The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
The retail chain has increased the product selection available by subscription from 200 baby-related items to more than 1,500 products in many categories, including household, cleaning supplies, health, beauty and pets. It also sweetened the deal by tacking on a 5% discount to all subscription orders, all the time.
Target Corp. is sweetening its online subscription offer to better compete with Amazon.com Inc.’s Subscribe & Save program. The retail chain announced today it has expanded the selection of items available by subscription via Target.com from about 200 baby care products to more than 1,500 products that also cover household essentials, health, beauty, pets, grocery, home and office and personal care.
To further entice consumers, the retailer has also begun discounting all subscription purchases by 5%. Target RED cardholders, who already receive 5% off all Target store and web purchases, can add the 5% off on subscription orders, for a total of 10% off their recurring online orders.
Target launched its subscription program last September, offering such baby-related items as diapers and formula. Subscribers receive free shipping and free returns, and they may also return items to Target stores. With its product expansion and the new discount, Target’s program looks much more like Amazon’s, which also offers free shipping and returns for products in comparable categories, plus automotive.
Amazon Subscribe & Save also offers a discount on products eligible for subscription, though the amount of the discount varies. A pancake mix on Amazon.com today, for example, costs $11.95 via Subscribe & Save, but $12.54 via Amazon Prime, the retailer’s free, two-day shipping membership program that costs $99 per year. Target Subscriptions, meanwhile, appears to offer only beverages in its grocery section for now. Additionally for Subscribe & Save customers, those who subscribe to receive five or more items per month to be delivered on the same day receive 15% off their entire order, according to Amazon.com.
Paula Rosenblum, managing partner at research and advisory firm RSR Research LLC, says Target will be a true threat to Amazon only if it can compete on price. “If their prices are the same or lower, it might make a dent in Amazon’s business,” she says. “But if it’s a pure pricing play, does the customer really care whose label is on the box? Maybe if it’s tied into some kind of rewards program.”
The bigger question, she says, is whether Target will be able to make money off its subscription program. Amazon’s business is built around direct delivery, Rosenblum says, “and even they don’t make very big profits. Can Target be as—or more—profitable than Amazon, while trying to compete in their space? Only time will tell.”
A Target spokesman says the retailer has been “very pleased with results of the pilot and how guests have responded since we launched Subscriptions in September”—enough so that it expedited the expansion that launched today. While he declines to give specific sales figures, he says that Target Subscriptions now account for 15% of the sales of products eligible for the program. Adding the 5% discount will help make it even more compelling to guests, he says.
As to how Target plans to stay competitive with Amazon in its subscription e-retail efforts, he says: “Only Target can provide assortment that includes major national brands and our exclusive owned-brands like Up & Up.” And, unlike Amazon, Target also has stores where customers can return online orders.