One in four online shoppers uses delivery subscription services like Amazon Prime. So why are so few posts offering a similar delivery subscription model? Marek Różycki (Last Mile Experts) and Ian Kerr (Postal Hub Podcast) share the benefits of this model and look at two posts that have launched delivery subscription services.
According to a recent Royal Mail Delivery Matters report, one in four online shoppers now opts for delivery subscriptions offering unlimited domestic delivery on all orders within the subscription period. Amazon Prime is the most frequently chosen offering, with more than three quarters of online shoppers now using this option.
What’s so smart about subscriptions? We think:
• For the e-tailer, pre-paid subscriptions are a great way of tying in their customers. It is far more likely that a subscriber with a ‘free delivery’ – in this case, one that has been pre-paid via subscription – will buy more from the e-tailer.
• The service can be enhanced by offering bundled products like Amazon does, with free video or e-books included in the package. This further binds the consumer to the e-tailer. The exact multiple is semi-secret but based upon Amazon’s experience, a subscription customer is likely to buy several times more items on its marketplace than a ‘normal’ one.
• For the consumer – especially frequent shoppers – this is an opportunity to have great value in terms of a low cost per parcel and better last-mile delivery experience, as the service provider and/or e-tailer will know much more about the subscription customer than an ad hoc consignee.
• This model can work for carriers with dense delivery routes or a universal service obligation – generally a postal operator – as they can optimize their routes with more parcels going to regular consignees with a better first-time delivery success rate. This is due to the increased consignee information they are likely to have from a subscription customer.
So why have so few postal operators or last-mile carriers decided to offer such services?
Most likely we’re seeing a classic case of ‘not invented here’. Amazon has shown that subscriptions work. Parcel carriers and posts have advantages, such as the ability to offer subscriptions for delivery by several e-tailers or to bundle other services offered by them.
Australia Post and Shipster
Australia Post is active in this space with Shipster, which gives customers free delivery on purchases over the value of AS$25 (US$18) from some big name Australian online retailers, as long as the delivery cost is under A$20 (US$15). There’s a free trial period, then an annual membership fee of only AS$10 (US$7). Shipster members’ shipping costs are automatically deducted on eligible purchases at the checkout.
Sweetening the deal for customers is a tie-in with Deliveroo – Shipster members get free delivery on one Deliveroo order each month.
Australia Post hasn’t released details about how membership fees and delivery costs will be shared with participating retailers, but one retailer disclosed that retailers pay the delivery cost but receive a rebate on their share of the subscription fee, which is split based on the volume of orders retailers receive.
La Poste and Colissimo Pass
La Poste – via its Colissimo brand – offers Colissimo Pass, an unlimited subscription for parcel delivery. It is currently available at a ‘promotional price’ of €9 (US$11) per annum (later it will be €39 (US$48)).
The pass includes free deliveries with no minimum purchase via all partner e-commerce sites, along with free returns. Subscribers can also access premium customer service seven days a week, from 8am to 10pm.
Grab that market share
Delivery subscription services such as Shipster and Colissimo Pass should help their respective posts grow e-commerce parcel volumes, which is particularly important for posts where letter volumes continue to fall.
From our perspective, it’s not a question of ‘if’ but ‘when’ last-mile players will offer subscriptions at scale. Amazon has shown the way.
Marek Różycki is managing partner at Last Mile Experts, specializing in CEP and e-commerce last-mile advisory.
Ian Kerr is the founder and host of the Postal Hub Podcast, the weekly podcast for the postal and delivery sectors.