Lockdown has fueled strong growth in subscription-based business models on both sides of the pond as retailers and foodservice operators seek to coax customers back into stores and generate a more reliable and predictable source of income than a one-charge model.

In the U.K., Pret a Manger launched its YourPret Barista subscription model. Customers who sign up pay £20 ($25) per month and receive a voucher, which they can redeem up to five times per day on any Pret coffee, tea, hot chocolate, iced coffee, cold brew, frappe and blended smoothie.

YourPret Barista was barely out of the blocks when rival food chain LEON launched its own unlimited coffee subscription, undercutting Pret by £5 per month.

In the U.S., Panera Bread’s My Panera, which offers an unlimited coffee subscription for $8.99 a month, has proven a big hit during the pandemic, while McDonald’s is reportedly testing a food loyalty program, likely to be offered through a mobile app and geared toward helping alleviate drive-thru lines, which have spiked due to restaurant closures during COVID-19.

According to Tom Caporaso, CEO of premium loyalty provider Clarus Commerce, McDonald’s has the potential to steal a bigger market—aside from burgers and fries—namely, coffee drinkers. McDonald’s already has a loyalty program for its McCafé drinks, which gives customers a free drink after purchasing five. In addition, its Forward It program allows cardholders to redeem and then forward a reward to someone else. But the brand could benefit from a premium program like Panera’s, Caporaso argues.

“Many people have been awaiting a rewards program, and a paid component could be the missing key to truly dominate the fast food space,” he said.

Without doubt, lockdowns have fueled the popularity of subscription services from both the retailer and the consumer’s perspective.

Subscribers are comfortable and happy to share their data in return for a service, which gives retailers permission to market to them.

Lockdown Demand

Research by Barclaycard Payments, which processes nearly half of the U.K.’s credit and debit card transactions, found that two-thirds of the nation’s homes are signed up for regular subscription services, and their popularity has led more than a fifth of retailers—22%—to develop a subscription service during lockdown. Further, 82% of retailers believe the popularity of subscription services increased during lockdown as Brits took advantage of safe and convenient ways to receive everything from essential items to entertainment into their homes.

According to Barclaycard, 75% of retailers value subscription services for providing a reliable revenue stream in uncertain times; while 82% state the model allows them to build customer relationships through increased contact, and 87% think it enables their businesses to keep up with competitors.

Although entertainment subscriptions are the most popular, food and meal subscription services—such as wine-tasting kits—are the second most adopted, while health, well-being and grooming services also are on-trend, Barclaycard found.

“Subscriptions were already a vital tool for U.K. retailers prior to the pandemic, helping businesses to remain nimble and transport their product or experience direct to their customers’ homes,” retail consultant Mary Portas stated. “Due to the prolonged period of lockdown, the public has grown accustomed to the range of products on offer, as well as the ease at which they can be regularly surprised and delighted by the brands they care about.

“As a nation, we face the challenge of a lifetime, finding ourselves in a precarious position financially, staring into a recession and with many forecasting more difficult times to come. We should remind ourselves that businesses in the U.K. have always been recognizable by their ingenuity and ability to pinpoint their customers’ needs. Now, with many pivoting toward the subscription economy, we have further proof retailers are willing to try new things to find untapped revenue streams.”

For Paula Thomas, host of the “Let’s Talk Loyalty” podcast and chief content officer at the fuel and convenience loyalty specialists Liquid Barcodes, subscription-based models drive extreme loyalty and are exploding within convenience retail globally.

Subscribers are comfortable and happy to share their data in return for a service, which gives retailers permission to market to them, Thomas said, “but recurring revenue is the Holy Grail in marketing terms, increasing the lifetime value of your customers.”

While retailers can benefit from repeat revenue and predictable income, they can’t be complacent just because someone has subscribed to their model. “They still need to deliver exceptional service, and subscribers need to be able to leave very easily—that’s a key feature in building trust,” Thomas said.

While there are a variety of subscription models, Thomas argues that curated services, such those provided by the recipe box company Gousto (which wants to triple its capacity by 2022 and create more than 1,000 new jobs in the process) or MealPal, which aims to help office workers “eat more intelligently” by ordering meals from a selection of local restaurants, are the most powerful since they go beyond simple functionality. “They have learned my needs and are recommending certain food kits or the style of lunch that I may want,” she said.

75% of retailers value subscription services for providing a reliable revenue stream in uncertain times.

Tiered models such as Alibaba’s 88 program in China, which was launched as a free subscription in August 2017 but then expanded a year later with a paid VIP option, also are effective in incentivizing shoppers to spend more and accumulate membership points to access benefits.

Successful subscription models that attract drivers to the forecourt include RaceTrac Reward’s VIP, which offers subscribers savings on fuel, and Circle K’s subscription car wash programs that enable subscribers to enjoy the benefits of more frequent car washes for an affordable fixed fee. Besides driving traffic, these programs engender a halo effect and create more opportunities to visit and buy from the retail store, Thomas said.

Pret will be looking for a similar type of spin-off from YourPret Barista suggests Tim Peniston-Bird, founder of Orangutan and an expert in customer loyalty programs. Peniston-Bird reckons Pret’s program is smart thinking for a business that has had its core customers abandon its stores in city center and station locations. “Although there has been a ‘COVID ghost’ haunting our high streets, there are still people there—those that live or work there—and they will still be wanting a number of coffees per day,” he said.

Subscribers will visit more often and in most cases will purchase something else—a snack, lunch, a drink for someone else—and may bring other people along who will pay full price, he said. Even given increased product costs, the business case is compelling, Peniston-Bird said. “Subscriptions have become one of the real hot topics in customer loyalty. They tie the customer in financially, which lets the provider plan ahead. By increasing customer interactions, subscriptions make it much easier to build a relationship, upsell and cross-sell—whilst removing the pain point of paying on each transaction,” he said.

Panera Bread has already reaped the benefits of its subscription model, with subscriber visits increasing from about four to more than 10 per month in test markets, while food sales increased 70% with those customers.

Product bundling around occasions, akin to Marks & Spencer’s Dine In for Two campaign but with a subscription element, also could work in convenience retail, Thomas suggests.

There are big opportunities for subscriptions within the FMCG space, said Thomas, who cites the Coca-Cola Insider’s Club, which offers exclusive access to new drinks and flavors through a monthly $10 subscription to just 1,000 members. Members have no input on the product selection, so there’s a lot of inherent brand trust ensuring that subscribers are sure that the products will have a value of at least $10, said Thomas. The innovation lies in the exclusivity aspect, plus the opportunity to “surprise and delight,” she adds.

Subscription-based models are thriving and evolving with each new iteration, and future models in convenience retail may encompass voice technology in some form, said Thomas. Other novel ideas include a shared car subscription service (evidenced in Denmark), wellness products such as cold-pressed juices and restaurant-quality, occasion-led, premium meal kits. Themes around community would also fly, she suggests. A subscription service based around wine, for example, could be hosted at a community level, bonding groups of local people around a shared interest—and it would appeal in lockdown conditions or not.