Subscription growth tests APAC retailers’ margins

Retailers must prove that higher order frequency and retention can outweigh the costs of shipping and returns.

Asia-Pacific retailers are expanding delivery subscriptions, but rising membership alone may not translate into profitable loyalty as free shipping and returns add to fulfilment costs.

Some 71% of retailers now offer memberships. Mary Ann Lamigo, Senior Manager at Kadence International, said subscriptions can encourage repeat purchasing, but retailers need to distinguish genuine loyalty from behaviour driven primarily by discounts and free delivery.

“A subscription can actually create a habit, but a habit is not certainly loyalty,” Lamigo said. “The question is whether that habit creates profitable long-term consumer value.”

She cited data showing that 72% of customers enjoy their shopping experience more with free shipping, whilst 55% favour retailers offering free returns. Stronger evidence of loyalty, however, comes when subscribers order frequently, explore additional categories, renew their memberships and remain despite competitors’ promotions.

That makes incremental customer lifetime value a more useful measure than subscriber acquisition alone. Retailers should compare members with similar non-subscribers to determine whether subscriptions actually increase purchasing frequency, retention and spending.

“If 100 new subscribers were already high-frequency customers, the subscription may not have created additional value,” Lamigo said.

Margin pressure becomes more pronounced when memberships include free returns. Lamigo said returns can rise by as much as 90% in some apparel sectors, often because of sizing or product quality issues.

Rather than making returns more difficult, retailers can address the underlying causes through better sizing guides, detailed reviews, and product images. Exchange options can also help retain both customers and revenue.

Lamigo said subscriber acquisition should not be treated as the main measure of success. Retailers should instead compare members with similar non-subscribers across frequency, retention and spending to determine whether the programme creates additional value.

That makes incremental customer lifetime value the stronger measure of whether subscription benefits generate enough extra activity to cover shipping, customer service and return costs.