Target expands subscription service
Some may think Target is late, but the company says it is ahead of schedule when it comes to developing a successful subscription plan. The retailer, which first began testing a subscription program featuring 150 baby care items last September, announced it has expanded its offers to 1,600 products, including items from grocery, HBC, household, home & office and pet categories.
In its initial test, Target found that up to 15 percent of its total online sales came from customers signing up for subscriptions. Target spokesperson Eddie Baeb told RetailWire that the retailer found this number particularly significant because it happened "in a program that we really didn’t put any marketing behind at all."
While it can be argued that Target is late to the game when it comes to subscriptions, the company denies it is chasing Amazon.com’s Subscribe and Save or any other retailer’s program with its offer.
Mr. Baeb said the company is taking a deliberate approach to expanding the program. "It’s still early. Will this go beyond 1,600? That’s our intention. But, we still have a lot of learning to do. We’re going to listen to guest feedback and see where we take it," he said.
Besides the obvious convenience appeal, subscribers have the added benefit of receiving a five percent discount on items included in their plans. If they use Target’s REDcard, they will get an additional five percent discount. Free shipping is included with all subscriptions.
Mr. Baeb said Target customers have a degree of price protection with their subscriptions, as well. "When the product ships, you get charged what the product is on that day. So, if the product is on sale the day it ships, you get the sale price."
One category that could figure more prominently in Target’s subscription plan is grocery. Right now, it is offering various Keurig Green Mountain K-Cup coffee and Soda Stream refills.
While not providing details on future plans, Mr. Baeb said consumables would be an area to watch. He said Target had added these products when it expanded its order online/in-store pickup program from 35,000 items to the more than 60,000 it offers now. He said, "How guests respond to that option will inform what we do going forward."
Target has taken some hits in recent years for its IT and e-commerce performance, including a bumpy transition managing Target.com after parting ways with Amazon, problems processing coupons in stores and a data breach that exposed the records of tens of millions of customers. The retailer will no doubt face increased scrutiny over any new or expanded initiatives such as the new subscription plan. In a review of the site, RetailWire discovered that of five paper towel items offered for subscription by Target, two were available only in stores.
Discussion Questions
Do you think Target is being too cautious in rolling out its subscription plan? Where do you see the biggest opportunities for growth? What are the relative pros and cons associated with a subscription plan?
I kind of think we’re asking the wrong question. The real question is “Can Target make money with this service?” If Amazon is barely profitable, and their entire ecosystem is built around home delivery, can Target do the same while remaining competitive or under-pricing them?
If I were a shareholder, that’s the question I’d be asking. If I were a Target shopper, I’d be price checking against Amazon’s subscribe and save.
Either way, I’m not so confident in the outcome.
The problem Target faces is not being cautious, it’s being accurate. Being late to the party is not necessarily bad, so long as you have a significant competitive advantage, such as variety or price. Target is traditionally late and then they bungle the offering. They also have few points of difference. This is why Amazon has such a significant advantage in ecommerce.
If Target wants to become a significant player in ecommerce, it needs to build the necessary infrastructure (inventory and technologically) and then make some bold moves.
Right now, they just look like an indecisive player who is tagging along, rather than one of the country’s leading retailers.
No, I think it’s always better to wait and make sure you aren’t going to promise customers more than you van deliver.
The issue with any retail strategy is less “Is it right?” than it is “Is it right for “Retailer X?”
So, that said, I won’t opine on subscriptions but I have major concerns about whether or not Target can pull this off profitably.
I can’t see any advantage in Target’s plan. Why is this any different from Amazon? The only thing I can buy from Target are products that Target stocks, where as I can get a much larger variety from Amazon. Heck, Amazon even sells Costco items through their web site and offers prime delivery. As long as I am paying Amazon for prime (2 day delivery + fantastic streaming), I am not looking to Target for anything. Besides, everything Target sells seems to be more expensive than Amazon anyway, and I don’t have the security issues at Amazon.
Target is smart to head quickly in this direction. There are clearly frequently purchased, commodity categories that shoppers will be willing to buy on a subscription basis as long as the price is competitive and the service is accurate.
There are multiple potential benefits. In addition to protecting sales loss to other online options, the shopper data and product preferences that can be derived from a subscription service has value as it can be used in suggestive selling and cross promotion deals opens up a new business opportunity for Target and other retailers who are looking to posture themselves as a viable alternative to Amazon.
Also recognizing subscribers with special offers that can be used online or in the physical store can be an effective loyalty tool.
Target has effectively created “cachet” on rollouts of their stores and merchandising programs over the years. Given the current challenges of soft retail, data breaches, fewer store openings, and the need to focus on getting execution right across retail, the cachet that they will build on the deliberate rollout of their subscription program makes sense.
They are not being too cautious.