Federal Ammunition Subscription - An Analysis
Federal Ammunition recently came out with an ammunition subscription service.
While I believe the execution of the subscription service could be better (we’ll get to that in a minute) the fact that a major player in the industry has recognized the benefits of offering a subscription service is a great thing in my opinion. I guess better late than never Federal.
Let’s jump into the particulars of “Federal Connection” what Federal calls its ammunition subscription service:
- You can sign up for 3 calibers initially: 9mm ($0.55/rnd), 40 S&W ($0.61/rnd) and 45 ACP ($0.68/rnd)
- You get 250 rounds delivered to your door each month.
- You are limited to one subscription per caliber per household.
- Shipping is included in the price.
- You are committing to a year term.
- If you cancel early you are subject to a $300 cancellation fee.
This is a true ammunition subscription service Federal is offering. That means you pay a set amount of money and you get a set amount of product (in this case, ammo) each month. It is not a whole lot different from a coffee subscription or “Amazon’s Subscribe and Save” service - except there is no discount for subscribing.
This approach has pros and cons to it:
- You get a set amount of ammo every month, since it is Federal you should be reasonably sure that it will arrive on time.
- You can budget that set amount so you know that $140 per month is going toward your 9mm every month, for example.
- You know what exact product you are going to receive - 115gr 9mm American Eagle for example. (Well sort of - they do say they have the right to substitute 124gr instead.)
- You don’t need to shop around or lift a finger after setting it up, the ammo should just appear on your doorstep every month like clockwork.
The Pros sound pretty good for people with limited time and extra money to spare, but there are some issues with this set up, so let’s look at the CONS:
Price: There is no way around it, the price is very high for this ammo. You can go online right now and buy this exact same ammo for $0.36 per round with free shipping. (And yes it is in stock!) versus Federal’s price of $0.55 per round for this 9mm.
If you aren’t as concerned about the brand then you can find cheaper options for practice grade 9mm, 40 or 45 ACP. Based on today’s market prices it looks like you would be paying between a 35-60% premium per round for the convenience of Federal’s subscription option.
Cancellation Fee: You are locked in for a year and have to pay a cancellation fee to stop receiving the ammunition. While I can understand the business perspective on why they do this, so they can better plan their ammunition runs, it is only valid if this were coming from a really small company. The subscription side is a drop in the bucket compared to the pallets that Federal is shipping to big box stores and online retailers. Anything not purchased from subscribers that cancel can easily be sent down other channels.
Market Price Changes: You are locked in on price (it appears) so that means if the ammo market trends down even further as factories ramp up production, you are stuck paying for overpriced ammo instead of it adjusting to the market rate. With the above cancellation fee, you might want to eat the $300 to get out of the deal if you can save by buying cheaper ammo elsewhere.
On the other hand, if there is another ammo shortage then Federal is taking the risk here that they can deliver the appropriate amount of ammo for that set price - which is why they want the subscribers “locked in”. Given that they are the manufacturer of the ammo and all of the components, they shouldn’t have any problem meeting the price or demand in a shortage situation.
Lack of Options: They came out with just three calibers but manufacture hundreds. The jury is still out as to whether they will be adding more calibers to the mix. Either way, three calibers all in FMJ is pretty limited. Maybe they will add self defense rounds in the future and give customers the option to do a monthly shipment of practice and self defense rounds. Or how about some 223 / 556?
Now that we’ve been through the pros and cons, let’s summarize:
OVERALL CONCLUSIONS AND SUGGESTIONS FOR FEDERAL:
Well, unfortunately this program appears to be stacked too much in Federal’s favor and not enough in the consumer’s favor. Which is why most forum comments on Federal’s subscription service are generally negative. The market is the final decision maker and while there might be a handful of takers, this program could be so much better.
So as much as it pains me to give away free advice to a competitor, here are some suggestions from an ammo subscription veteran about how Federal can improve its program:
First remove the cancellation fee. We know you don’t really need to charge it to cover your costs if someone cancels. We’ve operated our ammo subscription service for over SIX YEARS now without a cancellation fee and it hasn’t hindered our growth in the least bit.
Second let the price of the ammo change with the market - that means down when the market trends down and up when the market trends up. This makes things more fair for both the consumer and the company. The market rate is the market rate and trying to lock people into a price is only going to create upset subscribers as the price trends downward (which it currently is).
Third if you aren’t going to do either of the first or second suggestions, at least give your subscribers a discount on price. If someone is going to be locked in for a year they would like a discount to what is offered on your website. This would be an Amazon “Subscribe and Save” approach.
Lastly, offer more variety! Hopefully this is on somebody’s radar at Federal and they are just waiting to see how this initial rollout works, but three calibers??? Really? At AmmoSquared, we offer over 200 calibers and 500 variations (self defense, practice, match, etc). So with the multi brand powerhouses of Federal, Speer, CCI and now Remington available at your fingertips (these are all under Vista Corp’s umbrella), Federal Connection could offer dozens of popular and hundreds of obscure calibers in the subscription program.
Again, the fact that Federal saw the market opportunity to start a subscription program for ammunition is a good thing for our industry. While in my opinion, their first attempt was less than stellar without enough benefit to the consumer, let’s hope they take the market feedback and retool it into something better and more customer friendly in the future.
I joked earlier about giving secrets to my competition, but in all honesty, everyone wins (even us) if ammo subscription services become more popular and a “default option” for gun owners. If there is a lot of variety from different companies then customers can choose between options that fit their needs best. When that happens, everyone wins.