The marketplace, which is said to have been in development for the past year, was born out of Amazon’s homegrown subscription initiatives. “Over the years, Amazon has gained extensive experience in the memberships and subscriptions space, innovating across programs like Prime and Kindle Unlimited,” Lovina McMurchy, the GM of Subscribe with Amazon, explained in a press release.
Vendors interested in selling through Subscribe with Amazon have access to self-service tools that allow them to create detail pages for their offerings. An API allows vendors to receive order data and updates from Amazon so that they can automate the management of subscriptions. As one would expect, Amazon is giving vendors the ability to sell subscriptions with different terms, such as monthly and annual, and also allows them to offer introductory pricing to new subscribers.
Initial Subscribe with Amazon partners include Disney Story Central, The Wall Street Journal and Dropbox. Currently, Subscribe with Amazon is accepting applications from vendors that sell digital content, but it would not be surprising to see Amazon later extend it to subscription services that offer physical products.
Distribution, but at what cost?
Subscribe with Amazon’s primary value proposition is that it offers subscription vendors a marketplace through which they can sell to Amazon’s massive customer base. To help them sell, Amazon is even offering vendors the ability to create special promotions for Prime members, which are now estimated to number more than 65m.
For example, one Subscribe with Amazon launch partner, Texture, offers a 50% discount to Prime members for the first six months of a subscription to its digital magazine service.
In addition to helping vendors market their wares, Subscribe with Amazon could, like Pay with Amazon, reduce purchase friction because it enables Amazon customers to purchase and manage subscriptions through their existing Amazon accounts, speeding the purchase process and reducing concerns about trust. Such concerns are often more pronounced in subscription purchases because charges are recurring.
But despite the appealing aspects of Subscribe with Amazon, vendors will probably want to think carefully before they embrace Amazon’s new offering.
First, there’s the issue of margin. Amazon takes a 30% cut of subscription revenue in the first year. That drops to 15% after the first year. While giving up 30% and then 15% might make sense for some vendors – it’s in line with what other distribution channels charge – it might not make sense for others and vendors will want to do the math to determine the potential impact on the profitability of their business, especially if they consider that some Subscribe with Amazon subscriptions may displace some portion of subscriptions that would otherwise be sold direct.
Second, there’s the issue of data and customer ownership. While Amazon is giving vendors access to order data through an API, Subscribe with Amazon will obviously give the online retail giant the ability to collect significant data about its vendors. And it will own the relationships with customers who purchase using Subscribe with Amazon.
Data and customer ownership is a thorny issue for vendors. After all, Amazon increasingly competes with companies that sell in its marketplaces. For example, it has launched its own private brands in categories ranging from apparel to electronics accessories. Some companies believe that Amazon has used its vast trove of sales data to identify products that its private labels should sell.
Given that Amazon already operates a number of digital subscription services of its own, the company’s actions in other markets make it clear subscription vendors will have no choice but to consider that Subscribe with Amazon could eventually help the retail giant at their expense.