Target expands subscription products to fend off online competition

  • Article by: JOHN EWOLDT , Star Tribune
  • Updated: April 18, 2014 - 5:22 AM

Need a coffee shipment once a month? Put in one order, then relax.

Target Corp. announced Thursday that it is greatly expanding the number of goods that can be ordered by subscription and delivered on a regular, recurring basis.

Last year, Target dipped its toes in the subscription market with 150 baby items such as diapers. With the increase, the discounter has 1,600 items, including printer cartridges, coffee, laundry detergent, vitamins, razors, cosmetics and furnace filters, that can be shipped automatically every 4, 6, 8, 10, 12 or 26 weeks at the customer’s choosing.

For example, instead of making a note to replace the furnace filter every three months, a subscription order puts one on your doorstep every 90 days.

Target spokesman Eddie Baeb said the company discovered a definite appeal for online schedule ordering after the quiet launch of the baby items last year. “Fifteen percent of our online orders for baby items came from subscriptions,” he said. “So we knew there was an appetite for it.”

The initiative is a way for Target to compete with online sales of consumables, which are expected to grow three times faster than the growth in store sales through 2017, according to Forrester Research.

To attract even more shoppers, Target has added a new 5 percent discount on all subscription orders on top of the 5 percent discount for Redcard credit card holders. Shipping is free on subscription orders with or without a Redcard. If an item is on sale when ordered, customers get the sale price too.

While the new service is a time saver for harried consumers, it’s also a discreet way to order products that some might prove embarrassing in a shopping cart. Products for feminine hygiene, incontinence and smoking cessation can be ordered by subscription.

It’s also a more convenient way to get bulky products home. Besides the 32-roll package of toilet paper, Target super-sizes some items for sale online only, including a four-pack of 24-ounce Enfamil baby formula.

Ordering by subscription isn’t new. Examples include new music from Columbia House/BMG or monthly packages of fruit, flowers or bacon. More recently, subscriptions have caught on with razor cartridges, video games, contact lenses and samples of cosmetics.

The subscriptions are in addition to Target’s “Buy Online, Pick Up in Store” program launched in October. Nearly 60,000 items can now be picked up in the store from an online order, but the retailer is still behind Wal-Mart, which has nearly 1 million eligible products in its Site to Store program launched several years ago.

For Target, subscriptions are one more way to find and keep customers, though with the multiple discounts and free shipping offered, analysts don’t see the move as profitable in the short-term.

“They’re hoping to lock in customer loyalty,” said Brian Yarbrough, a retail analyst at Edward Jones Investments in St. Louis. “A customer starts with baby products and adds beauty and a few others. Pretty soon it might be a good source of reoccurring revenue.”

Still, the path is littered with failure from other retailers trying home delivery subscriptions. PetSmart tried it with dog food and cat litter without success, said Dave Brennan, co-director of the University of St. Thomas Institute for Retailing Excellence. Wal-Mart’s healthy snack box service called Goodies Co. was dropped last year.

With bricks losing market share to clicks, retailers have little choice. “It’s what they have to do in this day and age,” said Yarbrough.

 

John Ewoldt • 612-673-7633

 

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