Netflix. Online magazines. Disney. Mascara delivered to the door for those endless Zoom calls.
In the online subscription world, convenience boils down to “set it and forget it.”
In an interview with Karen Webster, Justin Benson, CEO of Spreedly, said subscriptions can thrive in a post-pandemic world, with a bit of personalization thrown into the mix.
The conversation took place as the legal battle between Apple and Epic Games continued to rage, centered on what role online platforms should play (and on what commissions Apple should charge, but that’s another story).
Right now, we’re in a sweet spot for subscription services because during the pandemic, it’s the easiest way to get the items we need — everything from toothpaste to movies — as we slowly venture out of our houses.
As Benson noted, generally speaking there’s been a surge in subscriptions offered and managed directly by merchants — and in platforms that are selling and managing subscriptions, too.
Dig a bit deeper, noted Benson, and not all subscriptions are alike.
“It’s different depending on whether it’s a digital good or a physical good,” he said. “I also think that a lot of the subscriptions are not so much cannibalizing one-time purchases but are offering an opportunity to take customers who might purchase occasionally and turn them into recurring subscriptions.”
For merchants and platforms that are global in scope, there have been surges in certain areas and verticals, depending on who is emerging from lockdown and where.
Restrictions on shopping in places where businesses are still shuttered may have spurred the great pivot toward subscriptions — moving beyond, say, content (such as magazine and newspaper subscriptions) and toward everyday items like toilet paper and mascara.
Welcome to a world where the “middle-aisle” items that are typically found in the grocer’s tangible layout are now placed on auto-refill — so that consumers never run out — and with payments integrations underpinning it all.
With a nod to the auto-refill experience, Benson noted that “there’s two parts — there is the convenience, and then there is the opportunity for a superior experience.” In the case of mascara, what once might have been a trial-and-error process at the in-store counter can now be done digitally, with the ability to match new shades to eye colors across online platforms.
Eyeing Post-Pandemic Commerce
That layer of personalization, combined with subscriptions and auto-refill options, maintained Benson, can help platforms and merchants keep their relationships sticky.
For the platforms and merchants banking on convenience and auto-refill offerings (along with the ability to, say, skip a month), it’s critical to layer on payments functionality that embraces card and network tokenization, along with preferred payment methods. Benson noted that Spreedly operates at the payment stack level, helping merchants and platforms, among other things, gather payments data to improve the customer experience. That could come through higher success rates or even by helping businesses to build recommendation engines to guide consumer behavior as they consider different trials and subscription options.
“If sales are going to be direct-to-merchant for a long period of time, those merchants might want to build a lot of in-house expertise to look at consumer behavior and ordering activity, so they are able to say, ‘Certain people in this age group or in this location buy this product with this frequency because of weather.’ A company can build a recommendation engine around that, one that is very specific to their particular business,” said Benson.
Beyond the direct-to-merchant interactions, he said that “blended eCommerce” — where services are attached to platforms with significant scale, such as Shopify or Amazon — is seeing growth.
“Now there’s a prompt that comes with what would have been a one-time purchase, which asks if you want to ‘buy again’ in 45 days,” he noted. That feature — converting one-time purchases into repeat buys — may help transform brick-and-mortar commerce, too, said Benson, pointing to grocery stores as a vertical that is ripe for blended eCommerce.
Instacart is powering eCommerce for grocers, functioning as what Benson described as a perfect platform for auto-refills. Conceivably, one need not run out of pepper, salt or flour.
“That’s potentially a strategic play given the competition with Amazon and Walmart because these grocery stores would obviously like to get their piece of the pie, too,” Benson said. “For Instacart, the challenge will be becoming the brand that consumers associate with ordering their groceries, but also being a service provider to brands who may not like that concept at all.”
In other words, services consumed via platforms may consolidate any number of brands and experiences but must also have a range of back-end payment integrations in place.
Against that backdrop, the coffee shop where, pre-pandemic, the consumer was grabbing their morning cup of joe and paying with plastic cards at the register has now become a digitally powered, order-ahead experience.
Building a platform specifically for coffee shops requires another layer of intelligence that can set up recurring subscriptions and coupons to reward users who, say, buy 20 cups a month. Diversification — the ability to reach consumers where they live alongside technology, and letting them choose the way they want to pay — is key to surviving and thriving. Benson pointed to Square as an example of this, as the payments firm started out serving retailers and smaller merchants and then broadened into Cash App.
Along the road to diversification, and to global commerce and auto-refills, Benson noted that there are guiding principles in the pivot to subscription-based commerce that can help firms scale — or fail — especially where payments are concerned. Credit cards mandate an entirely different authorization and purchase flow and capture versus, say, alternative payment models (APMs), he said.
“The way that you approve a transaction, the way that you know funds are available, the way it is all captured, differs greatly,” he said — and that process can be streamlined by integrating payments.
As Benson told Webster, “when you think about a post-COVID world and what might happen to subscriptions, if it was just a convenience story, you might see a slip in business as people return to stores … but if you’ve created a superior experience, then you have a good chance to keep that momentum.”
NEW PYMNTS DATA: HOW WE SHOP STUDY – SEPTEMBER 2020
The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.