The grocery delivery business is expected to generate $627.30 billion in revenue by 2023 and continue to grow at a CAGR of 16.11% between 2023-2027. Grocery businesses used various monetization models such as subscription, advertisement, access to premium features, and more for increasing revenue, gain success, stay competitive, and ensure sustainability.
By implementing a well-designed and customer-centric monetization strategy, the grocery delivery business can thrive and continue meeting customer needs in an increasingly competitive market. Out of all monetization models, the subscription model turned out as the most popular and most used model among grocery delivery businesses. The digital subscription economy is projected to reach $1.5 trillion by 2025 globally.
The subscription model offers numerous advantages for a grocery delivery business, including stable revenue, higher customer retention, reduced acquisition costs, increased customer engagement, and pretty more. The extensive benefits appeal to the grocery delivery business to implement the subscription model.
Some grocers found that the subscription model has helped them cover the budget invested in developing grocery application in a short time. Knowing the grocery app development cost will help to build a successful app with a subscription model implemented that brings a range of benefits to the grocers and get to know when it will turn profitable. Before digging further to know the benefits that the subscription model offers, let’s understand the subscription model in a nutshell.
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What is the subscription model for the grocery business?
The subscription model involves customers paying a recurring fee at regular intervals, typically on a monthly or yearly basis, to access a product or service. Subscriptions offer customers ongoing access to grocery products such as vegetables, dairy products, fruits, and others as long as they continue to pay the recurring fees.
Instead of placing individual orders each time they need groceries, customers can sign up for a subscription plan that meets their needs, and groceries will be delivered to their doorstep on a consistent schedule. This way subscription model offers several benefits for both the customers and the business itself that we will discuss in the next section.
10 reasons why grocery delivery businesses should offer a subscription model
The subscription model is providing numerous advantages to grocery delivery businesses that contribute to their success and customer satisfaction. If applied properly it can turn out to be an effective means to grow your business and get ahead of your competitors. Here are ten detailed benefits of implementing a subscription model for a grocery delivery service:
· Predictable Revenue
It’s nearly impossible for grocery delivery businesses to precisely identify how much customers will purchase. But it becomes feasible with a subscription model that defines how much customers will spend and the revenue it generates for business.
The subscription model offers a consistent and predictable revenue stream for the grocery delivery business. Subscribers pay a recurring fee at regular intervals, allowing the company to forecast revenue and plan accordingly.
· Customer Retention
Predicting the percentage of customers who return to the grocery store is difficult but subscription service determines a particular number of customers will return.
Subscribers are more likely to be loyal customers since they have already committed to the service for a specific period. This higher customer retention rate reduces churn and increases the lifetime value of each customer.
· Enhanced Customer Engagement
Grocery delivery businesses find it quite a task to engage the customer continuously and make them return to the store for repetitive purchases. On the contrary, subscribers are actively engaged with the service due to their ongoing commitment.
This opens opportunities for personalized communication, recommendations, and promotions tailored to their preferences.
· Improved Inventory Management
As grocery products’ shelf life is short and they get spoiled within 2-3 days, which makes inventory management difficult for the grocery delivery business. On the flip side, with subscription services, grocers are pre-informed about grocery demands.
Knowing the recurring demands of subscribers allows the grocery delivery business to optimize inventory management. They can anticipate which products will be needed and when reducing the risk of overstocking or running out of popular items.
· Reduced Customer Acquisition Costs
Acquiring new customers is 100 times costlier than retaining existing customers for businesses. With a subscription model, there is a focus on retaining existing customers, leading to lower customer acquisition costs and higher return on investment.
· Increased Customer Lifetime Value
Grocery delivery businesses have experienced that an average Joe never purchases groceries from the same store repetitively. Instead, subscribers tend to make repeated purchases over an extended period, which results in a higher customer lifetime value. The longer the subscription duration, the more revenue a customer generates for the business.
· Convenience and Time Savings
Subscribers benefit from the convenience of receiving groceries at their doorstep regularly. Some grocery services enable set-it-and-forget-it services wherein groceries are delivered automatically till the time customers defined them. This saves time and effort, which enhances customer satisfaction and loyalty. On another side,
· Data-Driven Insights
Subscriptions provide valuable data on customer preferences, buying behavior, and consumption patterns. This data can be leveraged to personalize offers, refine product selections, and improve the overall customer experience.
· Upselling and Cross-Selling Opportunities
With ongoing customer relationships, the grocery delivery business will have the chance for introducing new products or premium subscription tiers. Upselling and cross-selling opportunities can lead to increased average order value and revenue.
· Lock-In Effect
Subscribers may feel a sense of commitment and loyalty to the service, creating a lock-in effect. They may be less likely to switch to a competitor due to the perceived benefits and familiarity with the service.
Closing thoughts on the Subscription Model for Grocery business
As everything from socks to drinks is now sold recurringly and automatically. And, by the end of 2023, 75% of organizations selling directly to consumers will offer subscription services. Similarly, the subscription model has become a crucial aspect of the grocery delivery business. It impacts revenue generation, customer satisfaction, market competitiveness, and long-term sustainability.
With the subscription model, grocery delivery businesses can provide convenience, personalization, and ongoing value to subscribers. It helps businesses to establish a loyal customer base and position themselves for long-term success in a competitive market.