(Newswire.net — May 18, 2021) — Subscription services are not a novel phenomenon. The beauty craft delivery business was the first to take off in the early 2000s and as it started gaining more traction, other areas of service like home meal-kit delivery, began to pour in. During their peak in 2015-2016, it was estimated that leading food box subscription like Blue Apron and hellofresh was raking in over a whopping 1 billion in annual sales and that too within just a few years of its inception.
In those times it seemed like that the meal-kit market would just explode and overwhelm the home-cooking and traditional grocery supermarket shopping. But as soon as more and more players joined in, the bottom began to fall off. With the rise in the scale of competition, market leaders began splurging huge sums of money to get their old customers back and try and make new ones, which eventually led to their downfall as sales plummeted and hit rock bottom. This happened as a staggering 75% of customers canceled their food boxes subscription within a span of fewer than six months. People were quick to cancel because it’s perishable and costly.
Low consumer awareness also contributed to the decline. Only 50% of consumers in the US were aware of at least one food subscription service and less than 15% actually subscribed to any one of them.
Surge during the pandemic
The truth was that most visionaries got the meal kit market wrong. In fact, it was never at all that big as was initially envisaged. However, an unlikely scenario occurred due to the coronavirus lockdown which gave the business a new lease of life in the shape of a global pandemic. Gradually, as the entire population was forced indoors as the pandemic gained in strength, the customer base too again started to increase. Rather than stalk the grocery outlets with gloves in hand at dawn, people preferred to stay at home and order food.
As a result, companies started to act on a war footing to counter the challenges presented by the spread of the coronavirus. They quickly altered their operating procedures and adopted simple recipes and expanded the availability for customers to order multiple weekly boxes which were available only for couples before. For consumers, who were enduring uncertain times, food subscription boxes were a boon as they offered both convenience and predictability.
A recent report on the impact on food subscription services indicates that there has been a growth of over 22% on the acquisition of all subscription services (primarily F&B) since the advent of the current pandemic. The high demand came about as more and more people decided to stay indoors and avoid unnecessary trips to the supermarkets and grocery stores. Apart from returning customers, several first-time buyers have begun to use food services because of their price and ease of use.
To meet the growing demand and to deal with the rise in competition, subscription brands should consider ways and means to retain customers and acquire new ones. Those looking for growth have to show understanding and flexibility as per the demands of the current environment and also consider the needs of the customer in times of quarantine.
Some brands, for example, are allowing customers to pause on their subscriptions until the financial situation improves. Others are leading the way by offering the workers on the forefront like, healthcare, special editions of food boxes, or donating significant numbers of their signature boxes to healthcare workers. The choice to temporarily close accounts, defer payments or pause subscriptions will be remembered long by the customers and will create a sense of loyalty among them towards the brands concerned well after things return to normal.
Moving forward after the pandemic
In the aftermath, it is predicted that the strain on supermarkets as a result of Covid-19 has given us reason to believe that home deliveries through alternative supply chains are the future. Having said that, getting the food from the field to the doorstep will become a massive challenge, because when the shutdown lifts there will be initially a huge pent-up demand to eat outside the home. The moot point is that with vaccination distribution already underway, will customers continue to avail these costly meal delivery services that require a significant amount of prep work?
The thought process is that the trend to gravitate towards excitement during meal times through specialty foods will continue well into 2021 and may accelerate even beyond once people begin to work from the office. What has exactly happened is that even though supermarkets were open all the time, people sitting at home with time on their hands got an opportunity to try out new things that they never thought of or got a chance to do before.
Agreed that the food box services will face many challenges in the coming years as they have to again face severe competition from restaurants, but in reality, these changed habits may prove to be difficult to give up by most consumers. In return, these meal subscription providers must endeavor to see that the customer is getting not only value for money but a high level of culinary experience. The key takeaway is that customers are changing the way of buying products, thereby presenting a massive opportunity to meal kit brands to utilize the pandemic boost to instill in the customers the habits of a lifetime and turn them into loyal brand advocates.
The Bottom Line
Food and beverage subscription box services are just a handful of businesses that have proven their track record by serving customers seeking safe and convenient delivery options. Moreover, some of the enterprising leaders have grabbed this opportunity to innovate further by adjusting and launching new products to expand their customer bases. In this way, they will be able to ensure that their businesses remain as strong as ever, much after the spending habits and economy have returned to normal. The hope, of course, remains that customer influx will make the business much stronger in the long run.