备忘录：重新定义消费类电子产品的收入模式

It’s been a boom season for consumer packaged goods and perishable foods brands. This growth skewed heavily towards those properly positioned to benefit from omnichannel distribution and it punished many who rely solely on direct-to-consumer and subscription models.

This week – after sitting with executives at one of America’s most prominent grocers, I was left thinking about all of the changes in how we consume the consumer packaged goods that we love. Here is what I concluded after those conversations:

You have a subscription to products that you like, you repeat purchase the products that you love. More often than not, those repeat purchases exceed the volume of the product that you’d consume if you subscribed to a monthly shipment from the same company.

Olipop and Poppi need no subscription box – they have Amazon Prime Now and DoorDash. I would venture to guess that the enthusiastic Olipop fan buys 4-5 cases of four per month ($50) through various channels. Wild Planet needs no subscription box, nor does Primal Kitchen, Bar Harbor, Organic Girl, Brad’s products, Dave’s Killer Bread, Waterloo water, Bare Bones bone broth, Bulletproof, or Force of Nature meats. Prime Now basically advertises these brands at no cost to them. Whether perishables or not, brands are losing volume to those positioned to help consumers with immediacy.

The subscription model in the food industry has been a popular trend, particularly in the past decade, with businesses offering curated boxes of ingredients, snacks, or specialty products to consumers on a regular basis. However, by 2022, the landscape had changed, with subscription box sales diminishing post-pandemic. For a deep dive on that, start here at The Subscription Crash: 

Winc, Birchbox, and Blue Apron’s shrinking markets tell the story of what happens when a subscription model falls out of favor with consumers. Each company’s current concerns teach a different lesson: Winc’s DTC-only strategy diminished growth, Birchbox’s acquisition partners failed at every turn, and Blue Apron can’t seem to turn a profit. In each case, these subscription companies learned that the novelty of subscription wears off.

As a result of recessionary effects in 2021 and 2022 and the move towards retail media networks, the emphasis has shifted towards making consumer packaged goods, both perishable and non-perishable, available for immediate purchase and consumption through services like Amazon Prime Now, DoorDash, Instacart, and Thrive Market. Three of these platforms have robust retail media networks and those three (Prime Now, DoorDash, Instacart) allow for instantaneous availability of goods.

Grocery delivery is set to become a $1 trillion market by 2027 fueled by this model. What’s not included in this figure is the subscription box model. The subscription model in food has now become a form of down-side protection – which aims to “reduce the frequency and/or magnitude of capital losses, resulting from significant asset market declines” for brands looking to maximize revenue. It’s a model that protects a nonsensical (at this point) dependency on aging digital customer acquisition channels (Meta, et. al.)

As the market for grocery shifts to marketplace, this change impacts the consumer’s purchasing behavior and the CPG retailers. Traditional subscription models may actually slow sales velocity and overall volume for the best brands.

Down-Side Protection and Maximizing Revenue

In the current market landscape, the subscription model serves as a way to offer predictable (but increasingly less-reliable) steady stream of revenue through the commitment of customers to receive products periodically. This model, however, does not maximize revenue potential as it limits the frequency and volume of purchases made by consumers. For product-based brands that are truly indispensable, with high loyalty and affinity, a study of consumer behavior suggests that buyers prefer purchasing these products as needed throughout the days, weeks, or months.

Brands with a loyal customer base have a greater potential for revenue generation by catering to the convenience of purchasing products as and when required, rather than committing to a fixed subscription. This trend is particularly evident among the major grocers who benefit from buyers’ repeat purchases throughout the week, as opposed to stocking up through bulk purchases at stores like Costco or relying on traditional subscription models. By focusing on immediate purchase and consumption, brands can maximize revenue while providing a more tailored and flexible service to their customers.

Dynamic Shelf Space, Cooking Schedules, and Refrigerator Capacity

I have two subscription services that see more trash can time than freezer or refrigerator time. In fact, it’s time to cancel those subscriptions. If I cannot get them through Prime Now, DoorDash, or a like-service, I will just find a substitute. This is likely a shared consumer mindset as more products are available through grocery delivery services.

One of the key advantages of this shift towards immediate purchase and consumption is the increased flexibility it offers to consumers in terms of their shelf space, cooking schedules, and refrigerator capacity. Traditional subscription models often require consumers to plan their meal schedules around the arrival of their subscription boxes, leading to potential food waste and inefficiencies in meal preparation. By purchasing products as needed, consumers can adapt their cooking schedules to their daily routines, dietary requirements, and preferences.

