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The Allure of Subscription Boxes

Subscription boxes are quite popular if the statistics are anything to go by: The subscription e-commerce market has grown by more than 100% over the past five years and 15% of online shoppers have subscribed to an e-commerce service over the past year.

Let’s discuss the advantages for online retailers, and what it takes to succeed when using this sales model.

Who is the average subscription box subscriber?

According to recent research, e-commerce subscribers are generally younger urbanites with money to spend. They are more likely to be 25 to 44 years old, and have incomes ranging between $50,000 and $100,000. These subscriptions have particular appeal for women, who account for 60%. On the other hand, male shoppers (42%) are more likely than women (28%) to have three or more active subscriptions.

What type of subscriptions are out there?

The most basic type of subscription box is the kind that replenishes the same basic items, such as diapers or vitamins. Curation is a more personal type of subscription, which offers surprise products that inspire unique enjoyment. According to McKinsey Analysis, this type of subscription is the most popular, accounting for 55% of all subscriptions. The third type is access subscriptions, which offer member-only perks and lower prices on items.

What are some of the pluses for e-commerce merchants?

  • Low initial investment

There is little overhead involved when you set up a website and take recurring payments. You can source products on credit so that you will not have to pay for stock in advance. If you arrange to share floor space with another company, you can set up a viable business at low cost.

  • Higher retention levels

Instead of having to go out there and continuously attempt to acquire new customers, subscriptions ensure ongoing buyers and regular income through recurring revenues. However, the retailer must continuously ensure a pleasurable subscription experience in order to prevent cancellations and to attract new customers.

  • Controlled inventory

Inventory constitutes a real problem for most online merchants. If you run out, you can not meet orders, but if you order too much you end up with costly wastage. The subscription box model enables you to predict the volume of orders and acquire the precise inventory you will require to meet your needs.

  • Generating brand awareness

The subscription model is a great way to get started and generate brand awareness. The more word gets around about your offerings, the greater the chance to subsequently expand into gifting or traditional retail.

A word of caution

With the growing access to same-day and next-day fulfillment services, the subscription model may face fierce competition in the coming years. It is possible that the subscription model may evolve from the principle of regular delivery to enabling the purchase of favorite products on-demand.

Leading subscription companies like Dollar Shave Club, Blue Apron meal kits and Stitch Fox maintain their popularity by providing unique end customer experiences. Consumers will only hold on to a subscription if it provides real benefits like lower costs or a strong personalized experience.  

 

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