Off Brand

We Have Officially Hit Peak Subscription

If Panera thinks it can sell $8.99 subscriptions, who can’t?

Illustration: Fran Caballero

WWould you subscribe to a coffee? No, not a monthly box of fancy ground coffee in the mail — although obviously that’s a thing. What about an everyday cup of coffee from a mass-casual chain. Like Panera. Because now that’s a thing, too.

If you “subscribe” to MyPanera+ Coffee, for $8.99 a month, you get unlimited coffee (or tea) at the pervasive sandwich chain. Panera CEO Niren Chaudhary told Business Insider that this subscription experiment may be just the beginning. “We have started the journey off with coffee, but we are going to be watching very carefully what kinds of food attachments are happening,” he said. (By “food attachments” he evidently means: What edible items are customers buying with their coffee?)

Lately, it seems that everyone has jumped on the subscription-based business bandwagon. Software publishers like Adobe and Microsoft have successfully moved from selling users a product to in effect requiring them to subscribe to a service. Trendy e-commerce subscription businesses delivering monthly boxes of pet toys or meal kits or wine have grown to become an estimated $10 billion category. Plus, you can subscribe to a regularly updated heap of movies and shows from Netflix, music from Spotify, exercise programs from Peloton, clothing from Rent the Runway, or news and information from many digital descendants of periodical publications that essentially invented the idea of “pay me on a recurring basis for an ever-changing and refreshed version of the same thing.”

Maybe you’d rather have a coffee subscription from Starbucks, or subscribe to salads at Sweetgreen, or get a burrito subscription from Chipotle.

“Consumers continue to exhibit a willingness to set up fixed payments for everything from data plans and streaming content to fashion and food,” says David Portalatin, a vice president and food industry adviser at research firm NPD Group. And lately the experimentation with this model seems to have gotten simultaneously more adventurous, more mainstream — and, in this case of Panera coffee, perhaps more bizarre. If we haven’t reached it already, we may be approaching Peak Subscription.

It’s easy, really, to imagine other established retail brands and food chains zeroing in that consumer willingness to play along with fixed payment schemes, and inundating us with subscription offers. Maybe you’d rather have a coffee subscription from Starbucks, or subscribe to salads at Sweetgreen, or get a burrito subscription from Chipotle. Plenty of startups will let you subscribe to clothing; perhaps struggling brick-and-mortar rivals like the Gap or Macy’s will follow their lead. You might even be able to subscribe to, say, a certain brand of car.

Actually, that last one is in the works: Nissan is testing a service called Nissan Switch that comes close: For a recurring fee ranging from about $700 to $900 a month, you use a variety of its vehicles. “Just like your favorite shows, movies, and music,” the car-maker promises, “you can access your favorite Nissan models, right from your smartphone.” Drive a Pathfinder this weekend, swap it out for a Leaf Plus during the work week, then next time you have a date to impress you can substitute that for a GT-R.

Is this what consumers want? The Boston Globe wondered whether Panera’s new service added up to “a Netflix for coffee,” but that doesn’t seem quite right, given that Netflix offers thousands of movies, shows, and specials, and Panera offers… coffee or tea. Really what Panera is up to is more of a loss-leader scheme — an attractive deal meant to use its “coffee platform,” as Chaudhary (unfortunately) put it, to lure in customers who will buy other, profitable food items. And it seems to be working, at least in early experiments. The chain says that in testing the concept at 150 of its more than 2,000 locations, it found that 90% of subscribers renewed, and enough of them bought food to make the scheme worthwhile.

Really what Panera is up to is more of a loss-leader scheme.

And maybe that will prove out. What’s so intriguing — and perhaps tempting — about the subscription model is precisely the fact that it appears so flexible, a setup that can be tweaked for any category. But in practice, for a subscription model to work, there has to be a balance between offering genuine value to consumers — yet not so much value that it crushes the business.

To cite a notorious example, MoviePass offered customers subscription-style bundles of multiple cinema tickets for about $10 a month. The details kept changing, because the concept was totally unsustainable, with a model that positioned theater admission as a loss leader for an ill-defined plan to capture and sell consumer data from moviegoers. Ultimately, the company liquidated.

Panera, then, would be less thrilled with a coffee subscriber who actually dropped by to take advantage of the “coffee platform” twice a day and didn’t buy anything else. In fact, enough of those customers would force the chain to cancel its subscription dreams.

And in another sign that we may already have all the subscriptions we need, some consumers are feeling saturated even in the categories where we’re used to a monthly fee. Last year, Vice reported on a study that found 70% of streaming customers say “there’s now too many streaming options,” and 87% worry it will “become too expensive to keep up with all of them.” That’s an issue that’s widely seen as coming to a head in 2020, as the so-called streaming wars play out and even more options try to crowd their way onto your credit card.

The X-in-a-box trend in particular can often seem more like a novelty than a genuinely useful service.

Finally, the most common stumbling block for subscription-based businesses lately is on the genuine value side; the X-in-a-box trend in particular can often seem more like a novelty than a genuinely useful service. Thus even former stars of the category — Blue Apron is a notable example — have struggled over time. Lately such businesses are more focused on retaining loyal subscribers, as opposed to attracting ever more fickle ones who are attracted to special offers but unlikely to stick around.

“The question is, are we making things faster, more convenient, less expensive for the consumer?” says NPD Group’s Portalatin, referring to subscription businesses more generally. “If not, the subscription element itself may not hold much value.”

This brings up a distinction between businesses totally built around the subscription model (like the box services, or entertainment streamers) and those merely dabbling in it, like Panera — or Nissan, for that matter. Those more curious experiments don’t seem immediately convincing, but if they don’t work out it’s not an existential threat. They may attract a few customers and, either way, function like marketing stunts that associate a traditional brand with a popular trend.

For true subscription businesses, the stakes are different. Consider the case of meal kits, for instance: NPD found that slightly more than half of meal kit consumers say they’d really rather just buy the kits as needed from their local grocer. “The value that solves a problem for the consumer is the content of the box,” Portalatin says. “For many, the subscription just gets in the way.”

Author The Art of Noticing. Related newsletter at https://robwalker.substack.com

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