Amazon subscription service puts squeeze on Coles and Woolworths

Sue Mitchell
Oct 23, 2019

AFR

Amazon is turning up the heat on Woolworths and Coles by launching a discounted subscription service for regularly bought goods such as pet food, toilet paper and nappies.

A year after launching its food and grocery offer, known as Amazon Pantry, Amazon has launched Subscribe & Save, which enables customers to get a 10 per cent discount and free delivery when they sign up for repeat deliveries on products they buy on a regular basis.

Amazon Australia’s new country manager, Matt Furlong, said Subscribe & Save would be available on thousands of household essentials including packaged food and beverages, nappies, pet supplies, vitamins and beauty products and brands such as Carman’s, Coca-Cola, Heinz, Huggies, L’Oreal, Omo and Vegemite.

“Time and money are two of our most precious commodities and ‘Subscribe and Save’ gives Amazon customers a simple way to save on both,” said Mr Furlong, who took the helm in September from Rocco Braeuniger.

Under Subscribe & Save, customers do not pay a subscription fee but can subscribe to products they use routinely and choose the frequency of deliveries, ranging from one to six months. Customers can opt to skip deliveries, change delivery day or cancel their subscription.

While prices on individual products might change between deliveries, subscribers will always receive a 10 per cent discount on the price when their order is ready for shipping (after the initial order).

In the US the discount is even larger, with subscribers entitled to 15 per cent off when they receive five or more products a month and Prime members enjoying a 20 per cent discount.

An Amazon Australia spokeswoman declined to say whether the discount was funded by Amazon or by suppliers.

Threat for supermarket chains

Subscribe & Save will help generate a steady stream of orders and may encourage customers to buy more products on Amazon.

But fast-moving consumer goods experts say subscription-based services such as Subscribe & Save threaten to undermine the “one-stop shop” model of major supermarket chains by siphoning off volumes, especially in bulky goods such as nappies, pet food and soft drinks, and giving customers fewer reasons to shop in store.

“When we think about dry grocery products like laundry detergent and toilet paper they’re a habitual purchase and we tend to buy the same brand regularly, and we also tend to run out of these things because they’re such a low involvement product,” said Gary Mortimer, associate professor at QUT business school.

“Consumers like it because it’s set and forget … and it works well for Amazon and others that set up this style of offer – consumers type in their credit card details, it’s a weekly or monthly transaction and we don’t even think about it coming out of our bank accounts.

“But if you’re not going into a supermarket on a regular basis (to buy washing powder and toilet paper) you’re less likely to go to a supermarket and make those unplanned purchases,” Dr Mortimer said. “That’s why we’ve seen both Coles and Woolworths ramping up their online efforts.”

Ronan Farrow has released a new book Catch and Kill.