Case Studies

Subscription and Retail Distribution: A Customer Loyalty Strategy?

You might think that the subscription model is reserved for media, digital services like SaaS software or streaming. But what about retail distribution?

December 16, 2021

9 min read

Subscription and retail distribution: an unlikely pairing?

You might think that the subscription model is reserved for media, digital services like SaaS software or streaming. But what about retail distribution?

Yet the sector is reinventing itself by adopting the subscription model to better retain customers, establish lasting relationships with them, and generate recurring and predictable revenue.

Digital transformation in retail

The subscription model is a powerful innovation driver. In an era of rising e-commerce and declining physical store traffic, this business model appears as a way to restore attractiveness to a sector reshaped by the health crisis.

Key questions we'll address:

How is retail distribution adopting subscriptions to better retain customers?
How does this enable differentiation from competitors?
What are the concrete benefits for retailers and consumers?

Subscriptions to ride the e-commerce explosion wave

Since the beginning of the health crisis, e-commerce has begun to eat into traditional commerce market share. With successive lockdowns and store closures, e-commerce has broken all records.

In 2021, electronic commerce represents 13.4% of retail trade*, compared to 9.8% in 2020.

Exceptional sector growth:

Revenue progression: +25% in one year
Total volume reached: €32.4 billion**
Impact on physical retailers: +8% e-commerce revenue in Q2 2021

In the United States, subscription e-commerce sales took off during the crisis, with 41% growth. According to forecasts, 3% of e-commerce retail sales will come from subscriptions in 2021, for a total of $27.67 billion, an increase of more than $10 billion compared to just two years ago***.

In France, this e-commerce explosion has also benefited physical retailers. In Q2 2021, e-commerce revenue for store retailers increased by 8% compared to the same period in 2020. That's double the revenue compared to Q2 2019****.

Strategic opportunity

Now, traditional retailers, including retail distribution, are leveraging subscriptions to establish a lasting online presence and capitalize on this exceptional growth.

Subscription as a mass loyalty weapon

Traditional loyalty cards are starting to become obsolete. They're being replaced by much more engaging loyalty programs for customers, such as subscription programs.

In the age of digitalization and increased focus on customer retention, the subscription model emerges as an ideal choice.

How new programs work:

Historic retail distribution chains launch subscription offers
Customers receive discounts in exchange for a monthly payment
Greater benefits and enhanced engagement

Subscription programs are at the heart of new models that durably retain customers, encouraging them to consume as much as possible within the brand or retailer's ecosystem.

Return to stores

Another major argument: these new subscription programs allow retailers to bring customers back to stores. Since the health crisis, store traffic has declined and customers have more easily shifted to online purchases, including for grocery shopping.

Concrete example: Casino Max Extra Casino was the retailer that led the way, with its monthly subscription offer Casino Max Extra that provides a 10% discount on the receipt.

Indeed, retention is the new growth and this is the core of any subscription model. This model enables enhanced engagement and regular contact with customers. Thus, it's easier to understand subscriber behaviors.

Subscription to offer innovative services

Subscriptions aren't limited to loyalty programs and allow going further in strengthening customer relationships by offering them new innovative services.

Main customer motivations:

Save time on recurring purchases
Reduce costs of everyday products
Free up mental load related to shopping

What motivates customers to subscribe to a service is the possibility of saving time and money on recurring purchases. This is particularly the case for restocking everyday products.

Use case: Carrefour & ZIQY

Saving time, money, but also freeing customers from mental load is the objective of Carrefour's new offer - a subscription to everyday products. Designed by ZIQY, the new platform developed for this occasion allows customers to subscribe to products they buy every month.

How Carrefour's offer works:

Customers choose their products and delivery frequency (1, 2, or 3 months)
Free home delivery from €50
Up to 10% additional savings
Stable prices throughout the subscription duration
No commitment

Subscription is therefore a powerful innovation driver, even for business models as traditional as those in retail distribution. Indeed, it involves identifying a specific need, then designing an offer based on existing products or services.

It's also a way to differentiate from competitors: currently, Carrefour is the only major retailer to offer this type of service.

Impact on the retail ecosystem

The subscription model in retail distribution, long unthinkable, is becoming reality. Through digital transformation, retailers leverage this model to offer personalized customer experience, strengthen customer relationships, and generate recurring revenue.

Subscription programs, much more engaging than traditional loyalty cards, use levers such as:

Promotional discounts
Advanced loyalty programs
Offer personalization

By integrating digital channels, they enable better understanding of consumer needs and targeting new customers.

Retailers like Carrefour, with their innovative offers, differentiate themselves by proposing a digital subscription service for everyday products. This approach, in addition to being a loyalty lever, generates stable and predictable revenue.

Competitive advantage

In summary, subscriptions in retail distribution, through marketing strategies and efficient supply chain management, offer an innovative way to strengthen customer satisfaction and remain competitive in a constantly evolving commercial landscape.

Subscription to create additional and predictable revenue

Adopting the subscription model is also a powerful lever for generating recurring and predictable revenue, by charging subscribers a fixed price every month.

Financial advantages of the recurring model

Indeed, recurring revenue allows forecasting future cash flows and facilitates predictions. To generate them, companies must invest in customer acquisition. The total sales and marketing costs related to acquiring a customer corresponds to customer acquisition cost (CAC).

In the long term, customer lifetime value (CLTV) compensates for CAC and contributes significantly to profitability.

Fundamental cycle differences:

Traditional model	Subscription model
Marketing → Sales → Finance	Recurring and continuous cycle
One-time revenue	Predictable revenue
Transactional relationship	Lasting relationship

Indeed, a subscriber's lifecycle differs from a traditional customer cycle: in a classic business model, revenue starts with marketing, continues with sales, and ends with finance. In a subscription model, the revenue flow is cyclical.

Customer experience optimization

In the retail distribution context, adopting subscription models fits into a logic of optimizing the customer journey and enhancing the shopping experience.

This customer-centric approach aims to offer concrete advantages such as:

Attractive promotional discounts
Personalized loyalty programs
Simplified recurring purchases

Subscriptions allow retailers to better meet customer expectations by offering innovative services and facilitating recurring purchases. This model proves particularly relevant in the retail sector, where personalization and customer satisfaction are crucial for differentiation in a competitive market.

By integrating subscriptions into their strategy, distributors can create lasting bonds with their clientele while generating additional and predictable revenue.

Additional sales opportunities

And because the relationship with subscribers is already well established, it's no longer necessary to convince customers of the solidity and attractiveness of the product or service offering.

This is why it becomes easier to offer subscribers complementary services. Indeed, generally, upselling is easier to achieve within a subscription framework, as customers will be much more receptive to any additional added value.

Optimized inventory management

Finally, the subscription model enables efficient inventory and supply management. Subscriptions allow predicting product demand quite precisely by analyzing subscriber purchasing habits. This facilitates efficient inventory management and also enables cost savings on operational and logistics expenses.

Want to experiment with the subscription model?

Are you planning to experiment with the subscription model for your business and don't know where to start? To get started with expert guidance, contact us.

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