Additionally, this approach allows users to be more dynamic in their shelf space and refrigerator capacity management. Traditional subscription models may result in overcrowded shelves or refrigerators, as consumers must accommodate the bulk delivery of food items. On the other hand, purchasing products as needed allows consumers to optimize their storage space, avoid clutter, and reduce food waste due to spoilage or expiration.

Rewarding CPG Retailers with Significant Brand Equity, Product Loyalty, and Affinity

The shift towards immediate purchase and consumption of CPGs not only benefits consumers but also rewards the retailers who have developed significant brand equity, product loyalty, and overall affinity. These retailers have invested in building strong relationships with their customers, ensuring high-quality products, and providing excellent customer service.

By offering products for immediate purchase, these retailers can capitalize on their brand’s reputation and loyalty to drive sales and increase revenue. This approach further strengthens the relationship between the retailer and the consumer, as it demonstrates the retailer’s understanding of their customers’ preferences and their ability to adapt to the changing market landscape.

The move towards retail media networks, as often discussed here, has also created new opportunities for CPG retailers to target their marketing efforts and engage with their audience more effectively. By leveraging these platforms, retailers can further enhance their brand presence, drive consumer engagement, and foster long-term relationships with their customers.

The decline of the subscription model is a headwind facing many companies that have relied solely on this mechanism as a second-order effect of measuring paid advertising spend (with LTV or lifetime value as the holy grail of marketing efficacy) has paved the way for a more dynamic and flexible approach to purchasing and consuming consumer packaged goods. By focusing on immediate purchase and consumption, brands can maximize their revenue potential while providing a more convenient and adaptable service to their customers.

Out: monthly recurring revenue (MRR)

The value of a customer was viewed through two lenses: lifetime value and as a unit in a larger monthly recurring revenue rate. I would argue a new measure will become accountable.

In: monthly repeat rate (MRR) 

Thanks to data from platforms like Amazon Prime Now, DoorDash, or Instacart, a product retailer can measure a customer based on how often that customer buys the same product throughout the month and how that frequency of purchases lends itself to overall volume.

摘要

While subscription models can provide a predictable and steady stream of revenue for brands, they may not always be the most effective method for maximizing sales. The sales performance of brands through subscription models or Amazon Prime Now can vary depending on the specific brand, product, target market, and consumer preferences.

Brands can better understand the product’s performance by constantly assessing repeat sales (MRR) through delivery systems. The data will better assess competitive landscape and promote a better understanding of seasonal sales trends. This shift has enabled brands to capitalize on their strong relationships with customers and leverage retail media networks to further enhance their marketing efforts and brand presence.

The changing landscape of the food industry highlights the need for brands and retailers to adapt their business models to better serve the evolving preferences and needs of their customers. By embracing the shift towards immediate purchase and consumption, brands can not only maximize revenue but also foster stronger relationships with their customers, ensuring sustainability and continued growth in a highly competitive market.

作者：Web Smith | 编辑：Hilary Milnes，美术：Alex Remy 和 Christina Williams

Member Short: The Instacart Necessity

The Instacart OS is less of an ideal now and more of a necessity. In September, Instacart rolled out a suite of new technologies on the heels of two acquisitions that underscored where the company would be investing for the future: omnichannel retail. It wants to be the Shopify of grocery, and CEO Fidji Simo said that customers are going to shop both online and in store, so the company needs to serve retailers in both environments. In a memo at the time, we wrote:

本会员简报专为以下人士设计 执行委员为了方便加入，您可以点击下面的链接，获取数百份报告、我们的 DTC 权力清单和其他工具，帮助您做出高水平的决策。

在此加入

备忘录Instacart 的全渠道操作系统

Instacart is on its way to becoming the Shopify of Grocery on the way to its initial public offering. A suite of new omnichannel merchant tools is laying the groundwork for its refreshed identity, one built around democratizing the access to online marketplaces for merchants – big and small. Sound familiar?

We believe the future of grocery won’t be about choosing between shopping online and in-store – consumers are going to do both,” Fidji Simo, CEO of Instacart

The rollout of the new technology platform, called Connected Stores, is the latest move in a busy month for Instacart, which made two key tech purchases earlier in September that underpinned its independent grocery ambitions. We outlined the acquisitions of Rosie, a grocery eCommerce and mobile commerce platform, and Eversight, an intelligent pricing and promotions platform, and how they fit into Instacart’s long-term plans to connect physical and online grocery retail and advertising into a thriving flywheel for the digital age. From September 9’s Notes on Grocery:

Success online and in retail stores is connected, particularly when it comes to digital advertising. Digital ads and online visibility is necessary to drive awareness, particularly for emerging DTC brands that need to attract new customers. But physical stores are where most people buy CPG products. From Insider Intelligence, nearly 95% of food and beverage sales and 90% of total grocery sales take place in-store.

