Brits love a bargain. We’re also obsessed with loyalty schemes. If you asked most people over thirty to empty out their purses or wallets, out would fall a Nectar card, Tesco Club card, Boots card and probably around 20 dog-eared coffee shop stamp cards. These have kept us relatively committed to picking up our weekly shops on the high street.

​2020 has changed this. The lockdown has had huge impacts on the economy and buyer behaviour. Research by Kantar Media shows an increase of 92 per cent year-on-year in the four weeks up to 12 July 2020, and this means that high street grocery stores are now having to compete with online retailers on price, efficiency and choice.

Bricks and mortar stores have always struggled to compete with online retailers as their fixed costs are just so much higher. They’ve also been able to capture a relatively new and innovative piece of the market with their loyalty-inducing subscriptions schemes.

Attracting the Super-Subscribers

Do I even need to mention Amazon when I talk about successful subscription services? So synonymous now is its Prime service, that few people even question its value. Amazon have cleverly packaged up a suite of member benefits and hooked in customers with an affordable monthly fee which is seen as a sunk cost when doing shopping; “I’ve already paid for my free postage so I might as well buy the ‘thing’ online!”.

It’s as clever as it is compelling. Subscribers also get side benefits like access to their TV-streaming service, and even credit to use on Twitch (your under 16s will appreciate this) which keeps them loyal to the shopping site. According to Barclaycard’s recent research, the average household now spends on seven subscription services monthly, which adds up to £552 per year.

Amazon added groceries to its subscriptions this year. No wonder 15 million of us in the UK are members. So, what can high street competition do about it?

The High Street Gets Tough, Again

The likes of Tesco and Sainsbury’s are now facing the same fierce competition that decimated the high street at the peak of non-grocery online retailing. The good news is that they are responding with subscription services of their own. These ‘next-generation’ membership schemes are in some cases going to be ready for Christmas. Tesco are growing their ‘Clubcard Plus’ service which offers 10 per cent off shopping, discounted data contracts and banking services. It also comes in at the same price as Prime, at £7.99 per month. Tesco’s decision to grow loyalty shows an important commitment to customer retention.

It’s not just Tesco. Casino, a French supermarket chain, introduced Casino Max Extra offering subscribers 10 per cent off shopping as well, and as of last January, they had accumulated 200,000 members. It also accounted for 10 per cent of their sales.

What People Want from the Subscription Economy

“Tesco has realised customers don’t join a loyalty programme to get free rewards; they are in it for the value,” she says. “If the programme can offer the benefits people want, such as permanent discounts or free delivery, customers will pay a monthly fee.” Zsuzsa Kecsmar, co-founder of loyalty management platform Antavo.

Above and beyond the value elements, customers are also searching for other elements, such as:

Exclusive Deals and The VIP treatment
Customers want to feel like they are getting something that others don’t have. Competitions, free gifts or exclusive experiences or deals can very attractive.

Gamification
Some retailers, like Lidl, offer some fun and interactive benefits to shopping with them like digital scratch cards that enable customers to win money of their next shop.

Rewarding others
For some customers, it’s about being able to direct benefits to charitable causes and contribute to community projects. The Co-op have been doing this for a while.

It’s clearly time for grocery stores to step up their game in the battle against online. Tesco are likely to make the leap to free delivery as part of their membership soon, as all the customer insights point towards this being the real source of customer loyalty. Whilst this may add to the shrinking of brick and mortar grocery shopping, they’d be unwise to not follow customer demand.

 

References:
https://www.essentialretail.com/news/online-grocery-grow-lockdown/#:~:text=This%20is%20according%20to%20Kantar,during%20the%20Covid%2D19%20crisis.