To Meet Consumer Demand for Grocery Subscriptions, Merchants Must Rethink Pricing

Subscription commerce may be a powerful tool for grocers to secure customer loyalty, but rising food costs stand in the way of merchants and their would-be subscribers.

In this month’s edition of the Subscription Commerce Conversion Index, created in collaboration with subscription eCommerce platform, which draws from a census-balanced survey of more than 1,900 U.S. adults earlier this year, finds that 56% of consumers would be interested in a grocery subscription if product prices were lower.

Read more: Inflation Prompts 10x Increase in Consumers Reevaluating Subscription Value

Grocers are best served to note this demand, given subscription commerce’s built-in assurance of order frequency, with recurring purchases inherent to the model. Additionally, with their scheduled deliveries, grocery subscriptions allow grocers to meet the demand for online purchasing options without sinking the cost into on-demand fulfillment. Labor is pricy and basket sizes tend to be small.

Indeed, consumers’ actions show that when their go-to grocery subscription becomes more costly, these price increases significantly negatively impact sales. A December report following Whole Foods Market’s addition of a $9.95 delivery fee for Amazon Prime subscribers noted one employee’s account that deliveries per hour had fallen from 185 to 40 since the change.

Read more: Whole Foods Orders Drop After New Delivery Fee, Report Says

Price is the single most pertinent factor affecting grocery shoppers’ merchant choices, according to data from PYMNTS’ study “Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022,” created in collaboration with Toshiba Global Commerce Solutions. The study, which draws from the results of a census-balanced survey of more than 2,000 U.S. consumers in late fall 2021, finds that 37% of consumers cite price as the most influential factor when selecting a merchant from which to purchase, a greater share than said the same of any other factor.

See also: Thirty-Five Percent of Consumers Will Switch Grocers, Pharmacies for Better Digital Features

These concerns have been especially top-of-mind in recent months. April’s Consumer Price Index for All Urban Consumers (CPI-U), reported by the U.S. Bureau of Labor Statistics (BLS), showed food at home (i.e., grocery) prices rose 1% month over month in April and 11% year over year. This rate is well above overall inflation, which increased 0.3% month over month and 8% year over year.

Indeed, as inflation has sent grocery prices skyrocketing, shoppers have been switching brands to save on costs. In recent months, Walmart, the world’s largest grocery retailer, and big-box retailer Target have noticed consumers shifting to purchasing more from private-label brands.

Related news: Walmart Sees Shift to Private-Label Groceries Amid Rapid Food Inflation

Brett Biggs, Walmart’s executive vice president and chief financial officer, told analysts earlier this month that inflationary concerns are resulting in “an increase in grocery private brand penetration.” At the same time, Target Executive Vice President and Chief Financial Officer Michael Fiddelke noted to analysts that the company has seen “strength of the own brands in food and beverage.”

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