Ecommerce Delivery Subscription Models

#EcomChat on Monday 22nd May will be on the topic: “Delivery Subscription”.

The topic has very kindly been suggested by Rachel Tonner of Ampersand, on the basis that Next, Boohoo, New Look, ASOS, and Selfridges have all added ‘subscription delivery’ options giving customers unlimited free delivery for an annual charge. This all follows in the footsteps of the massively popular Amazon Prime, and has possible ramifications for other retailers.

Here are the 3 starter questions:

1. What effect has ‘Delivery Subscription’ had on companies that have introduced it?
2. Should everyone consider adding a ‘delivery subscription’ option? Who should/should not, & why?
3. Which other ‘VIP program’ options should retailers look at?

Join us at 1pm UK time and do share this post either on Twitter or via email with anyone you think would be interested.

As bonus homework & background reading, Rachel kindly sent her thoughts on these models:

According to Ampersand’s latest analysis, retailers have begun charging for postal returns in droves, showing that the free returns model just isn’t working for them – up from 26% charging in 2014 to over 40% in 2017. Retailers not offering free returns by post include The North Face, Whistles, Next and many more.

So, some retailers have introduced a ‘delivery pass’ option for unlimited next day delivery & returns, much like Amazon… But is it worth it? Annual costs below of a selection of retailers offering the service:
– Next – £20 Boohoo – £9.99 Pretty Little Thing – £8.99
– ASOS – £10 New Look – £10 Selfridges – £15

Asos founder Nick Robertson considers the VIP programme so valuable that he ‘would give customers its Premier service for free due to the loyalty he derives from it, however, he didn’t want them to think of it as worthless.’

According to OC&C – a home delivery can cost retailers between 5x – 23x more than the same purchase made in store. Considering that, plus the cost of offering free returns… is it worth it from a P&L perspective?

Average operating profit margins for the UK’s top-10 multichannel retailers have more than halved from 6% in 2011 to 2.5% in 2015. Last mile shifts could impact retailer margins again by -1.5% by 2025 (OC&C).

Then there is ‘delivery pass plus’ from Amazon £79 – adding value to Prime with family membership, early access to Lightning Deals, added TV & Movies on demand, and now ad-free music streaming. Does it justify the high cost? How could other retailers add value to increase delivery margins?

Thanks, Dan & James.

p.s. If you’re wondering “what’s this about?” there is a page explaining all just here.