Subscription services are moving beyond just being surprise boxes

Photo: Loot Crate
Dec 05, 2017

Klaudia Tirico

Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.

As more subscription box services saturate the market, several companies are moving beyond curating based on a quick personality quiz in efforts to remain relevant and top-of-mind.

Loot Crate, for instance, believes that editorial content is key. Aside from its line of 27 unique subscription box offerings ranging from themes such as Harry Potter, Marvel and Stranger Things, the company offers its community an editorial outlet called The Daily Crate, including fan films and thematic videos, promotions with WWE superstars, editorial content and event coverage. Loot Crate’s community also plays a significant role in developing new products and box themes.

“You have to realize that it’s a relationship; it’s not a transaction,” Erik Reynolds, VP of product marketing and communications for Loot Crate, told Retail TouchPoints. “That relationship — for us — needs to be a celebration of the things we love, of our fandom.”

Evolving from simply being a surprise box of a pre-fixed menu of products, some are embracing a “recurring” model that enables consumers to receive their favorite brand of, say, cosmetics (Glossier), vitamins (Care/of) and feminine hygiene products (Lola).

Said Kirk Anderson, EVP of North American Sales of Snapfulfil Cloud WMS, which provides back-end support for subscription box services, “That takes the ownership of him or her having to go to Amazon or a retail store to make the buying decision.”

Subscription services such as Stitch Fix or Trunk Club are taking further advantage of the treasure trove of customer data they’ve accumulated over the years to help create new products and target specific subscribers with the help of AI.

“They can create their own set of products and own the product lifecycle based on all the data they have about the customer — what they selected to buy, what they didn’t like, how much they paid for certain items,” said Tracie Kambies, principal at Deloitte Digital. “Then, they could watch what trends are happening more holistically and actually build their own products.”

DISCUSSION QUESTIONS: How should subscription box services position themselves to best engender loyalty? Do you see content/community, recurring deliveries or data-crunching as the best way for subscription box services to prosper?

Please practice The RetailWire Golden Rule when submitting your comments.
"Just as establishment brick-and-mortar retailers have moved beyond the box, so too must subscription-based box services. "
"I think the most fascinating thing about subscription box services is the potential for reverse disruption."
"For brands that are going after the Millennial consumer, it hits on all cylinders of what they are looking for..."

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26 Comments on "Subscription services are moving beyond just being surprise boxes"

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Mark Ryski

While there is a place in the retailing universe for subscription box services, it seems like the market is becoming inundated with them. Content, community and data-crunching will all play a role for any subscription box service hoping to effectively compete. Maintaining loyalty will be the critical differentiator of the services that have truly achieved a durable and sustainable relationship with their customers and the litany of “me too” services offering their goods.

Max Goldberg

Subscription services must make a constant effort to remain relevant to each subscriber. This means providing products that a customer wants and, for clothing delivery services, providing stylish products that fit. Gathering data is important, but should be secondary to the quality and relevancy of the products.

Sterling Hawkins

Erik Reynolds nailed this with his stand that it’s a relationship; it’s not a transaction. Really maintaining that includes staying relevant and keeping a consistent quality that fulfills on that relationship.

Charles Dimov

Data-crunching and supporting with content/community engagement is the ONLY way to make retail subscription services work well. Naturally, data-crunching is all about testing out similarities and stats between customers and groups. Running the stats well and bringing in adaptive algorithms to send customers what others who shared their preferences liked means greater customer satisfaction and lower returns. Equally important is the psychological factor. Don’t forget that adding a little note telling the subscriber that 60 percent of other customers like them found this product matched their wardrobe well gives them a social signal that can increase sales (items kept).

Subscriptions can be a great way to build and intensify customer loyalty.

Brandon Rael

I couldn’t agree more Charles. Subscription services for retailers could be an outstanding consistent revenue source however, if the experiences are not unique, personalized or curated, the consumer will quickly lose interest.

