Amid rising prices, the refill trade is winning, offering discounts to consumers while safeguarding sales for the brands.
Consumers are looking for ways to save while retailers are trying to retain customers. This is where subscriptions come in. Take Amazon’s Subscribe & Save, for example, which promises up to 15% off items when consumers sign up for scheduled, automatic deliveries of qualifying products.
Following a tip from the e-commerce giant, direct-to-consumer (D2C) brands are offering the same frequency by offering subscription discounts.
In an interview with PYMNTS, Adam Deremo, founder and CEO of caffeinated chocolate brand Awake, said the company “has started to focus on [subscriptions] this year” on his D2C website.
“In fact, we nearly tripled our subscriber base this year,” Deremo said. “Even so, we started from a really low point but I’m quite encouraged by how this is going.”
This sort of increased focus on regular replenishment is bad news for traditional retailers, as this remains largely the purview of e-commerce players for now, though a small handful of them have tried their own versions of the model, particularly on the other side of the world big pond.
In October, German discount chain Lidl launched refill stations in three UK stores, where customers can bring their empty detergent bottles and sachets to be refilled at a £0.20 discount. Other UK retailers including Aldi, Asda, Marks and Spencer, Morrisons and Waitrose are all testing different versions of dry produce refill packs.
In a recent Outlook, Karen Webster, CEO of PYMNTS, went so far as to say that the burgeoning refill economy could be among this year’s top trends. With billions of prescriptions already being refilled each year, consumers are becoming more comfortable and used to recurring purchase models and companies are using this to build loyalty.
“Innovators using `Is and payment technology can now turn any consumer product in the medicine cabinet, kitchen pantry, refrigerator, mud room, garage, shed or basement into an automatic refill device — including the clothing items and accessories consumers frequent brush up.” Webster wrote. “The refill economy will take a thousand cuts to the death of traditional retail, particularly the department stores and grocery stores already under attack.”
She highlighted research by PYMNTS which found that nearly 1 in 4 consumers have switched to buying items they used to get from another supplier at the grocery store, and the nearly 10% of US consumers who shop at Spar -subscription are proof of this shift.
This subscription option could soon be made available to brands outside of Amazon’s site, further compromising traditional retailers given how the e-commerce giant has expanded its technology. The company announced Tuesday (January 10) that it is opening its Buy With Prime program to a much broader pool of merchants by invitation only, making it available to all eligible US merchants. From there, it’s not hard to imagine Amazon expanding the Subscribe & Save option as well.
In fact, by offering discounts, recurring payments are particularly attractive to consumers right now, as inflation prompts consumers to look for ways to save money. Findings from PYMNTS’ recent study, Consumer Inflation Sentiment: Perception Is Reality, find that 69% of consumers have changed their grocery shopping lists based on inflation.
It’s not just grocers — other types of traditional retailers could also suffer from the shift to refill and recurring payment-based models. Let’s take the pharmacy for example. Research from PYMNTS’ recent study, The Instant Payments Transformation Guide: Grocery, Pharmacy And Convenience Retailers, produced in partnership with ACI Worldwide and based on a survey of 300 US and UK retailers, finds that pharmacies are struggling may have to compete with the convenience offered by digital native newcomers.
“Only mobile online pharmacies pose a significant challenge for retailers on multiple levels,” the report states. “Only mobile pharmacies can also enable consumers to subscribe to delivery services, where a batch of prescribed medications can be delivered on a regular basis or delivery can be a one-off experience.”
In addition, recurring models are not only used for products, but also for services. In an interview with Webster for the JP Morgan Payments Global Innovators in Payments Series, Jobber Payments and FinTech Lead Ryan Robertson discussed the potential of recurring models to drive service provider growth in scheduling.
“A really good example of this, as we often see, is commercial cleaning or seasonal lawn care,” he said. “These are things we can set up. These are recurring orders with recurring invoices attached that are sent out. Back to working capital: predictability.”
PYMNTS Data: Why Consumers Are Trying Digital Wallets
A PYMNTS study, New Payments Options: Why Consumers Are Trying Digital Wallets, finds that 52% of US consumers have tried a new payment method in 2022, with many choosing to try digital wallets for the first time.
See more in: Amazon, Awake, Consumer Spend, D2C, Discounts, Ecommerce, Economy, Grocery, Inflation, Featured Articles, News, Refill Commerce, Retail, Saturday Articles, Subscriptions, Weekenders
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