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01/20/2021

Retailers push for long-term relationships

David Orgel
Principal, David Orgel Consulting
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Not long ago, the biggest decision for shoppers was whether to make a purchase.

Now the stakes are higher. Shoppers are being asked to commit to relationships.

A number of retailers — from grocery to mass — recently launched initiatives that ask consumers to make monthly or annual payments in return for memberships offering such benefits as free shipping and delivery, and price breaks on products. 

It’s not hard to see why these retailer programs will interest shoppers. Price breaks on deliveries, for example, are more attractive at a time when consumers increasingly are embracing e-commerce. However, retailers need to carefully design initiatives to make sure they work as intended and meet consumer expectations over time. 

We’re more accustomed to making commitments these days — for everything from meal kits to music platforms like Spotify. You can think of the retailer efforts as memberships, subscriptions or loyalty programs with fees. They follow the success of Amazon Prime and aim to build loyalty with exclusive benefits. Let’s take a quick look at a few of the initiatives.

The pioneering force to be reckoned with is Amazon Prime, launched in 2005, which served more than 150 million subscribers across 17 countries as of January 2020. 
Prime’s fee — $119 a year or $12.99 per month — opens the door to a plethora of benefits, including free shipping for eligible purchases; streaming of movies, TV shows and music; exclusive shopping deals; and savings at Amazon-owned Whole Foods Market.

Walmart has been in the spotlight recently with a competing new membership offer called Walmart+ at $98 a year or $12.95 per month. Benefits include free shipping with no order minimum, free delivery from stores, member prices on fuel, and mobile scan and go. 

Meanwhile, Ahold Delhaize’s Carlisle, Pa.-based Giant launched a new subscription offer called Choice Pass in mid-January. The comes with an annual membership fee of $98 or $12.95 monthly, giving subscribers access to unlimited free delivery and pickup orders. 

One of the unique new retailer efforts is from Hy-Vee, with a plan called Hy-Vee Plus premium membership at $99 a year. It offers the grocer’s customers exclusive deals and fee savings on deliveries and pickups. Moreover, it provides exclusive access to a designated telephone number for premium members — staffed by Hy-Vee experts and personal shoppers. 

Other retailers pursuing subscription offers include Kroger, Albertsons and SpartanNash. It should be noted that such delivery companies as Instacart, Shipt and DoorDash have their own member discount programs with participating retailers.

Retailers are doing a nice job experimenting with member efforts. However, it’s important that strategies are based on a solid analysis of what consumers want. For example, programs need to meet consumer expectations with transparency, value and convenience — not unlike what is important to shoppers in buying products. 

Simplicity is another imperative. People have become jaded by years of complex offers from organizations ranging from credit card companies to airlines. Consider that one of the biggest consumer food trends today is “free from” — which focuses on streamlining ingredients. This trend underscores that often less is more. Likewise, for member programs, consumers don’t care so much about the number of benefits, but rather those they will actually use. 

I expect member programs will be popular in 2021. Consumers will choose carefully and lean towards offerings they are most likely to fully use. The biggest retailer challenge to overcome may not be fear of commitment by shoppers, but rather sustaining consumer interest and enhancing engagement over time.
 

About the Author

David Orgel

David Orgel

David Orgel is an award-winning business journalist, industry expert and speaker. He is currently the principal of David Orgel Consulting, delivering strategic content and counsel to the food, retail and CPG industries. Read More

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