Woolworths Group CEO Brad Banducci recently revealed in an email to customers (31st March 2023) that over 250,000 people are now participating in the Everyday Extra subscription program. This mighty number is especially impressive as the program has not been widely advertised, and the growth appears to have come from word-of-mouth referrals and recommendations in Facebook groups such as the "Woolworths Rewards Enthusiasts".
A subscription model is when a customer pays a fee in advance for recurring access to a product or service. Amazon Prime shows how a pre-paid commitment can lead to a win-win, with the customer receiving value that exceeds the fee paid and the retailer obtaining a higher share of the customer's spending.
Unlike most other retail subscription programs, Everyday Extra offers recurring benefits to in-store as well as online shoppers. For an annual fee of $59, subscribers receive benefits such as 10% off one shop each month at BIG W and Woolworths Supermarkets and "Extra Perks" such as complimentary products from the local store. The 10% discount may encourage customers to consolidate their spending with Big W and Woolworths, while "Extra Perks" create a buzz on social media as subscribers have fun comparing their latest free products. Creating a community of customers with a shared passion for your brand was one of four steps to creating a winning loyalty program identified by McKinsey & Company in their recent Australian Consumer Loyalty Survey.
Why have so few retailers introduced omnichannel subscriptions? In my experience, the biggest barrier to implementing a recurring subscription is legacy in-store systems. Retailers must be able to personalize a transaction in real-time while the customer is at the checkout. This is not possible with most retailer technology stacks.
To illustrate, consider a subscription program for new parents that offers monthly benefits such as a $10 contribution towards the cost of nappies. To deliver this at a store checkout, the retailer must be able to:
Implementing subscriptions in-store poses a significant challenge as this process must be completed in under half a second so the customer is not delayed at the checkout. There are a few ways this can be handled, but most retailers rely on a cloud-based platform (usually hosted on Google Cloud due to its speed and scalability) that communicates with the point-of-sale system in real-time, allowing for seamless execution of subscription steps. Retailers who cannot personalize transactions in this manner may struggle to take advantage of the subscription opportunity with in-store customers.
Everyday Extra's success shows that an omnichannel subscription can be a win-win for both the customer and the retailer. As we look ahead, it will be interesting to watch how Everyday Extra evolves and how retailers in other categories use subscriptions to build deeper and more personalized relationships with their customers.