The Role Of On-Time Delivery In The Success Of Retail Subscription Services

Customer conversion (CVR) and retention is the name of the game for online retailers, but the issue becomes even more important in a subscription model — especially within the context of a worldwide pandemic.

Right now subscription meal kit sales are at an all-time high as grocery stores are selling out of stock. These customers want assurance that their orders will arrive on time and as promised. A study done by ECR Europe suggests 31% of consumers will abandon their purchase after the first occurrence of an inventory stock-out. 

Delivering on this promise is important in a normal context, but it’s especially important right now as shoppers face so much uncertainty. Research shows that 73% of customers will abandon loyalty after just one bad delivery experience. 

If you run a subscription business, on-time delivery is critical to maintain your customer base. Here are some ways subscription merchants can assuage shoppers concerns and keep them from clicking “cancel.”

Why On-Time Delivery Is Important for Subscription Retailers

According to McKinsey, “The subscription e-commerce market has grown by more than 100% per year over the past five years.” Clearly, customers enjoy the subscription model. But McKinsey notes that customers’ love for subscriptions is conditional. Why?

  • Customers prioritize experience over brand loyalty. Consumers don’t have an inherent love of subscriptions. They just want a great end-to-end experience.
  • Subscribers hit “cancel” quickly. In the meal kit category, the McKinsey data notes that 60-70% of customers unsubscribe within the first six months. The study also found that over 40% of all e-commerce subscribers have canceled subscriptions at some point.

Bottom line: Don’t take customers for granted. Your ability to meet delivery expectations will be critical in keeping customers loyal. Assuring on-time delivery offers a way for subscription retailers to hold on to their customers. Companies inspire more brand loyalty when they do the following:

Why The Last Mile Makes A Difference for Subscription Retailers

The logic makes sense: customers who have a bad delivery experience will become wary of your brand. But why is the effect so pronounced for subscription retailers? 

There are three core reasons:

  • Brand loyalty. Subscription retail leans particularly hard on brand loyalty. A good last mile delivery experience is now the linchpin for sustaining that loyalty. And if 98% of customers note that the shipping experience impacts their brand loyalty, as we noted in Last Mile Delivery, on-time delivery is even more critical for subscription retailers who ship to customers every month. Consider how positive experiences now will affect Customer Lifetime Value (otherwise known as CLV) and your customers’ potential value in the future.
  • Cost. Failed deliveries are expensive on the surface level, but subscription providers also lose future revenue when they lose customers. Investing in on-time delivery helps prevent not only sunk costs from poor experiences, but can reduce the opportunity cost that comes from subscription cancellations as well. After all, the cost of acquiring a new customer is 5-25X the cost of retaining a loyal fan.
  • Service. Customer experience is more important than ever, and service is a huge component of that. With updates around on-time delivery, businesses can go above and beyond to deliver service (and peace of mind) that keeps customers in the loop about their orders.

What Happens When the Online Subscription Experience Fails To Deliver

The effect is even more pronounced for retail subscription services dealing in time-sensitive and/or perishable goods. Imagine ordering your family’s or your pet’s food from a subscription provider. It needs to show up on time and in-tact; otherwise, the item needs to be taken back and in the cases of food or flowers, the items need to be destroyed.

However, in this scenario, proactive action might create the difference between a happy customer and an upset one.  Once delivery is missed, customers will call in asking where their orders are (otherwise known as the costly ‘WISMO call.’  If the delivery experience is poor, why should the customer keep paying you next month? When 73% of customers saying the delivery experience would determine whether a customer is willing to shop with a brand outside of Amazon, getting ahead of the problem could do more than prevent WISMO calls. It might keep subscription customers around.

For example, one flower company is using Convey today to identify shipments destined to miss their delivery dates. After the company identifies the issue, they send the customer a customer alert giving them an option: Either the customer can choose to re-ship the order a different day and receive a credit for order, or if the order is time-sensitive, the customer can ask the retailer to do a re-ship that day. This brand claims that sending proactive alerts has neutralized negative responses from customers, and has also made their customer service team more efficient.

That’s why getting ahead of delivery issues and communicating with customers before the WISMO call is so critical. Accurate data and supply chain visibility can also help prevent time-sensitive issues. For example, our product Discover is capable of alerting customers of the issue as many as 33 hours before the carrier informs them.

Making Delivery Experience Management (DEM) a Priority for Subscription Customers

On-time delivery is critical for subscription retailers, but what can they do about it? 

In the case of Rent the Runway, they created a team of employees focused on membership retention. They also opened transport hubs to ensure that they could optimize their network design, improving their on-time delivery rates and reducing the amount of “we’re sorry” emails they had to send in the future. The results? The company has been profitable since 2016 and, as the Wall Street Journal notes, “the percentage of customers leaving is at the lowest point in years.”

Grove Collaborative saw similar results. Using DEM to proactively reach out to customers who might have delivery issues, the CPG brand reduced customer service claims (by 50%) and reduced the cost per claim. Additionally, their NPS scores increased by 3 points among customers who experienced Grove Collaborative’s Delivery Experience Management in action. Brands who want to inspire loyalty can do so even in the face of shipping issues by being proactive in their approach.

Supply Chain Visibility and On-Time Delivery Are Key To Retaining Retail Subscription Service Customers 

There’s nothing worse for a customer than not getting an item when and how they expect it, especially if it is time-sensitive or sentimental. While there are many variables that can affect last mile logistics, customers still expect their brands to uphold their promises, or they will find another brand that will.

Want to learn why hitting your estimated delivery date increases customer conversion rates and reduces WISMO calls? Click here, or learn how to convert more customers with additional transparency around estimated delivery dates.