It’s all about the relationship between the retailers and the consumer. Knowing your customer and making the experience personalized can only be achieved via advanced analytics, insights and a business-wide passion for customer experience.

Bob Amster

Retailers may want to consider allowing the customer to dictate the frequency with which these boxes are delivered and avoid saturating the customer with too much of a good thing. Content may be important to many but not to those who really are shoppers and are waiting for the next box to arrive. Personally, I am interested only in auto-replenishment subscriptions (of essentials and consumables). I don’t need content or choices to keep and return. Are there many like me?

Dave Wendland

Just as establishment brick-and-mortar retailers have moved beyond the box, so too must subscription-based box services. If the only differentiating factor becomes price, then the model will become victim of commoditization and consumers will suffer from boredom. On the other hand, if the box services engage shoppers and deliver a one-of-a-kind experience with each shipment, the model will soar.

I personally don’t believe it is an either/or. The winning recipe will include a solid portion of data management and personalization combined with a true sense of community. As American Express coined, “Membership MUST have its privileges.”

Adrian Weidmann

Subscription box service brands have the opportunity to develop exceptionally accurate profiles on their existing clients. As such, they can develop and/or source unique products and services that align with their customers’ buying history. Accessing and using artificial intelligence services such as Watson could provide invaluable insights to recommendations and predictive interests. These services need to continually invest in keeping their clients. Statistics have shown that acquiring a new customer is five times more costly than retaining an existing one. With this in mind, subscription brands need to continually innovate, invest and delight their existing customers.

Chris Petersen, PhD.

The success of subscription boxes is personalized service. To be able to do that requires state-of-the-art CRM and data mining to make relevant selections that customers will not return. But at the end of the day subscription boxes are curated, personal assortments of products that the customer deems valuable. Subscription boxes must provide quality, novelty/uniqueness and/or save the consumer time in some way. If not, customers will find almost every item in their subscription box just a click away, delivered to their door in a box with a big curved arrow.

Stuart Jackson

I think the most fascinating thing about subscription box services is the potential for reverse disruption. Most are currently online, niche-market companies. But this is an area ripe for disruption by the big High Street retailers — especially the department stores.

Big chains already hold a great deal of hard data about loyal customers, their buying habits and preferences. It would make sense for many to use this data to tailor a subscription service, exploit the desire for personalised experiences and jump into the subscription box market. I think this could be coming soon — watch this space.

Art Suriano

Each day there is another subscription company asking for business. Whether it be a retailer or streaming service offering the subscription, the secret to success is to make what you are providing be all about the customer. Be creative and make sure you personalize your service in a way that it quickly becomes a must-have. I like many of the features talked about in the article. We all have different likes and dislikes, so variety is significant along with convenience. A subscription must bring satisfaction when it’s something the customer needs to use. And it must deliver pleasure if it’s something the customer wishes to enjoy. When you do that, you have a great chance of being successful until the next best thing comes along. Of course in today’s world of never-ending competition that might just be tomorrow so always try to stay one step ahead and keep the customer happy by giving them what they want.

Ian Percy

Like most everything else the “subscription model” will implode of its own weight. Mark has it right, the “me too” lemming mindset will do it in.

In the multi-level marketing world this is cleverly called “auto-ship” and it is the bane of that industry’s customers. You end up with bottles of supplements, skin lotions, etc. that you couldn’t use in a lifetime. Oh sure, in some situations the customer can adjust the plan to their needs but that’s part of the ploy too with companies betting customers won’t bother to do that until they reach hoarding status.

Kim Garretson
2 years 6 months ago

Based on the mention here of rich customer data, I wonder if any box service has tried asking its customers to share their Amazon purchasing history in return for personalizing their boxes with the promise to outdo the Prime experience. That could lead to interesting results.

Chuck Palmer

This category seems to be reaching a plateau. I expect to see consolidation, re-positioning and some retailers simply going away. I think this may be a good example of data mis-use.

