LONDON: Major consumer companies including Unilever, Procter & Gamble and Nestle are chasing consumers who want food and household goods delivered automatically, even though this kind of business has not always worked. The companies are pitching new online subscription services, which promise stable revenues, lower delivery costs and valuable data about customers. The world’s biggest packaged food company, Nestle, whose Nespresso coffee is already a sizeable subscription business, recently launched a subscription program for nutritional drinks in Japan and expanded ReadyRefresh, an online bottled water service, in the United States. It also wants to expand the Tails.com subscription pet food from Britain to continental Europe, one of its executives told Reuters. It is testing the service in France for a possible launch this year. Unilever on Monday will launch its Skinsei brand in the United States after testing, offering “personalized” skincare by subscription. Unilever expanded its Dollar Shave Club subscription razor service to include cologne and beard oil in 2018 and toothpaste in 2017. Meanwhile, Procter & Gamble, the world’s largest home and personal care company, expanded its Gillette on Demand razor subscription service to Canada. Subscribers can text when they are ready for their next shipment. Selling directly lets manufacturers skirt retailers, giving them more profit and control over pricing, promotions and merchandising. This helps when retailers such as Amazon and Sainsbury’s are pressing consumer product companies for discounts and pouring resources into own-label products. Subscription selling gives them guaranteed revenues, a better picture of customers and can make goods cheaper to deliver. “They’re getting it to you on a specific date, but they don’t have to get it to you in one or two days,” said retail analyst Scott Mushkin at Wolfe Research. “It’s a way for them to manage down their logistics and distribution costs.” Amazon has offered discounts since 2006 with its Subscribe and Save program, which gives people up to 15 percent off when they sign up for repeat deliveries of household items. It is now “a multi-billion dollar business inside Amazon,” said Tom Furphy, CEO of venture capital firm Consumer Equity Partners and former vice president of Amazon’s consumables unit, which launched the service. Liz Cadman, founder of mysubscriptionaddiction.com, said children’s educational boxes were the US website’s hottest category in 2018, followed by grooming, make-up and beauty. Biggest losers were snacks, clothing and pet goods, she said. The trouble with subscriptions, analysts say, is high cancelation rates as consumers get bored, high marketing costs, costly delivery and the fact that people often end up with goods they don’t want. Mondelez International has suspended its Oreo Cookie Club, a program rolled out last year. For $20 per month, subscribers got a box containing Oreos in different flavours, with recipe cards, candy and merchandise such as Oreo-branded socks, sunglasses or cups. After three months, Ruby Scarbrough canceled her subscription, saying in an online review that she could buy the cookies more cheaply at a store. Jeff Jarrett, global head of e-commerce at Mondelez, pointed to the challenges of delivering mass-market snacks economically and keeping customers interested. Nobody has “cracked the code” for snack subscriptions, he said, though Mondelez may give its Oreo club another shot, likely with more flavours, better merchandise or a better online experience. General Mills axed its Nibblr subscription snack business in 2015 after 18 months. A similar project from Kellogg, reportedly planned for that year, never materialized. Walmart shut its Goodies subscription snack business in 2013 after a year. While subscriptions delight some consumers, they frustrate others because “you end up with too much of the product or too little,” Procter & Gamble CFO Jon Moeller told Reuters. Subscriptions represent about 10 percent of all US online sales, and more than 1 percent of all retail sales, said Burt Flickinger, managing director of consumer consulting firm Strategic Resources Group. He said subscriptions are the hottest part of the industry, growing more than 17 percent a year and outpacing overall online sales, which are growing more than 12 percent. He said subscriptions may exceed 10 percent of the US retail market in five years and 15 percent in 10 years. Euromonitor International says subscription shaving clubs, including Dollar Shave and Harry’s, took about 12 percent of the $2.1 billion US market for men’s razors and blades in 2017, up from 6.4 percent two years earlier. But Dollar Shave’s sales have slowed dramatically, with Unilever in October citing growth of around 10 percent year-to-date, compared to more than 50 percent in 2016, the year it bought the brand. Unilever said a slowdown was not unusual but it was “pleased with performance” at Dollar Shave, whose North American business would be close to breakeven this year. Unilever’s global brand vice president of skincare, Valentina Ciobanu, told Reuters the company wants to make its subscriptions more flexible, because consumers demand options when they buy. “We don’t force you to subscribe at the beginning,” Ciobanu said about the Skinsei brand, which she created inside the company. Skinsei aimed to keep shoppers loyal in part by making changes to the products it recommends based on the season of the year and other factors, she said. Ciobanu said Skinsei’s products could be combined into more than one million skincare regimens. She declined to give sales projections. However, she and other executives said it was unclear whether subscription brands would take off or remain niche. “For now it’s still early adopters. The question mark is how long will it take to become more mass, and I think nobody has the answer to that question,” said Bernard Meunier, who runs Nestle’s Purina Petcare business in Europe, Middle East and North Africa.
Multinational companies are expanding their online subscription service despite inherent risks . P&G ’s Gillette on Demand razor service is coming to Canada , while Unilever is launching its Skinsei “ personalised ” service in the US after previously expanding its razor - providing Dollar Shave Club to offer toothpaste , cologne and beard oil . Nestle has launched a nutritional supplement programme in Japan and improved its US - based online bottled water service , replacing its already established razor brand . However , subscription services often have significant marketing costs and high subscription rates . Nonetheless , they can offer more predictable revenues and data insights , so more attractive to businesses .