When Gillette asked its retail partner Kruidvat to start selling razor blades through a subscription model, it made perfect sense. Not only because Kruidvat is the leading brand in the Netherlands for health and beauty. Also because, with mass adoption of services like Netflix and Spotify, customers are more ready than ever. But selling and shipping physical products monthly brings new challenges. Kruidvat turned to its Hybris partner Osudio to help create the platform for a subscription service.
As consumers, we know the subscription model from newspapers and magazines, and more recently from music and entertainment. Yet the FMCG branch seems more conservative. Where companies like Netflix and Spotify pave the way for digital products, customers seem reluctant to subscribe to physical products. There is a fear to pay for products you don’t seem to need yet. On top of that, most consumers have had a bad experience with the long-term subscription contracts that newspapers and magazines used to wield. The sense of losing control is the foremost challenge to tackle in using a subscription model with physical products.
You need to get it just right. The implication for consumers is that they will save money and time. A personalized experience and exclusive products will create a deeper relationship. And when that grows beyond simply choosing the best choice, it becomes customer loyalty. The expectation is for subscription models to grow substantially over the coming years. But that may vary locally, depending on demographics and culture. Some countries, like the Netherlands, are quicker to adopt. That’s why Gillette opted to go with Kruidvat in the Netherlands first for selling razors through subscriptions.
Why Companies Choose the Subscription Model
For throwaway consumer products used on a regular basis, the subscription model promises full automation of repeat sales. The key benefits of a subscription model are:
- Higher margin which enables more marketing power
- Greater predictability in revenue, stock and shipping costs
- Lower retention spend because of customer loyalty
- Creating a new channel with fulfillment for offers, cross-sells and exclusives
- More customer engagement that creates a faster feedback loop
These are the reasons why Gillette is pushing its subscription model and why mother company AS Watson wanted to accommodate through their Kruidvat label.
Creating the Gillette Shave Club
As Gillette would focus on creating the customer demand with campaigns, AS Watson was given free rein on how to develop the platform. Within AS Watson there was no experience with subscription models, but it had to be based on their Hybris platform. So when they asked their Hybris partner Osudio to build a custom subscription platform, they also needed aid with creating the specifications of the flows, the reward system and the internal processes.
A subscription model is a different pricing model that requires a customer mind shift:
- You’ll never be without shaving razors
- You will always receive 15% discount on the in-store price
- You‘ll receive free gifts and discounts
- You decide when you receive your shaving razors
Essential in giving customers control, is a personal account. Here, customers find personal information and can set options for payment, delivery and choice. And while the word “subscription” implies a monthly commitment, for Kruidvat it’s, in fact, a membership program. Opting out is easy, it is the extra benefits that make it enticing for customers. In creating this proposition, there were a few notable challenges to meet.
Top Challenges to Build a Successful Subscription Model
Logistics-wise, receiving and processing the new regular monthly orders was no problem at all. The first month was dedicated to transforming business wishes into realistic features that bring business value. After specifications were finalized and approved, we started implementing the new features into the Hybris platform. The first challenge emerged. The Payment Service Provider that AS Watson uses, Ingenico, didn't have the required features to support recurring payments and status reports. With support from Osudio and AS Watson, Ingenico developed the payment structure to support subscriptions.
Another challenge turned out to be figuring out the possible scenarios that all the customer options could create. Customers can pause their subscription, restart or reset and change their standard delivery day in the month or week. On top of that, customers who use the subscription for a certain period, will get a certain discount or an exclusive product. This made the business logic more complex than anticipated. In the testing phase the early customers got their discount either too early or too late. To fix this, we drew out every imaginable scenario with the desired outcome, and then mapped this back to the platform.
After three months the new subscription flow for Gillette razor blades went into full production on the Kruidvat site. “The platform’s flexibility makes it easy to adjust the processes to the customer’s needs”, Wilco Nieuwenhuizen says, Online Architect at AS Watson. “So you can continuously optimize the customer experience and build that long-term customer relationship. Because a user-friendly flow is really key for repeat sales.”
Rinse and Repeat
Collaborating with Gillette was a first test for AS Watson to get valuable experience with the subscription model. The next step is to launch the subscription model for Gillette in Belgium. As Kruidvat uses the same platform there, this is only a matter of translations and legal clearing. Even though Belgian customers will be more hesitant at first to subscribe to shaving razors, it’s being the first what counts in positioning your brand in the customers’ mind. And for the Netherlands, Kruidvat is considering to utilize the baby diapers brand Pampers for subscription. It’s a typical throwaway consumer product that moms and dads need on a regular basis. Saving time and money certainly counts when having kids. Getting extra discount or free products will seal the deal.
Article by Jan Geelen, Digital Project Manager at Osudio