So What, Who Cares (vol 3, issue 54) How the Best Shopper Is the One Who Doesn't Even Realize They're Doing It
Hello!
The lag in newsletters is because I have learned the hard way that you cannot come back from the redwoods, spend a week working like mad (and getting back into the back-to-school routine, and podcasting, and being on TV), then jet off to Berlin and Prague for a week (Insta snaps here), then come home ... and not get walloped by extreme untethering from human time-keeping metrics.
Monday was the first day I did not look up every half hour and wonder when I was. And I'm so happy to be back and here now with you. Let's resume our twice-weekly routine.
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I love retail as an industry but I loathe shopping. As I was walking through the overwhelming, labyrinthine sections of Bed, Bath and Beyond on Sunday looking for a set of toothpaste tube squeezers (because I also hate when toothpaste tubes get squeezed from the middle), I muttered spitefully, "Not being able to find something in five minutes inside a store is why I buy things online from places with search engines." I eventually found what I was looking for, paid $3 for my pack of two squeezers, then went outside to check how much my convenience buy on Amazon would have cost. The difference? Two dollars and twenty cents. I would have paid 73% more if I had decided to pay for the convenience of not wandering through a store for fifteen minutes.
Convenience premiums don't end at being able to search for a specific product and get it delivered to your doorstep hours later. They also include auto-replenishment options (many brands in the Estee Lauder portfolio, including Aveda and Origins, offer customers the opportunity to set up recurring deliveries for specific items) and Amazon's own Subscribe and Save program.
For those who aren't familiar with this program: Amazon's got a number of household staples which it will offer at three price points: one price if the shopper is making a one-time purchase; a second, slightly lower price if the shopper will commit to subscribing to that product and buying it at regular intervals; and a third, 15% lower price if the shopper manages to stack up five Subscribe and Save subscriptions in a monthly delivery.
To use an example from my own shopping: We go through sunblock at a brisk pace and experience has taught me that sunblock sticks are the only things that work for our whole family. A three-pack of Neutrogena Cooldry Sport Stick Broad Spectrum SPF 50+ sunblock sticks cost $21.45 as a one-time purchase, or $20.37 as a Subscribe and Save buy if I'm just getting them as one monthly subscription item. When I grouped the sunblock with four other subscriptions, however, I paid only $18.23 for the three-pack. Since the cost per unit was $6.07 -- four dollars less than the price check I did on the same sunblock stick in my local Target and CVS stores -- I got a deal on sunblock.
Well, I got a deal this time. Amazon's prices aren't fixed in stone -- something covered in the media last summer -- and so every time any Subscribe and Save item is up for delivery, the recipient has to check the price to see whether it's still worth it to use what is basically retail's set-it-and-forget method of delivery.
Well ... I do because I'm the type of person for whom a $2.20 difference in toothpaste squeezers turns into me monologuing "It's a 73% rise in a product's price! It's the principle of the thing!" But the whole point to Subscribe & Save is actually not the discount from Amazon's regular, highly erratic list prices. The whole point is that, for customers, a retail model of "set it and forget it" means they're not spending time restocking the same item at regular intervals. On the flip side: for Amazon, Subscribe and Save means that the customer has to go out of her way to stop spending money. It's got convenience -- or inertia -- on its side.
So what? For retailers, having a customer's payment information on file and having a license to keep charging them for a product is the holy grail. Customer retention is thought to be far, far cheaper than customer acquisition -- estimates range from five to 25 times more expensive to get a new customer than to keep a current one happy -- and if a company can keep that cheaply-held customer shopping repeatedly, the more so the better.
I just spent a few paragraphs looking at the frictionless slide into repeat sales courtesy of Amazon's Subscribe & Save feature, but it's also worth examining how the Amazon Dash buttons provide another no-effort way to keep buying the same thing without noticing the price. All these pre-set subscription sales add up -- Amazon made $1.4 billion in subscription-services revenue last quarter. That's more money from subscription sales in three months than many retailers make in a year.
Who cares? Other retailers that want in on the "Give us the money that comes from customer inertia" gravy train.
Amazon has already used a decade worth of Amazon Prime shipping and offerings to train Prime Members -- and more than half the households in the U.S. will have at least one Amazon Prime member by the end of this year -- to think of Amazon as its first stop in shopping. It's been laying the groundwork for shifting shopping patterns for quite some time.
I've already referenced how some personal care companies are also doing replenishment services (usually, the incentive for delivery includes free shipping), but it might be useful to look to meal services, which also have a business model based on replenishing repeatedly consumed items (in this case, dinners) via delivery service. Blue Apron loses 72% of its new customers by the six-month mark, and a report in Fast Company last year saw research that estimated only ten percent of customers at Plated, Hello Fresh and Blue Apron stayed past six months. Note, however, that analysts aren't willing to count that business model out. And -- if you look at where Amazon's been directing its attention lately -- they're wise not to conclude there's money to be made there for a company that can absorb the early customer-retention costs. Or for a company that's already trained its customers into coming to them first.
So maybe other companies that want to try and adopt the passive-subscription model might take a look at the subscription-box retail model. There are already subscription box/retailer partnerships -- Target is teaming up with pet-centric Bark Box and Walmart is rumored to be looking at buying Birchbox -- so expect to see more effort from retailers at all levels to try and get you to consent to spending regularly and automatically.
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Your pop culture recommendation for the day: We took a train from Berlin to Prague and if you think I did not spend a portion of the trip humming Berlin's "Metro" under my breath, you are clearly new to this newsletter.
Anyway, between that pop culture moment and the presence of an actual Esprit bricks-and-mortar outlet in Berlin, I was having quite a 1980s moment. So it was serendipity to stumble across this round-up of Apple Computer-branded clothing from the same era. The colors! The sculpted hair on the models!
Now go pop the collar on the cobalt-blue Apple polo shirt you're wearing over a gold paisley-patterned shirt, then read Lori Majewski and Jonathan Bernstein's Mad World: An Oral History of New Wave Artists and Songs That Defined the 1980s. Berlin lead singer Teri Nunn gets good and gossipy in it -- it's a fun read.
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