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Insight of the Day: Amazon now has a grocery subscription. Should grocers follow suit?

Why Amazon Launched a Grocery Subscription

  • E-commerce cost pressures: Groceries are low-profit online. Subscriptions help offset fulfillment costs and drive volume.

  • Customer loyalty: Subscriptions encourage repeat purchases, higher average spending, and greater customer retention.

  • Perceived affordability:  Subscriptions can make e-commerce seem more affordable, even for existing customers.

Experts' Views on Amazon's Move

  • Mixed success:  Analysts are skeptical about widespread adoption due to Amazon's limited selection and history of frequent e-grocery changes.

  • Virtuous Cycle:  Subscription success depends on higher volume, leading to better staffing, fulfillment times, and overall consumer satisfaction.

  • Pickup Focus: While Amazon emphasizes delivery, regional grocers might benefit more from pickup-focused subscription models.

Should Other Grocers Follow?

  • "Necessary Evil": Subscriptions can offset e-commerce costs, increase loyalty, and boost spending per customer.

  • Third-Party Challenges: Regional grocers relying on Instacart or DoorDash face difficulties offering their own unique subscription services.

Key Takeaway

Subscriptions are becoming increasingly important for grocers grappling with e-commerce costs. While the immediate success of Amazon's model is uncertain, it highlights the potential benefits of subscriptions for driving volume, loyalty, and affordability perception. Regionals may find more success with pickup-focused models.

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