For years, Amazon has provided FBA sellers with the ability to offer discounted subscriptions to customers via their Subscribe & Save program. Traditionally, individual sellers have chosen whether to offer subscriptions for their FBA items and born the financial burden of paying for those customer discounts.
Recent changes to the program, however, show Amazon taking more ownership of that program, including some of the financial burden. There are pros and cons for sellers—but if you understand the system, it’s almost all good news.
How does Subscribe & Save work?
Since 2007, Amazon’s Subscribe & Save program has allowed customers to receive recurring and scheduled deliveries of the products they love and use most often—such as toiletries, foodstuff, and diapers—at a discounted price. It’s a great opportunity for buyers to save money on things they already plan on purchasing. When leveraged correctly, it’s also an opportunity for FBA sellers to increase customer retention and boost conversion.
With Amazon’s Subscribe & Save service, customers can select their favorite products for automatic shipping every one to six months, and are rewarded with a small discount for each order that ships. They can cancel any order that isn’t needed, so the risk is low for customers. When customers receive five or more subscriptions in a single month, a steeper discount makes the program even more appealing.
Changes to the program
Amazon started rolling out changes to the Subscribe & Save program in Q1 of 2020. There are three main changes that sellers will want to pay attention to:
- Tiered discount options
- Who funds the discounts
- How products are enrolled
1. Tiered discount options Originally, the amount of discount was determined by which category items were in. Most common was a 5/15 model: discount of 5% for single orders, with an additional 10% if a customer was receiving five or more subscriptions in a single month. Sellers can now opt in at either a 5% or 10% base discount to customers. (Technically, you can opt in at 0%, but we’ll get to that later.)
Amazon claims that funding at 10% can drive up to a 1.8X increase in conversion over no discount at all. Being able to choose a 5% or 10% discount means that sellers can now make more strategic decisions based on various factors. Having the option to push up to a 10% discount gives aggressive competitors an extra weapon in their arsenal.
2. Who funds the discounts In the past, sellers saw no personal benefit from paying the higher discount rate for 5+ monthly subscriptions. Those items didn’t have to be from the same seller, so sellers were essentially paying for the benefit of a customer being very Amazon-centric. Acknowledging this, Amazon has taken responsibility for the additional discount offered for 5+ monthly subscriptions, but made it a standard 5% above the seller discount.
That means customers may receive 5/10 or 10/15 based on their number of subscriptions, but sellers are only responsible for the 5% or 10% that they’ve committed to. (Again, there is one other option, but we’re still getting to that.)
During the transition from the old model to the new model, it is a bit unclear on how long existing subscriptions will continue with 5/15 before getting pushed over to the new pricing model. All pre-existing Subscribe & Save ASINs are, however, automatically enrolled at the 5% discount. Sellers would need to manually change those legacy items to 10% if they wanted to offer a steeper discount moving forward.
3. How products are enrolled One of the biggest changes to the program—and the one that could possibly cause contention for some brands—is in how items are opted in to the Subscribe & Save program. Instead of relying on sellers to choose which products offer subscriptions, Amazon now determines which items are most relevant to regular replenishment and automatically enables Subscribe & Save at a base 0% discount.
That means that brands that follow tight pricing practices will now have their products below their Minimum Advertised Price, but technically Amazon skirts this complaint by not offering the discounted price on the product detail page. The discount is only realized behind-the-scenes if customers receive five or more subscriptions in a single month. They would then receive a 5% Amazon-funded discount.
In addition, the ability for sellers to bulk upload products for enrollment in Subscribe & Save has been removed. To begin offering a 5% or 10% discount, sellers need to contact the Amazon Subscribe & Save team to check eligibility and get those running (or to opt out of the program altogether). With so many other great things happening, this seems like a step backwards for the Subscribe & Save program.
Overall, though, these changes reflect Amazon’s obsession with providing a good customer experience. More products will be available with Amazon’s auto-enrollment feature for replenishable products, which means bigger savings for customers. Sellers will benefit as well, because they can strategically choose their discount tier—and only pay for what they’ve committed.
Have more questions about selling on Amazon? Contact us at Pattern at (888) 881-7576 or read more on the Pattern blog below.