Autoship or auto-replenishment has paid off handsomely for Chewy, but apparently hasn’t been gaining major traction with retailers outside the pet foods category.
In the third quarter, Chewy sales to Autoship customers represented 83% of sales, with sales expanding significantly faster than to non-subscribers. The free program offers 35% off your first order and a 5% discount on future orders.
Chewy CEO Sumit Singh said on the retailer’s third-quarter analyst call, “Autoship is a rinse and repeat product merchandise program that has high reliability and accuracy, both in terms of planning, in terms of delivery and high satisfaction rating.”
Singh added that the order predictability “allow[s] operational planning to reduce cost and grow margin in a way that gives Chewy unique structural competitive advantages.”
Among competitors, PetSmart, the largest U.S. pet retailer, just launched a campaign to win $1,000 of orders via its own Autoship program, perhaps to counter the success of Chewy. Petco has a similar program, Repeat Delivery, but its e-commerce approach is undergoing a reset.
Several subscription programs have found success with replenishment subscriptions that allow consumers to automate purchases in certain commodity items, such as coffee (i.e., Trade Coffee), razors (Dollar Shave Club), diapers (Coterie), cleaning products (Blueland), and vitamins (Persona Nutrition).
Auto-Replenishment May Be Attractive in Some Cases, But Has Drawbacks
McKinsey finds replenishment-based subscription models have higher conversion rates and less churn than other subscription models, but subscribers are highly motivated by financial incentives, such as discounts, that can weigh on margins.
Many mass sellers that potentially could benefit from delivering household staples on a monthly auto-pilot have lately been focusing investments on same-day delivery.
Amazon’s Subscribe & Save program, launched in 2010, offers Prime subscribers the ability to save up to 15% off when receiving five or more products in one auto-delivery to one address. In 2023, Amazon noted that it had passed on more than $1 billion in savings over the prior 12 months to subscribers globally. Amazon said at the time, “That’s tens of millions of customers never running out of the things they reorder most, like coffee, diapers, dog food, toilet paper, cleaning supplies—even socks.”
Walmart only launched a subscription program in 2023 as a convenience, with no discount applied. Walmart said at the time, “When customers shop Walmart.com or the app, their baskets often contain repeat items, which means precious time is spent every weekly shopping trip finding and adding the items they’ve purchased countless times before.”
Target in 2020 discontinued its Subscriptions replenishment service, telling Bloomberg that the majority of Subscriptions guests “shifted away from regular deliveries to enjoy the speed and flexibility of our same-day services.” Walgreen’s also recently discontinued its Auto-Reorder & Save program.
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