Photo: HelloFresh
More consumers are developing the subscription box habit. Retailers should too.
Subscription box service sales have soared since the start of the pandemic, driven by consumers’ desire for convenience, value and variety.
EMarketer.com estimates that the subscription box segment grew 41 percent between 2019 and 2020, followed by a 19 percent gain in 2021. Sales are forecast to grow 18 percent this year to $32.65 billion before jumping another 17 percent to $38.2 billion in 2023.
Subscription box services appear here to stay. Here are some ways that brands and retailers can get customers to return time and again.
Product
Consumers want unique, quality products. Selecting and curating merchandise that appeals to targeted consumers and supports brand position is essential for retention. Provide relevant recommendations, options, choices, new beyond-the-box items or Mystery Gifts (with QR code to give feedback). Leverage technology to understand product performance, issues and opportunities to upgrade assortment or offer new adjacent lines.
The best box providers provide:
- Relevant and exciting merchandise;
- The right number of options – not too few or too many;
- Flexibility to browse, choose, swap and skip;
- Feedback from others, such as “Hall of Fame” and “Most Popular” items;
- A selection of limited-time offers, seasonal specials and partnerships.
Service
Complete the actual sales transaction efficiently. Focus relentlessly on pre- and post-purchase engagement to set the service apart, grow loyalty, retention and referrals. Identify key touch points and send an optimal number of communiques at various times during the subscription period. Utilize data and advanced analysis to understand consumer sentiment and opinions to predict preferences. Manage the number and tone of reminders. Ensure communications are on-brand, informative and useful. Provide many opportunities to engage, rate and give feedback through surveys, quizzes and QR codes at each step in the process.
While the pandemic boosted subscribers, 34 percent of Millennials say they are likely to continue purchasing subscriptions. Subscribers (including me, a confirmed foodie and new HelloFresh meal kit subscriber) feel more connected to direct subscription services than one-off e-commerce purchases. Boxes are here to stay, and brands need to take notice.
Discussion Questions
DISCUSSION QUESTIONS: What do you see as the keys to operating a successful subscription box service? Do subscription box services offer an incremental sales and loyalty-building opportunity for retailers?
Poll
Loading …BrainTrust
Gary Sankary
Retail Industry Strategy, Esri
Verlin Youd
SVP Americas, Ariadne
A successful subscription box service will depend on knowing a great deal about a customer’s tastes and prior history. The program will offer flexible frequency of shipments, flexible box sizes and an assortment of unique and staple products, with a “surprise” item in the package every cycle.
The prize – cheesecake this week – drives a surprising amount of joy!
You definitely captured the essence of subscription box services in this description: “Selecting and curating merchandise that appeals to targeted consumers and supports brand position is essential for retention.”
The keys to operating a successful service include: 1.) Thoughtful curation (make it relevant to your subscribers); 2) Personalization (no two consumers are identical, so customize the assortment where possible … with built-in flexibility to eliminate or add items); 3.) Responsiveness (from timely and consistency delivery to feedback and conversation); and 4.) Value (consumers will pay some extra for convenience and uniqueness, but they will not accept being gouged).
I agree that subscription box services will be part of our future and those that do it well will stand out in the crowd.
There was a boom during the pandemic. However I am not at all sure that it is being sustained at the same level. There is an article on CNBC this morning by Lauren Thomas which details why the subscription box boom (especially in apparel) is fading. I do not think subscription boxes will disappear, but I think the forecasts are too optimistic and are based on an assumption that the trends of the pandemic and the 2021 consumer boom will continue.
I agree with this. I think the pandemic did a lot for subscription services but now that people are going out to eat, or shop for clothing, the boom will begin to diminish.
Yes, I agree that some apparel subscription services have lost their way (and subscribers) with the new WFH and casual dress rules. I never thought I’d become an advocate for meal-service – I’m a foodie and Covid-cooking wore me down – but HelloFresh not just solves a problem, it energizes me.
I expect that food solutions, like HelloFresh, will continue to evolve to provide more auto-replenishment and same-day delivery services, giving grocers and restaurants another type of competition.
Subscriptions for sure build loyalty for retailers. If the subscription is done right, and consumers like what they get and feel like the value is there from a price and assortment perspective, they’re going to stick with it.
I currently do not have any subscription box services, although I do have my eye on Bespoke. I also tend to give subscription services as gifts. I like the thought of monthly anticipation, especially when the product is fresh and not a monthly more of the same.
And that’s the key: keep what’s in the boxes fresh and exciting. The items on the list in the article are almost mandatory, it’s the unexpected that makes a subscription box enticing, and it’s what keeps subscribers coming back for more.
Seems like any pandemic fueled trend deserves to be viewed with a cautionary eye right now. Just ask Peloton. And it’s ironic to see this article on the same morning I’m reading about “box fatigue” all over Twitter. Yes, a recurring revenue model is attractive, but to all the points mentioned in the article, populating that box with enough of the right stuff every time is a really difficult assignment. Just ask Stitch Fix.
Is this from 2020? Everything I’m reading says that subscriptions are way down, particularly in apparel but also in food kits.
I have not seen anything reported that the cost of customer acquisition is less than the subscription payout.
The subscription model has gained in popularity. Consumers are used to it, and they like it. The key is making sure the customer is taking advantage of the subscription. Otherwise, renewals suffer. Once a customer subscribes, they typically try and use the product, which helps create repeat business that thwarts competition. That’s why, for example, Amazon wants people to be Prime members, not just customers.
Despite this report from CNBC, I remain convinced that if properly done, subscription boxed solutions will continue to survive and thrive post-pandemic.
I’m with you, Dave. Done well in the right categories, boxes will continue to thrive.
To answer the second question – yes and I don’t understand why more retailers aren’t diving into this market now. As for the first question, the keys to operating a successful subscription box service are not so different from the right store experience – right product (fresh and interesting), right place (on-time and convenient delivery/pick-up), at the right price (value and competitive) – with the addition of being very responsive to customer feedback to adjust the offers over time, leveraging crowd/social reviews and interaction, and constantly updating the offer to keep it fresh, relevant, and interesting enough to continue. It’s not an easy gig, but well worth it if done right in terms of customer loyalty and sales growth. So, why aren’t retailers acquiring subscription box providers now?
Hi Verlin! I look at boxes, especially in food / home categories as an extension of replenishment and in some cases same-day delivery. Retailers would be well-served to develop this type of service.
For the food and grocery side of things, I’m not convinced we’ll see the food box subscription yield substantial growth. It requires a significant commitment and financial investment.
However, I do see signs of increased customer engagement with quality grocers promoting their differentiated products, get customers to taste, try them. App/tech platforms are helping build engagement, whether in subscription form or not.
Another bright spot is replenishment of commonly bought products. For example, Replenium (led by former Amazonians), is helping grocery stores fulfill typical household products to save customers time and hassle. Good upside here.
There are benefits of subscription boxes that are not called out enough. For example, in efforts to be sustainable, a fruit and vegetable box could be focused on the current “in-season” products sourced from the shortest distance/with the lowest planet impact. We have all got used to having whatever fruit and vegetables we like at any time of the year — with little thought for where it comes from or how it is grown.
Consumers may need a little help though with recipe ideas on how to best use vegetables they are less used to!