Food-based add-ins are playing a larger part in Amazon’s subscription plan, as retailers across the industry seek ways to combat fading customer loyalty and reduced spending.
The addition of a year of Grubhub+ to Prime membership could be a sign that convenient food-based offerings can be a strong loyalty driver.
There’s no denying that Prime Day is one of the year’s biggest shopping occasions, but economic uncertainty may be taking its toll on how much consumers will spend this year. The average shopper plans to spend $388 across all retailers during Prime Day, including $238 spent at Amazon alone, compared to a $594 total spend in 2021, according to a survey by RetailMeNot.
A stronger Prime offering may draw in shoppers that may be sitting out or reducing their Prime Day spend this year.
DISCOUNTS’ IMPACT
The importance of discounts in driving loyalty is shrinking, according to CommerceIQ. Discounts on Amazon have been significantly lower in the leadup to Prime Day 2022, as well as during the year overall. The company’s analysis noted that “steep discounts are becoming less important not only for Prime Day but for online retail as a whole,” and that there has been “hardly any change from day to day so far in the discount levels in the leadup to Prime Day 2022.”
The average discount level in the leadup hovered at just over 20% in 2022, compared to 30% in 2021 and 2020, according to data from CommerceIQ. Grocery had the highest overall discount level at 27%, followed by beauty, patio, and home goods, which all reached about 24%. All categories remained consistent over a several-day period.
Grubhub+ membership has the benefit of not being just about savings — it also provides convenience. Offering Prime members easy access to food delivery may be a strong loyalty driver that justifies the increased Amazon Prime subscription price. As discounts lose their importance, particularly due to how rival retailers like Target run their own competing events, offering alternative loyalty drivers will be the key to success.
EXPERT: BRANDS MUST DIFFERENTIATE
“With more retailers in the mix offering similar discount deals and with inflation at an all-time high and costs continuing to increase, it will be the brands that can effectively differentiate themselves using personalization and the customer experience to build long-lasting loyalty that will come out ahead,” said John Nash, Chief Strategy and Marketing Officer of Redpoint Global.
Amazon also has reason to boost the benefits of a subscription along due to its recent price increase. The annual cost is now $139, up $2 monthly, and while this hasn’t had a huge impact on loyalty — 95% of Prime members are still holding onto their accounts, according to RetailMeNot — continuing to add value to the membership is of greater importance given the other pressures that consumers are facing.
This matches Amazon’s thinking. Jamil Ghani, VP of Amazon Prime, called the Grubhub+ subscription “our way of saying ‘thank you’” in the new benefit’s announcement.