When data is created, rather than crunched or mined, a company can gain more bankable insight. I can see those companies that are aggressively engaging individual consumers backed up by focused data-driven experience and merchandising strategy as the big winners in the next phase.

Joy Chen

The subscription box is a key marketing tool for many brands. For brands that are going after the Millennial consumer, it hits on all cylinders of what they are looking for: customization, newness and convenience. Subscription boxes that can continue to hit on these three areas above by using their data to refine will continue to perform well.

There is also a level of community when you are part of a subscription box service. One example is Ipsy, the beauty subscription box. The consumers that join that subscription are beauty enthusiasts who want to be the first to know about new products. The positioning of Ipsy as a beauty influencer extends to their consumers.

Peter Luff

It’s an interesting model. Initially you get the box, you look in it and you think wow — but then you realize from that initial survey they have not quite got you right and you have the returns process to manage; what a drag.

For the providers to prosper, they really have to get the upfront analysis much tighter to target the subscription box. They then need to evolve the knowledge of the consumer tuning it very tightly. Just like traditional retail there is a strong element of number crunching that needs to be completed to get this right but, unlike brick-and-mortar, the subscription box does not have overlap with other offerings. Data crunching has to be on the money!

Nikki Baird
Nikki Baird
VP of Retail Innovation, Aptos
2 years 6 months ago
I very much agree with the idea that this is a relationship. I’ve tried quite a few different subscriptions and I like the idea of being delighted, or of having one less thing to worry about (like needing to buy more dog food). But as soon as it becomes more hassle than delight, then the value of the subscription gets questioned. That’s what happened with my family and Lootcrate. The quality of the t-shirts went downhill and while some people may value some of the online freebies, my family really didn’t. it pretty much comes down to three strikes and you’re out. Three boxes in a row that don’t deliver, and the subscription gets cancelled. So, data crunching is crucial, and so is community — not just for the stickiness of being part of something fun, but also to sense if you’re hitting or missing on a box. As soon as that happens, the company needs to be on notice that they have a customer at risk of canceling. It’s not an easy business. But… Read more »
Cristian Grossmann

While many subscription box companies experienced diminished retention rates as the market began to saturate, SaaS and streaming subscriptions offering monthly recurring services and entertainment continue to thrive among customers because streaming and software services have the power to become intensely ingrained into the user’s routine. Instead of novelty t-shirts or sample sizes of skincare items that would be otherwise cost prohibitive for the customer, entrepreneurs hoping to pursue the box subscription model should consider selling direct-to-consumer items that are more likely to become a mission-critical aspect of the customer’s day. If a subscription box company can make the process of buying razors or household cleaning items an elevated experience, replete with visually compelling branding and perhaps even a social mission tied to the purchase, customers are more likely to stick with the service both out of convenience and desire to identify with a forward-thinking brand.

Ralph Jacobson

At the risk of many subscription services being not much more than “me too” enterprises, all of these services must provide compelling reasons for the consumers to keep “piling up” on this stuff each month, without growing tired of the incoming products. One way to avoid this challenge is to ensure that your systems are capable of true machine learning to build a growing understanding of each subscriber and be able to adapt in real time to changing demands.

Todd Trombley

The relationship with your customer remains key in this segment — shouldn’t it always be thus in retail? Subscription is all about the feeling of relevancy felt by the customer towards the subscription service provider. How that relevancy is derived will vary by consumer; any of the above three stated in the question are sources of relevancy. Key for the provider is to make their particular value proposition prominent to their particular consumer segment and then keep that proposition front and center with their consumer. Any one of the value propositions stated in the discussion question can be made to work. The mistake would be in trying to be all of these.

Jeff Miller

Subscription-based businesses whether standalone like LootCrate, Birchbox or Stitch Fix or part of an omnichannel approach like those from Under Armour, Gap and Sehpora are not that different from all retail now, which means of course they need to build community and use data to help acquire and retain customers.

