Subscription Commerce

Brewing User Interest In Coffee Subscriptions

Consumers have turned to online subscriptions to get their caffeine fixes while the bulk of America’s 37,000 coffee shops remain shut down – with the same expectation for customization as from their in-store baristas. In the latest Subscription Commerce Tracker®, Mike Lackman, CEO of coffee subscription company Trade Coffee, explains why personalization is key to retaining subscribers in tough economic times.

The subscription market creates comfort and value for subscribers who want flexibility in the way they receive products and services.

The coronavirus pandemic has further ramped up this need as consumers abide by stay-at-home mandates and crave normalcy in their daily routines, wanting once-regular experiences like enjoying a morning cup of freshly brewed coffee.

Trade Coffee, a New York-based personalized coffee subscription company, is one such player working to ensure that customers who subscribe to its service are connected with more than a steady supply of specialty goods.

“We’re making it a lot easier to create comfortable experiences in a way that is entirely customizable and … gets the morning started right,” Mike Lackman, the company’s CEO, said in a recent interview with PYMNTS.

Lackman said he believes coffee gives customers a sense of partnership with their community, particularly when subscribers are struggling with pandemic-related disruptions. Trade Coffee reported in late April that it was serving four times the number of subscribers and shipping twice as many coffee bags as before the pandemic. This boom in subscription sales comes as Starbucks experiences a 10 percent decline in same-store sales, with the chain feeling the pandemic’s impact in both the U.S. and China.

“Our business is about the uptick in demand for the comfort one can get from the café culture, which has been removed from their daily life,” Lackman said. “We bring an ecosystem of craft roasters to a nationwide audience. More than ever [there is a] need for us to bring demand from all these consumers to those roasters.”

Understanding Customer Preferences

Subscription providers can benefit from developing a deeper understanding of their customers’ preferences. Trade Coffee has found that its subscribers, who range in age from 25 to 40, want variety more than anything else. The company sought to personalize its experiences by developing a way for its subscribers to describe how they want their coffees to taste.

“Each of our 400 varieties of coffee has 20 points of metadata based on the way we physically taste [each, whether] in our company process here in our office today or at our director of coffee’s department,” Lackman said. “So, the data we ascribe to each particular roast goes through a very specific and proprietary process that allows us to match people to … flavor profiles that we think will be perfect for them.”

The company’s website offers guidance on coffee-making methods and provides questionnaires to help subscribers determine how they like their coffee. Trade Coffee uses a proprietary system to send customers’ orders to one of 50 roasters in 38 states. The 2-year-old company was initially developed to be mobile-first but now supports a variety of digital channels to offer convenient ordering anytime, anywhere.

“If I opened my phone when I was in front of the stairs in the subway, I could actually order the coffee before I lost service going underground, and I think people don’t want to jump through 50 hoops,” Lackman said.

Building Community

Subscription-based companies also benefit from creating a sense of community among their customers. Trade Coffee subscribers can choose to buy from someone right in their neighborhood or from a roaster in another part of the country that they may want to support.

“One of our most popular roasters is a coffee called Red Rooster from Appalachia,” Lackman said. “They’re in southwestern Virginia; they are a really interesting small American business [and] a critical employer in that part of the state. … So, when we can, we bring them volume.”

Connecting consumers with roasters they want to support is even more significant now, as small businesses struggle to stay afloat during the economic downturn.

“Now, COVID-19 is putting a real spotlight on that component of our marketplace … helping consumers have a partner in coffee, especially if they are able to replicate the experience of going to the café and supporting their local baristas,” he said.

Building Trust

Many American consumers are experiencing financial strains because of pandemic-related unemployment, however, and subscription-based businesses are allowing them to pause their subscriptions as a result. Unemployment, emergency medical bills and falling victim to fraud are just a few reasons why consumers may shift their financial priorities. Pausing is an appealing option to consumers and is something Trade Coffee currently offers to its subscribers. The recent increase in demand means that the company has not seen an uptick in requests to cancel or pause subscriptions.

“We’ve had four times as many requests to increase the frequency or amount of coffee as we have requests to slow down or stop the flow,” Lackman said.

Offering promotions is one of the other approaches subscription companies rely on to engage new customers and gain their trust. But Lackman claimed that angle is not always the most organic way of developing a subscriber base.

“We don’t typically do the ‘first bag free’ kind of promotions, and we definitely don’t do anything to force the customer into things that they don’t naturally want,” he said.

The company’s delivery schedules are entirely customizable rather than monthly, and Trade Coffee made the cancellation process easy should customers ultimately decide they no longer need the service.

“Companies have taken the approach of making it too hard for people to cancel, and that’s something that’s as old as the old Columbia House records model or the old jelly of the month club. … When we looked at what we wanted to do, it was just about building trust,” he said.

Allowing customers to sign up, pause and cancel their subscriptions will not only help firms develop a continued following but also will increase the odds they win consumers’ loyalty during and after times of hardship.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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