THE NEW SUBSCRIPTION CULTURE

Retailers try to lock in loyalty with unlimited delivery for a fee.

November 12, 2020

NACS daily

ALEXANDRIA, Va.—Retailers are looking to membership programs that provide unlimited delivery or pickup for a fixed fee as a way of ensuring customer loyalty in a world that has dramatically shifted to digital shopping, reports GroceryDive.com.

Both Kroger and Albertsons now offer unlimited-delivery subscriptions, while SpartanNash has a pickup program that offers no-fee fulfillment for $50 a year. Ahold Delhaize has announced it will offer a subscription program with The Giant Company, its Carlisle, Pennsylvania-based brand, next year.

These subscription programs aim to lock in loyalty among consumers that are spending an average of $95 per order, according to Brick Meets Click. They come at a time when retail giant Amazon is offering steep discounts through its Prime program, and Walmart has rolled out the Walmart+ membership program, which provides shoppers with mobile scan-and-go, fuel discounts and unlimited free delivery.

“The industry is getting pushed in this direction,” said James McCann, former CEO of Ahold USA who now serves as an investor and adviser to companies like Takeoff Technologies and Afresh. “I think it’s going to become a big part of the game plan at all the major grocers.”

Kroger’s $79 annual subscription program, Delivery Savings Pass, waives the $10 fee the company normally charges for delivery for orders of $35 or more. The program is now being tested in Dallas and the Los Angeles area.

Albertsons has rolled out Unlimited Delivery Club, which is available for $99 a year or $15 a month and is eligible for orders over $30. The program began in 2019 and is now available in markets where Albertsons operates its own delivery service, including Southern California, Phoenix and Chicago. The subscription waives fees on pickup orders and includes a two-hour delivery service that the grocer is testing in Chicago.

SpartanNash has 155 stores under several Midwest banners and offers a subscription option under its Fast Lane pickup program for $17 per month or $49 annually. The Giant Company’s subscription program will cost less than $100 a year and will offer an “improved value proposition and preferential delivery time slots,” the chain said.

But it’s a challenge for retailers to convince consumers—many of whom participate in multiple paid programs—to fork over more cash. A 2018 survey of 2,500 consumers found they spent on average almost $240 a month on subscription services. However, grocers are an essential service and have long-term relationships with many of their customers, said Gary Hawkins, CEO of the Center for Advancing Retail & Technology, an education and consulting service for retailers.

Today’s shoppers also see the value of the set-it-and-forget-it nature of paid membership programs, said Jordan Berke, founder of Tomorrow Retail Consulting and a former Walmart executive.

“I have been very amazed at what I would call the subscription culture that has emerged with consumers, where they prefer a subscription model for experiences that remove friction from their lives,” said Berke, who has researched subscription models.

As more retailers add online subscriptions, however, the offers become less unique and appeal primarily to grocers’ most loyal online shoppers, who may already be paying per-order fees, McCann said. “It’s a defensive move because it stops existing loyal shoppers from shopping with someone else,” he noted.

Retailers’ subscriptions also must compete with memberships from third-party service providers, such as Instacart, Uber and DoorDash, services that soared in popularity with consumers during the pandemic.

But grocers can get creative and leverage assets that are core to their stores and brand identities. Berke said Kroger could channel its “Fresh for Everyone” marketing platform into a “Fresh Life” membership that includes livestreamed cooking classes and fitness memberships. Grocers could offer free fruit and vegetable prep in stores, free coffee fill-ups, first access to exclusive products and host a range of in-store events, sources said.

The NACS Crack the Code Experience, which runs through December 4, offers a deep dive look into c-store loyalty efforts and how they help retailers retain customers. Don’t miss the education session “From Points to Passports: Reimagining Loyalty,” for more information regarding this trend and how it can grow your consumer base. Register now and get access to these sessions, along with 50+ education sessions, virtual showrooms and online networking within the convenience and fuel retailing industries.