Retail

How Retailers Drive Innovation With Subscriptions (And Payments)

How Retailers Drive Innovation Via Subscriptions

Brick-and-mortar retailers, as well as online merchants, are offering consumers all sorts of products and services through the subscription business model, from movies to tea. And many consumer-focused companies are finding the subscription model attractive, as it can help them establish long-running customer relationships and more predictable revenue streams.

According to the latest PYMNTS Global Recurring Payments Tracker, retailers in one study said that subscriptions increased customer loyalty by 55 percent, and 50 percent said it improved revenue predictability. At the same time, the Tracker pointed out that approximately two-thirds – or 67 percent – of respondents reported higher revenue.

From The Vitamin Shoppe to Free Your Tea, these are just some of the ways physical and eCommerce companies are aiming to offer compelling subscription offerings, as well as convenient payment experiences:

Among retailers, 67 percent say that using subscription sales models increased their revenue. The Vitamin Shoppe, for instance, recently rolled out Only Me, a personalized online assessment that provides a custom assortment of supplements and vitamins to subscribers on a monthly basis. Only Me uses a detailed questionnaire covering current health status and daily routines to create a wellness plan. With the completion of an assessment, the retailer said customers could “expect a uniquely sourced daily regimen, providing them with vitamins and supplements essential to their foundational health.” The subscription is available for a monthly fee, and plan prices are based on dosages and total recommended products.

It is estimated that by 2024, there will be one billion video streaming service subscribers worldwide. Some entertainment innovators are also rolling out new subscription services. Disney’s anticipated Disney+, for instance, will reportedly launch on Nov. 12 on most major streaming platforms, per news in August. Consumers can subscribe to Disney+ via numerous devices and platforms, with the inclusion of iOS and Apple TV, Android and Sony PlayStation 4. The move by Disney is reportedly an effort to tackle rivals with original content like Amazon, Apple and Netflix. Disney+ is planning to offer streaming content from brands like Star Wars, Marvel and Pixar. “Re-imagined” content from popular titles, such as “Home Alone,” will also reportedly be featured.

Subscription companies based in the Asia-Pacific, Europe and North America experienced more than 300 percent growth in subscription sales from 2012 to 2019. And retailers are offering innovative subscriptions for all sorts of products. Walmart, for instance, is launching a grocery delivery service, InHome, which is offered at an introductory price of $19.95 per month. Shoppers need to buy a smart lock or garage door kit, which come with free installation and a free month of unlimited deliveries. The pilot program was first announced in June at the company’s shareholders meeting, with a rollout planned in Vero Beach, Florida; Pittsburgh and Kansas City. Shoppers can visit a website to enter their address to determine eligibility for the service. They can then select their delivery preferences and corresponding smart lock device installations.

A July survey of respondents in 12 countries found a worldwide shift toward adopting subscriptions, with the share of adults having subscriptions rising to 71 percent in 2019 from 53 percent in 2014. And digital innovators are providing subscriptions as a means of discovery for consumers. Free Your Tea’s base plan, for instance, offers customers a day’s worth of tea every month. The company sends a sampler of six different teas after sign-up, and then asks subscribers to rate those teas. Using those ratings and other customer-provided preferences, Free Your Tea can then customize varieties to suit subscribers’ tastes. From that point on, subscribers will receive a new tea in the first week of the month, as well as one free additional sample. They can pay for their subscriptions by PayPal, debit card or credit card.

The share of adventure vacationers who would travel more if given access to payment solutions such as automated recurring payments is 59.7 percent. At the same time, travel industry innovators are offering subscriptions for airline tickets. Wanderift allows subscribers to pay a monthly fee in exchange for a certain number of tokens. As of May, the company provided approximately 28 destinations based on its subscriber markets. Subscribers can book one day to 21 days before departure and can choose between a lite plan (three one-way flights and one rollover) and a pro plan (four one-way flights and two rollovers). Wanderift focuses on subscribers in cities such as Austin, Denver, Atlanta and Las Vegas. The company accepts credit and debit cards for payments.

From Wanderift to Walmart, online merchants and brick-and-mortar retailers are harnessing the power of subscriptions. But business-to-consumer (B2C) companies need to underpin those offerings with easy-to-manage payment experiences and satisfy customers as they aim to innovate with subscriptions.

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Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the November 2019 Mobile Order-Ahead Report, PYMNTS talks with Dan Wheeler, Wahlburgers’ SVP, on how the QSR balances security and seamlessness to secure its recently launched WahlClub loyalty program.

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