SMH: Supermarket launches subscription service

The original article which appeared on SMH.com is available here.

written by Dominic Powell

Australian shoppers can now include Woolies alongside their monthly Netflix and Spotify bills, with the supermarket giant launching a new subscription service for grocery delivery.

Called 'Delivery Unlimited', customers receive free delivery on their weekly shop for a monthly or annual fee, provided they spend more than $100 on each order.

An annual subscription for delivery any day of the week costs $169 or $19 on a monthly basis. Delivery from Tuesday to Thursday costs $119 annually or $15 month-to-month.

Standard, one-off delivery from Woolworths costs up to $15 for orders under $100, but drops to $3 for orders between $250 to $299.

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Demand for the supermarket's online services have been growing rapidly leading the company to investigate new delivery options, a Woolworths spokesperson said.

"Australians are also increasingly embracing subscriptions across a range of different services to help save money, make budgeting easier and remove the hassle of individual fees," the spokesperson said.

It guarantees cash flow because regardless if customers actually use it or not, they're paying every month for it.

Pippa Kulmar, retail consultant at Retail Oasis

Woolies is one of the few major bricks and mortar retailers in Australia to make a foray into the world of subscriptions, borrowing from the playbooks of Costco and Amazon.

Fellow supermarket giant Coles explored delivery subscriptions last year through a restricted roll-out of 'flybuys max', which offered free home delivery on all Coles online orders over $50, along with bonus flybuys points, movie tickets and other discounts.

Flybuys max has still not moved beyond its limited trial stage, despite Coles saying it planned to "evolve" the offer. It instead diversified its delivery options through partnerships with eBay, Airtasker and UberEats.

Pippa Kulmar, retail consultant at Retail Oasis, said the step into subscriptions was a natural move for Woolworths, saying regular revenue and a dedicated customer base was the "holy grail" for retailers.

"It guarantees cash flow because, regardless if customers actually use it or not, they're paying every month for it," she said. "We'll no doubt see more and more retailers start to follow suit."

Subscriptions to help Woolies retain customers

The online grocery space has been increasing in popularity. In the previous financial year both Woolworths and Coles reported their online divisions were profitable and growing 30 per cent year on year.

But where supermarkets once could guarantee a loyal following by ensuring they had the largest number of stores in a certain region, the rise of online has produced more fickle customers.

Ms Kulmar believes Woolworths' move into subscriptions will help the supermarket lock in customers and prevent them jumping ship to competitors.

"With online, all of a sudden location and physical boundaries aren't an issue, and traditionally supermarkets were notorious for locking down customers for entire areas," Ms Kulmar said.

"This subscription model is another way of doing that because if you're paying a company for a subscription, you're more likely to return to it to reap the benefits."