LONDON • Major consumer companies including Unilever, Procter & Gamble (P&G) and Nestle are chasing consumers who want food and household goods delivered automatically, even though this kind of business has not always worked.
The companies are pitching new online subscription services, which promise stable revenues, lower delivery costs and valuable data about customers.
Nestle, whose Nespresso coffee is already a sizeable subscription business, recently launched a subscription programme for nutritional drinks in Japan and expanded ReadyRefresh, an online bottled water service, in the United States.
It also wants to expand the Tails.com subscription pet food from Britain to continental Europe, an executive told Reuters. It is testing the service in France for a possible launch this year.
Unilever on Monday will launch its Skinsei brand in the US after testing, offering "personalised" skincare by subscription. It expanded its Dollar Shave Club subscription razor service to include cologne and beard oil last year and toothpaste in 2017.
Meanwhile, P&G expanded its Gillette on Demand razor subscription service to Canada. Subscribers can text when they are ready for their next shipment.
Selling directly lets manufacturers skirt retailers, giving them more profit and control over pricing, promotions and merchandising. This helps when retailers such as Amazon and Sainsbury's are pressing consumer product companies for discounts and pouring resources into own-label products.
Subscription selling gives them guaranteed revenues, a better picture of customers and can make goods cheaper to deliver.
Liz Cadman, founder of mysubscriptionaddiction.com, said children's educational boxes were the US website's hottest category last year, followed by grooming, make-up and beauty. The biggest losers were snacks, clothing and pet goods, she said.
The trouble, analysts say, is high cancellation rates as consumers get bored, high marketing costs, costly delivery and the fact that people often end up with goods they don't want.
Mondelez International has suspended its Oreo Cookie Club, a programme rolled out last year. For US$20 (S$27) a month, subscribers got a box containing Oreos in different flavours, with recipe cards, candy and merchandise such as Oreo-branded socks, sunglasses or cups.
General Mills axed its Nibblr subscription snack business in 2015 after 18 months. A similar project from Kellogg never materialised. While subscriptions delight some consumers, they frustrate others because "you end up with too much of the product or too little", P&G chief financial officer Jon Moeller told Reuters.
Subscriptions represent about 10 per cent of all US online sales, and more than 1 per cent of all retail sales, said Mr Burt Flickinger, managing director of consumer consulting firm Strategic Resources Group.
He said subscriptions are the hottest part of the industry, growing more than 17 per cent a year and outpacing overall online sales - which are growing more than 12 per cent - and may exceed 10 per cent of the US retail market in five years and 15 per cent in 10 years.
Unilever's global brand vice-president of skincare, Ms Valentina Ciobanu, told Reuters the firm wants to make its subscriptions more flexible because consumers demand options.
However, she and other executives said it was unclear if subscription brands would take off or remain niche. "For now, it's still early adopters. The question mark is how long will it take to become more mass, and I think nobody has the answer to that question," said Mr Bernard Meunier, who runs Nestle's Purina Petcare business in Europe, Middle East and North Africa.
REUTERS
