business news in context, analysis with attitude, in addition to having increased its grocery selection from 14,000 to 22,000 SKUs in the approximate one year that it has been selling non-perishable groceries as part of its online offering, now has taken the program to the next logical step – a “subscribe and save” program that offers regular replenishment of routine products.

The program only includes a limited number of products identified as being regular purchases – 70 items in the household supplies category, 238 grocery products, and 865 HBC items. But the program clearly is designed to create a captive and dependent customer base.

As described on the website:

“Our new Subscribe & Save program is a great way to save money on items you use routinely--coffee pods, shampoo, laundry detergent, and more--while helping to make sure you don't run out. Benefits include:

• “A delivery schedule that fits your needs--every one, two, three, or six months… You select the frequency with which you want to receive new orders, and we'll send out the shipments on that schedule automatically. You can change your subscription schedule online at any time.”

• “Discounts on our everyday price, whether you subscribe for a single month or for years…All Subscribe & Save orders come with a discount over the everyday price of the item. The discount percentage is guaranteed, no matter how long you continue your subscription-- whether you end your subscription after just a single shipment or keep it going for years. If we increase the Subscribe & Save discount we offer on the item, we'll automatically apply the better discount to your active subscription.”

• “Pay as You Go…You'll be charged for each order only when the item is shipped. The amount charged each time will reflect the price of the item on the day the order is processed less the Subscribe & Save discount, plus any applicable sales tax.”

• Free shipping.

• “E-mail reminders of upcoming shipments…Before we send the next order, we'll send you an e-mail letting you know that the process has begun, giving you time to make updates to your subscription as necessary.”

• “The flexibility to change your schedule or cancel at any time… There are no commitments."
KC's View:
This is an extremely smart approach for Amazon to take…mostly because it can establish a level of loyalty that is only partly dependent on price. For most people, the real bonus will be knowing that the tissues/toilet paper/razor blades/cookies/detergent/whatever will show up right on schedule, without one having to think about going to the store.

We’re out of the baby business, but one of the first things we noticed was the automatic replenishment of diapers for new parents – it doesn’t get any better than that.

It seems to us that if this catches on, it is a game changer for the food retailing business. We have been arguing for years – here and elsewhere – that supermarkets ought to be figuring out a) who their best customers are and b) figuring out how to do regular and automatic replenishment of often-used products. Free shipping is a cost of doing business…and it is cheaper than losing the customer to a competitor.

And just think about how young people will view such a program, especially because many of them don’t remember a world before Amazon and don’t have any particular allegiance to the traditional supermarket experience.

This is a smart, serious move by Amazon, a company that consistently impresses us by – to use the overworked phrase coined by Wayne Gretzky – skating to where the puck is going, not to where the puck has been.