Amazon looking to launch Subscribe & Save in Australia

Amazon Australia has confirmed it is looking to launch Subscribe & Save, a discounted subscription service for items that people tend to buy on a regular basis, such as toilet paper, toothpaste and dish soap.

The news, which Amazon Australia country manager Rocco Braeuniger revealed to the Australian Financial Review on Wednesday, comes on the heels of the company’s one-year anniversary of launching in Australia.

Since introducing its retail and marketplace offering in the local market, Amazon has increased its selection five-fold to 100 million items, launched its popular loyalty program, Amazon Prime, and hosted local Prime Day and Black Friday sales, for the first time.

The impending launch of Subscribe & Save, which could occur as early as next year, according to Braeuniger’s comments to the AFR, reflects the US-based company’s strategy of bringing its products and services to customers around the world.

“Amazon’s focus is always to bring products and services to customers that provide great value, convenience and selection,” a company spokesperson told IR.

When asked about Subscribe & Save, however, the spokesperson declined to provide any specific details.

“We work hard to bring the products and services that customers around the world enjoy to each of our marketplaces, such as Subscribe & Save, but we have nothing specific to announce.”

How it works

Unlike most subscription companies, Amazon doesn’t charge a monthly fee for Subscribe & Save, and two-day delivery is free. Instead, it offers a discount on eligible items to incentivise customers to automatically re-order certain items on a regular basis, from monthly to ever six months.

The discount is between 5 and 15 per cent off, depending how many items the customer subscribes to. Prime members receive up to 20 per cent off.

This system benefits Amazon, since it is guaranteed a steady stream of orders. And thanks to the “lock-in” effect of subscription services, customers that start using Subscribe & Save may be more likely to buy more items on Amazon, since they are already shopping there.

That has some experts worried about the impact of Subscribe & Save on Australian supermarkets, which have traditionally relied on customers coming in for fresh fruit and veg to stock up on non-perishable pantry items while they’re at it.

Supermarkets should feel nervous

“The Subscribe & Save model is a really smart move from Amazon, and I genuinely think incumbent players should feel nervous if this model were to enter Australia,” Gary Mortimer, associate professor at QUT’s business school, told IR.

“We know subscription-based models tend to work because it’s very much a ‘set and forget’. Whether it’s Netflix, a gym membership, or Birchbox, the monthly fee comes out of your credit card; you don’t even see it, and it just arrives,” he said.

Online accounts for just 3 per cent of the roughly $100 billion total food and grocery market in Australia, but it’s growing around 14 per cent annually, according to Mortimer, and pantry staples like the items in Amazon’s Subscribe & Save service have long been viewed as easier to sell online than fresh produce.

Even if it takes some time for Amazon Australia to move into fresh food products, the potential launch of Subscribe & Save next year could still impact consumer buying behaviour. If customers no longer need to visit a supermarket to stock up on items like toothpaste, dish soap and pet food, they may decide to it’s just as easy to buy fresh produce and meat elsewhere too.

“The subscription-based service with an overall discount becomes quite an attractive offer. What that enables shoppers to do is get the basic, dry, packaged groceries delivered and then shop at their local greengrocer or butcher for everything else,” Mortimer said.

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