Why subscriptions are the future of retailing

Really? That doesn't sound very radical?

Hang on. Give me a chance. Often the best retail solutions are the most obvious, the easiest for consumers to understand and for operators to deliver. Yes, retail subscription models have been around for as long as we have been collecting the latest instalment of the Encyclopædia Britannica. But in recent years they have become a far more sophisticated retail model designed to build a loyal customer database that is willing to spend money with you on a regular basis. Thus providing a constant stream of almost guaranteed cash flow that means you don't have to rely on getting shoppers into your store, or users onto your website.

But hasn't that always been the case with a subscription offer?

Yes, but traditionally a lot of subscriptions we have signed up for have been for more mundane “have to have” services and goods. Like our utility bills, council tax, TV licence, or for insurance, health or tax payments. But over the last 10 years we have become used to voluntarily signing up to subscription models in order to get access to the latest, must have services, goods, content, music or film.

So what's changed?

It all comes down to the explosion in downstreaming services that did not exist five to 10 years ago. For years we've been used to paying for the TV we want to watch thanks to Sky and its premium services for sports, movies or drama. Now there are a whole raft of subscription sites for every kind of entertainment. First there was music thanks to iTunes, that has morphed into services like Spotify. Now Netflix and Amazon Prime have brought the equivalent of the local DVD shop into the comfort of our homes. All of which have been made possible by the breakthroughs in technology that have been able to create and deliver these downloadable services, be it via an iPod, iPad, smartphone or digital television.

Interesting. What else?

These technical advances have, in turn, transformed the way we now expect, and are happy, to spend our money. Look back 10 years ago at what direct debits you had. Now we are quite prepared to spend £100 a month to Sky for all its TV and broadband services. Phone tariffs are no longer about just making or receiving calls and texts, we're quite willing to spend £30 to £50 a month to have the right handset and amount of data we need to download what we want, where we want. Noticeably, the monthly subscriptions for the likes of Netflix, Amazon Prime, Spotify and Apple Music are all around the £10 level. After all what's another £10 a month? In the US the subscription e-commerce market has grown over 100% a year for the last five years.

So what's this got to do with wine?

Everything. Consumers now expect to be able to sign up to specialised, personalised subscription services that meet their personal needs and food and drink has become one of the fastest growing sectors for subscription offers. So much so that the big supermarket chains are now just as fearful about the rise of new meal-kit delivery subscription sites like HelloFresh (the Financial Times' fastest growing company in Europe in 2017) and Blue Apron as they are the rise of Aldi and Lidl. They are fast taking away market share from well heeled 25-45 year olds who are looking to pay premium prices for good quality, fresh ingredients that can be delivered to their homes. Services that take away the hassle of weekly shopping, and also allow you to cook quick, fresh, healthy and quality meals at home. The UK's delivery subscription market is now worth over £2bn a year with users citing convenience (45%) and value for money (60%) as the two key reasons for signing up (Whistl).

Sounds like they're also making consumers pretty lazy?

Lazy in that they now expect everything they want to be available to them, to their door, or wherever they happen to be. But it's also making them extremely demanding and hard to please. The recent Whistl report found one in five Brits now refuse to shop with retailers that don't offer a subscription model. The arrival of Uber and Deliveroo in our lives, means we now expect there to be an app for every sort of service that is available direct from our smartphone. Need petrol for the car? There's a van that will come to your car and fill it up for you. So why bother going to a shop to buy wine, however pretty and engaging it is and well informed its staff are, when you can just get a case or bottle delivered whenever and wherever you want?

OK fair enough, you can see why traditional retailers should be worried.

Subscription retailing is now a retail channel in its own right. We might not be able to physically see it, but it is operating like a virtual, parallel retail universe gobbling ever bigger shares of our disposable income. The rich and famous have for years been able to use concierge subscription services to keep them fed, watered and pampered, but now we all have access to our very own concierge-type services through the wonders of our smartphone. We just need to know which apps to use.

And finally?

Subscription models also make commercial sense. Once you can convince someone to sign up they are often too lazy to cancel. Just look at how many gym memberships you have versus the amount of time you go to a gym. Many a subscription retailer will still keep collecting people's money whether they use their services or not. Now wine has not quite managed to pull that stunt off yet, but it's surely open season for those operators capable of drawing customers in, getting them engaged and watching those monthly direct debits come in.