The quote from Erik Reynold is spot on that “You have to realize that it’s a relationship, it’s not a transaction.” Relationships take real effort and in a subscription box that effort needs to shine and be better than a brown box of stuff coming from Amazon. Sehpora with their PLAY by Sephora box does this so well. The box may be a marketing tool or maybe a break even standalone business when looking at a P&L but they drive community and engagement in store and online by treating the subscribers as real members who belong to something special. Yes they get products and they provide value, but the long term is a real community.

Cate Trotter
The sweet spot for subscription boxes is a mix of surprise and familiarity. Getting a curated box of goodies each month where you have no control over the content is fun for the first few, but if you find no value in the contents then the novelty quickly wears off. Likewise, getting a box where you know exactly what is inside is nice (especially if it’s things you love), but has the danger of becoming mundane month after month. Being able to pick, or have some control, over the majority of the contents could mean that customers get their regularly used products when they need them (without requiring them to go to a store). At the same time the company should be using what it knows about the customer, data crunching and/or AI, to include additional products that they think the individual customer will like. At the end of the day it’s about thinking of each subscriber as an individual and making each box match that, rather than blanket mailing out of the same products.… Read more »
Cynthia Holcomb

Loyalty is earned by getting/giving each customer exactly what he/she wants. For example apparel. Shopping for apparel is a sensory experience of each individual shopper seeking apparel products to match his/her individual sensory preferences of fit, look and feel. Just as in the physical world, subscription box retailers must sensory-preference match individual products to individual customers. Period. A seamless experience resulting in each and every individual customer opening a box of “magic.” “My retailer really gets me.”

Individual human preference data abounds in retailer data silos. Unfortunately, the “noise” of AI and ML applications in the media render customer preference intelligence lost in plain sight, waiting to be excavated … pure, individual customer sensory-preference intelligence. I wonder what retailer[s] will be first adopters in utilizing Preference Shopping Science to give each individual customer exactly what he/she wants?

Shep Hyken

I have always loved the subscription model as a way to run a business. I also think, as a consumer, it’s easy, convenient and dependable. Those are three good reasons to want to subscribe, but when you add in the concept of relationship (as Erik Reynolds points out in the article above) or connection to a community, you take the subscription model to another level.

Ricardo Belmar

There are only so many product categories and so many merchandise options that consumers are going to repeatedly accept month to month on a subscription model that are not commodity products. To differentiate and remain relevant, these retailers will need to dive deep into their customer data to truly personalize the product mix or they will quickly drop into irrelevance for the consumer and loyalty will be at risk. Leveraging customer data in the curation process will introduce better variety where desired (enhancing the discovery process) and consistency for products that need replenishing — that will foster more customer loyalty for these subscription services.

Kevin Simonson

Three words: Test, test, test.

Our agency used this approach when working with L., a sub-com brand that sells ethical and organic personal products.

The key to their growth was experimenting with paid advertising targeting.

We noticed that the demographic they’d tested on was fairly wide and not hyper-focused to a particular audience — so we wanted to change that and structure work around future paid media efforts so we could learn more about the brand’s most valuable customers.

Every sub-com company should be thinking this way to create customer loyalty. You have to learn all about how different demographics would respond to different ads.

Do lots of early testing to learn about their different types of customers. Break them down by age range, customer interests, and more.

Ask questions like: Who stayed on the subscription longer? Who has a higher Lifetime Value and ultimately lower cost per acquisition?

With this data, subscription companies can deconstruct and then rebuild their paid media approach to make it more effective and garner greater loyalty over time.

"Just as establishment brick-and-mortar retailers have moved beyond the box, so too must subscription-based box services. "
"I think the most fascinating thing about subscription box services is the potential for reverse disruption."
"For brands that are going after the Millennial consumer, it hits on all cylinders of what they are looking for..."

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