine household chores are a time-consuming part of everyday life, plus, these tasks often bring with them the pressure of “getting it right for the household.” Subscription purchases can reduce the time and effort associated with routine activities.

A new relationship with consumers

Based on these benefits,subscriptions can strengthen loyalty and transform the shopping and buying process from a one-off transaction into an ongoing, dynamic two-way relationship – one in which information flows between the company and the consumer in addition to the exchange of money. Consumers receive valuable subscription content and services (like cooking directions, lifestyle tips and access to extended product selections), and retailers receive valuable consumer data about the needs, concerns, and preferences of their customers.  The opportunity is to:

• Build a continuity of purchases for a specific set of needs and products, i.e.,move beyond a single product subscription.
• Sell related products and gain an additional share of household spending.
• Build an on-ramp to long-term relationships.

Subscription models and opportunities are more diverse than you might think

In his book, The Automatic Customer , John Warrillow identifies the following nine types of subscription models: Consumables, Surprise box, Simplifier, Membership website, All-you-can-eat content, Private club, Front-of-the-line service, Network, and Peace-of-mind.  

Mashing up Warrillow's list and our own research, here are the two main types of subscription models for grocery retailers to focus on because they lean most heavily on products and services and contain the most opportunity for supermarkets.

• Curated collections can deliver solutions – mealkits are a great example, but the concept extends into selections of specialty meat, cleaning products, kid’s snacks, or everything that’s needed for back to school.
• Wide-assortment subscriptions are a little like a buying club. For an upfront monthly payment, consumers can shop a special collection of goods. Audible sells audio books this way and ShoeDazzle uses this model to sell shoes. For a grocer this could translate to a dessert club, deli subscription, Family Dinner club from the prepared food area, or eco-friendly cleaning products.

Meal kits are just the beginning

Despite industry estimates that meal kit companies sold between $1 billion and $1.5 billion in 2016, a TechCruncharticle argues that these companies won’t be the ultimate winners in the meal kit market. “Once the novelty wears off, most people will ask if meal kits fit conveniently into their life,” Brendan Witcher, Forrester principal analyst and former chef told TechCrunch. “People like the option to make what they want, when they want. Managing a subscription service can become more complicated than going to the grocery every week, especially for families or people who simply enjoy going to their neighborhood market.”

When we wrote about this topic in November 2016, our readers suggested this is where supermarkets could leverage their advantage of physical proximity and the ability to bundle additional higher-margin items in addition to meals, such as a choice of bakery items for dessert, beverages, flowers, etc.

Traditional supermarkets and specialty markets are already experimenting with the meal kit model. Publix and Ahold’s Giant-Carlisle are selling meal kits in their brick-and-mortar stores,Whole Foods is partnering with Purple Carrot to provide the service, and in London, Sainsbury is running a test with Hello Fresh kits.

As these experiments spread to others, competing food retailers will be pressured to respond, and the winning proposition will likely be based on a more dynamic and flexible go-to-market strategy than today’s meal kits.

Where to start: Define your focus

When you’re thinking/exploring the potential of subscriptions to drive growth, you need to define your focus in order to find the right opportunities.

>> How will you deliver value?

Subscriptions can deliver exceptional value to consumers by focusing more narrowly on specific need states and shopping occasions than broad-based mass market offers, making it possible for retailers to tailor more unique and appealing value propositions, including regional flavor preferences.

>> How will you win?

Because you’re more efficient? Or because you have a better value proposition?

We’re in an intense period of retail reinvention, and product subscriptions are part of the current direct-to-consumer trend that is redefining the meaning of service for grocery shoppers. Subscriptions aren’t right for every consumer or every product, but when used to connect the right consumers with the right products to solve the right problem, they can deliver new sources of growth.

If you’re ready to think seriously about subscriptions, you’ll want to check out the range of retailer-specific go-to-market strategies in our paper “ Leveraging the Subscription Opportunity .”

1. Expanding Sale of Products Not Available in Your Store
2. Seasonal Buying Solutions
3. Personalized“Favorites” Clubs
4. Programming Replenishment of Items Regularly Purchased In-store

Once you have a vision for what value you want to deliver, then it’s time tackle the important topic of profitability.