Instacart’s approach isn’t to try to replace in-store grocery sales with eCommerce sales, but to power both physical and digital purchases in a way that connects them to each other seamlessly. If successful, it will be the platform responsible for flipping the online switch for small, independent grocery companies that have so far struggled to translate their retail businesses to digital ones. The goal is to bring small, independent grocers online with as much capability and tech prowess powering them as Whole Foods has an Amazon-owned company.

It’s an ambitious plan, but Instacart has proven in the past three weeks that it’s prepared to invest heavily in the technology to do it.

Under the Connected Stores umbrella, the company is rolling out six new Instacart Platform technologies. According to the press release, the technologies will help “grocers bring together the best of online ordering and in-store shopping for consumers. Connected Stores create a unified, personalized experience for customers by enabling them to move seamlessly between a retailer’s app or website and its physical, in-store experience.”

The six new technologies are:

Caper Cart: This is an AI-powered smart cart that lets customers automatically scan items for pricing and more information as they shop in store using scales and sensors and equipped with a touchscreen and computer vision. This is Instacart’s version of the smart shopping carts, teased by grocery tech for years and most prominently executed by Amazon but still largely nonexistent in everyday stores.

Scan & Pay: Scan & Pay turns phones into scanners so customers can automatically check themselves out as they shop and skip lines. They’ll need to be logged in to Instacart, which will also save items to online shopping accounts to make future purchases easier.

Lists: Lists gives customers the ability to sync shopping lists from their Instacart app or grocery stores’ Instacart-powered apps to a Caper Cart via QR code. The Caper Cart’s touchscreen will then make it easier to locate items from the shopping list in the store and check them off as they’re added to the cart.

Carrot Tags: Carrot Tags are electronic shelf labels that can be uploaded to the Instacart platform, giving labels more functionality for shoppers and associates. Carrot Tags essentially turn traditional labels into smart labels and can let associates choose what information they want to display about an item in store. It also makes it easier for customers to match online products with in-store items by making shelf labels scannable.

FoodStorm Department Orders: FoodStorm is an order management system connected to the prepared food departments, like bakery and deli, and the new Department Orders functionality connects across departments so that they can all have one customer’s order ready at the same time.

Out of Stock Insights: This API gives retailers real-time alerts when items are nearing out of stock or have fully run out, making it easier for stores to plan ahead with inventory management, avoiding out-of-stock notices.

Together, these technologies are positioned to enable a smarter, independent grocery store. Instacart is also partnering with Good Food Holdings to build the first Connected Store at a Bristol Farms grocery store in Irvine, California. Instacart’s new services will power the store with all six Connect Stores technologies, including new checkout options and smart discovery tools. It’s not unlike Amazon’s strategy of building retail stores to show off its own retail tech, but Instacart is skipping the Instacart-branded store and going straight to the retail partners to demonstrate compatibility. It has no plans to own a branded storefront, it simply wants to enable others. Neil Stern, CEO of Good Food Holdings, on incorporating the Connected Store model:

At Good Food Holdings, we’re proud to provide our customers with a personalized shopping experience – whether they’re opting to build their baskets online or joining us in-store. As customers have adopted delivery and pickup over the past year, we’ve found it increasingly important to evolve our business with omnichannel customers at the forefront. As we look to the next decade of grocery, we want to make sure that we’re providing an inspirational shopping trip for our customers – and this starts by building a Connected Store. In partnership with Instacart, we’re excited to introduce multiple ways to checkout with Caper Cart and scan & pay, while driving inspiration through Lists and Carrot Tags. Instacart is an innovator in grocery technology, and we’re thrilled to be their partner and debut the first-ever Connected Store at Bristol Farms this year.

The partnership between Instacart and Good Food Holdings will show at large that grocery, long the last digital frontier for retail, is coming into a new era of commerce. While the majority of sales are likely to remain in-person, retail media networks and online ordering capabilities will drive business and make it more intelligent at the same time. Instacart is amassing power by giving smaller grocers a way to grow online without sacrificing physical stores. It’s the Shopify approach to grocery retail, and like Shopify, it views Amazon as its competition.

作者：Web Smith | 编辑：Hilary Milnes，美术：Alex Remy