In the dynamic world of retail, two seasoned experts, Glynn Davis and Matthew Valentine, go head-to-head each month. With sharply contrasting opinions, they dissect the hottest retail topics.

This month, they spar over subscriptions.

Get ready for Glynn Davis and Matthew Valentine’s clash of perspectives in this edition of “Retail Face-Off.”

The pros by Glynn Davis:

If anybody was in any doubt about the value of subscription schemes in retail then they need only look at Pret A Manger. During the pandemic the company was on its knees but then when some genius in head office came up with the Club Pret subscription it helped save the business.

For an initial price of £20 per month it gave subscribers up to five barista-made drinks per day. Although it has since been raised to £30 this has not deterred subscriber numbers and usage. The last released figures revealed that as many as 17.8 million drinks were redeemed in the April-to-June period – up 31% year-on-year.

Mindful Chef has also been on a tear with its healthy recipe box service. It reported an incredible 2,000% uplift in new sign-ups since the New Year as it no doubt benefited from a move by many people to a healthier lifestyle after their festive period splurges.

Also proving particularly robust is fresh pet food subscription service Butternut Box that recently raised £280 million to add to its previous £100 million fundraising that will help the business to further build-out its European expansion.

Such has been the appeal of the subscription-type dynamic that it has expanded out over recent years to encompass a myriad of goods and services – from on-demand streaming of TV, to razors, meal kits, health & beauty boxes and greetings cards – that can all now be delivered on a regular basis to consumers.

Such initiatives have led to an explosion in the size of the market – which hit £395 million in 2021 and the forecast had been for it to reach £1.8 billion by 2025, according to research from Whistl. The research also found 81% of people surveyed signed up to at least one subscription in 2021, compared with 65% in 2020, and that the average UK consumer spent an average of £52 on subscriptions last year.

However, this is not to say that the market has not had its challenges. The cost-of-living crisis has led to a cull of subscriptions by many people. Over a third (35%) of UK consumers are now using fewer subscription services than during the pandemic, according to research from Virgin Media O2. 

This backdrop of churn in the market has led those companies who were focused purely on subscriptions to broaden out their models. There have been many examples of businesses moving into selling through retailers such as Graze and Harry’s shavers. Others have sought to increasingly use subscriptions as a driver of customers to purchase the items individually. This effectively copies the models of the health & beauty boxes that typically send out small versions (sample sizes) of products to introduce subscribers to new brands.

Subscription schemes certainly come in various forms and as such offer retailers a great opportunity to add a new channel-to-market to their existing operations. It might not prove to be as powerful as it has been at Pret and save a business but it represents an additional revenue stream that every retailer would surely welcome in these tough times.

The cons by Matthew Valentine:

For a long term fan of retail, it is hard to get excited about subscriptions. The whole concept is a kind of anti-retail that essentially exists to get retailers out of the picture altogether.

The idea of cutting out the middleman is as old as business itself and, in this situation, the retailer is the middleman. 

Product subscriptions – be they for toilet paper, beer or razor blades – are a convenient way for product brands to deal directly with their customers. In this world, the brands make a higher margin because retailers aren’t taking a cut, and customers get a cheaper product delivered to their door. 

There are certainly benefits for the brands. They don’t need to deal with cutthroat buyers, they don’t face demands to fund discounts, they don’t have to pay for POS displays. They just invest in their own brand reputation and marketing, set up a clever app and a neat delivery mechanism, and reap the rewards.

But it is invariably the case that there is only room for one direct-to-consumer subscription brand in any given category. And that is because most consumers don’t like living their lives to a schedule that is decided by a brand.

Subscriptions don’t leave much opportunity for spontaneity, they give little scope for impulse purchases. And when some subscription services literally give you a recipe and the ingredients to make your own dinner, that will not appeal to everyone. 

In reality, subscriptions don’t even offer that much convenience for consumers. Sure, an optimal quantity of toilet paper can be delivered to your house every week or month – but you will still need to use retailers for other products. The subscriptions do not remove the need for shopping, they just allow you to skip an aisle.

What the subscriptions do manage is to remove is exposure to new products in their category. They tie customers up to a commitment to pay for a particular product, even if it is piling up in a cupboard, or if new and attractive competitors have launched. Sure, the subscriptions are easy to cancel, but so is the gym membership you took out last January and forgot about.

The benefits of subscriptions can start to look rather one-sided, with the brands getting the best of the deal. Ultimately, a brand’s balance sheet looks fantastically good when its customers sign up in advance for a regular monthly purchase.

On the other side of the equation is an individual who has committed a proportion of their income to a company for its product, and who will now ignore rival products when shopping (because that purchase is already ‘done’).

Looked at like this, subscriptions can feel like a sleight of hand where brands get customer loyalty – and make the customers pay for the privilege. It’s nice work if you can get it.