Why Brick-and-Mortar Retailers are Embracing Subscriptions

Borrowing cues from Amazon Prime with a need to build long-term engagement, major retailers are starting to embrace subscription or membership strategies—taking advantage of their physical presences to boost the potential value of the offerings.

With competition on the rise and the environment ever-challenging, retailers are finding growing appeal in one of the e-commerce industry’s favorite tools: the membership program.

Recently, a number of retailers—including athletic apparel retailer Lululemon and the major pharmacy CVS—have announced new membership strategies, with the goal of improving loyalty as competition for their business picks up and leveraging the biggest advantage retailers often have: their status as a destination.

Lululemon’s program, which at $128 per year costs more than Amazon Prime, will include a mixture of exclusive apparel, free access to events and onsite classes, personal development offerings, and free shipping for orders on its website. In other words, the program isn’t just a discount—and the company’s CEO, Calvin McDonald, even sees the potential to increase the price down the line.

“We actually feel we can increase the price to the value of the program and the additional services it offers,” McDonald said, according to Multichannel Merchant. “Most of the first half of 2019 is going to be tinkering with the program, getting the curation of services right. We are super excited and we’ll continue to test and learn around the notion of a membership and the curation of services we offer.”

In a recent article, Digiday compared Lululemon’s model to that of Best Buy, which has seen enduring success with its Geek Squad offering and now offers an annual tech-support subscription program to consumers. Others, such as footwear retailer DSW, are trying similar offerings. The goal: To create programs that sell the retailers not just as places you go to buy things, but as specialists in a certain topic. So Lululemon aims to own active lifestyles, Best Buy tech, and DSW shoes.

But what about stores where the destination potential isn’t as obvious, and you’re generally going in and out? That leads us to CVS, which recently started testing a new initiative in its stores called CarePass, which, for $5 per month, gives consumers $10 in store credit, along with free delivery on prescription drugs and certain purchases.

In comments in USA Today in October, the company noted it was being careful about its strategy as it moves forward.

“The goal is to expand the program nationally, but the pilot is to test and learn so we can make sure it is a great experience for customers,” CVS spokeswoman Erin Pensa stated.

The move by CVS, which is also working to make its receipts less annoying, comes as it faces more direct competition from Amazon—the e-commerce giant acquired an online pharmacy startup, PillPack, earlier this year.

Beyond the destination aspects of these strategies, there’s also a need to create emotional buy-in. In comments to Digiday, Forrester senior analyst Lily Varon noted that the challenge for retailers is creating subscription services that serve a business purpose but also create an emotional connection.

“Brands are looking to build subscriptions into their business model, but the risk is that you’re just going for behavioral loyalty—you’re locking the customer into a recurring stream of revenue, but you’re doing nothing on the other side to build emotional loyalty,” Varon noted.

(jentakespictures/iStock Editorial/Getty Images Plus)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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