With news that Amazon is sunsetting its Amazon Care healthcare initiative, Peloton’s pivot to a more open ecosystem for its app and content and upbeat outlooks for the battered buy now, pay later sector seeing light at the end of the tunnel (it’s not a train), it’s a mixed bag of topsy-turvy activity begging for a shot of clarity in what’s been a weird week.
That’s on top of the hunt for deals and more deals as consumers trade down from premium brands and preferred retailers look to stretch dollars rapidly losing their buying elasticity.
Subscriptions are one way that brands and merchants can lock in spending and loyalty at times like this, as Sticky.io President and CEO Brian Bogosian said, joining PYMNTS’ Karen Webster to discuss this and other news in the latest installment of “This Week in Payments.”
Farewell, Amazon Care
This week saw the surprise announcement that Amazon will shutter its Amazon Care division, founded in 2019 as an employee telehealth benefit that the eCommerce giant moved to expand nationwide. But with its $3.9 billion acquisition of One Medical, it seems Amazon is buying into a more scalable model. One Medical charges a $199 annual membership fee.
“As we take our learnings from Amazon Care, we will continue to invent, learn from our customers and industry partners, and hold ourselves to the highest standards as we further help reimagine the future of health care,” Amazon Health Services Senior Vice President Neil Lindsay said in a memo shared with The Wall Street Journal and other media outlets.
On this count, Bogosian sees the massive healthcare sector as (ahem) prime for subscriptions. He called Amazon’s One Medical move “a very clever way to provide people with coverage, and I think that it does play into not only the healthcare segment, but all the adjacencies around the products required to support people in the healthcare area that are also available on the same platform. They’ll be able to create interesting bundles.”
Peloton Pushes Open Ecosystem
Embattled Peloton is moving to right to the ship — or stationary bike, if you prefer — with CEO Barry McCarthy telling analysts on the company’s fourth-quarter earnings call Thursday (Aug. 25) that stratified pricing prioritizing subscriber growth over hardware sales is the new focus.
McCarthy acknowledged that around half of Peloton customers are using its fitness content on non-Peloton hardware. “I would be delighted for you to use our content on somebody else’s hardware that you’ve already purchased. That’s the big installed base and I think it’s a big opportunity for monetization for us and we’re going to lean into that segment,” he said.
Bogosian cut to the chase, saying, “hardware is a loser in the long run. Moving to an agnostic software position is going to be probably the right thing for them to do. It reminds me a lot of Blackberry. You had these devices and in the end it was the software, and the software on Android and then iOS obviously killed that business.”
He said to expand “I think it’s going to be very important that they build other bridges and alliances, and I don’t think Amazon is the answer or even close to being the answer for them. They’re going to need to find other significant distribution channels where their software and content can be leveraged in a meaningful way” and reposition the business model.
Not surprisingly, Bogosian said for Peloton, “It’s all about subscriptions. They need to build up that customer base, and a significant portion of those customers — the majority eventually — will be equipment agnostic.”
Food for Thought
As food prices rose throughout the first half, consumers got creative in where to find the best bargains. Surprisingly, some of those deals found restaurants beating out groceries.
Based on a survey of 2,669 U.S. consumers, the PYMNTS’ August report, Digital Economy Payments: Consumers Buy Into Food Bargains, found that consumers generally dined less at restaurants compared to the previous month, dropping from 72% to 70%.
But bridge millennials who made restaurant purchases increased from 72% in June to 74% in July, as the percentage of millennials rose from 71% to 72%, “responding to the fact that restaurant prices, especially limited menu or fast-food service prices, rose at a much slower rate than grocery prices, meaning restaurants may prove an affordable and convenient option.”
It’s all a reflection of the rough economic road ahead, Bogosian said. “The inflation rates are still bad and interest rates are still rising. I think we’re in for some rough sledding for the next year or two. Companies need to be prepared to continue to run their businesses profitably and to sustain [against] a longer-term headwind. I don’t see anything that’s going to avoid that.”
Get the Study: Digital Economy Payments: Consumers Buy Into Food Bargains
Despite getting clobbered premarket trading on Friday after reporting fiscal Q4 and full-year earnings on Thursday (Aug. 25), buy now, pay later giant Affirm nevertheless logged a 31% transaction increase versus 8% a year ago. and PYMNTS research finds that more than 46% of baby boomers and seniors and 71% of BNPL users with incomes over $100,000 increased their use of BNPL in the last year.
“I think we will see a little bit of a pullback in that, but it’s an important tool to be utilized by merchants to get people in,” Bogosian said, although he sees big changes down the road.
As for the prospects he said, “rapid growth in that sector will also cool for sure. Affirm did post good numbers so I’m hoping that they continue to do so here in the coming quarters,” but he sees BNPL becoming of “a feature within e-commerce platforms than it does a standalone product. You will see that it’s going be difficult for these independent buy now pay later companies to squeeze out a significant market share as those that control the checkout with merchants are going to offer their own flavor, their own version of the solution.”
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