Subscription addiction: the rise of subscription ecommerce
Raw ingredients and meal recipes delivered weekly to your door; a curated section of clothes posted out to you monthly; a selection of wine hand-picked and delivered so you never run out again.
In today’s competitive digital landscape, if you can think of a product or service, chances are there’s a subscription that caters for it.
Once, the word subscription in retail was synonymous with consumer magazines, Netflix, or Spotify and Apple music services. Pay a monthly fee, to receive a product or service.
Now, for online consumers, it means discounts, value for money, opening the door to new products and brands, being part of an exclusive ‘tribe’ and of course, convenience.
For brands, it means consumer data, engaging with customers, extra sales and long-term loyalty.
But how much convenience is too much? What types of subscription should your brand be considering? Here, Redbox takes a look at the rise of our subscription addiction.
TYPES OF SUBSCRIPTION MODELS
The subscription business model allows digital retailers to charge customers a recurring fee – often monthly or annually – for a service or product.
A study by McKinsey & Company split the ecommerce subscription industry into three categories: replenishment, access and curation.
Replenishment: provides customers with the chance to top up on a product automatically, so they don’t run out, saving them time and often money. Consumers pay a monthly fee to have a product delivered to their homes at regular times. Think wine, razors and snack boxes.
Access: gives consumers the opportunity to get special discounts or exclusivity. This doesn’t always have to be a physical product, but can include discounts, special events, or VIP access to something. Think health, entertainment, food and fashion.
Curation: leaves some of the decision making to the brands, with personalised services that see customers receive boxes of products to try and buy. Often, consumers will get a surprise in what they receive, with brands able to try out new products on them. Think fashion and beauty.
At the time of the US study, 55 per cent of total subscriptions were in the curation category, pointing to a desire for personalised services, convenience, trying different things and perhaps a weariness in too much choice online.
WHY BRANDS SHOULD CONSIDER A SUBSCRIPTION MODEL
It’s clear the model is on the rise, with the global subscription ecommerce market set to be worth £347 billion by 2025.
Subscription boxes lead the way in the UK, with food boxes the most popular in 2020 at 31 per cent, shaving in second at 24 per cent and perfume and cosmetics in third at 18 per cent, according to Statista.
So, what’s in it for digital brands?
Engage with your customers
In today’s digital market, it can be difficult to stand out from the crowd. Other than products, when all digital stores start blending in with one another, how can you make your brand different?
Social media and newsletters are tried and tested methods of communication, but subscription models give brands the opportunity to engage in different ways with their customers without them ever needing to step foot in a physical store.
Fashion brand Stitch Fix, for instance, sends an ‘inspiration’ guide with their subscription clothes box. This gives customers an idea of what the clothes sent in the box could be styled with. Not only is the brand sending clothes options now, encouraging purchases that would not normally have occurred, they’re opening the door to further sales down the line. Customers also get new ideas and professional styling tips for added value. It’s just one example of how brands can go that extra mile.
Chris Pendse, director of partnerships at Redbox
Chris Pendse, Redbox’s director of partnerships, said: “With so many brands doing the same thing, what can make it stand out? There’s got to be a level of engagement that a brand can have directly with a consumer that outweighs the benefits an Amazon or other market place may have.
“Subscriptions give brands a chance to do something different from other brands. It gives them other ways to show their products off and engage with their customers in creative ways. And importantly, it also gives them an opportunity to communicate on a regular basis.”
Enhance a customer’s loyal
If you have an Apple iPhone, chances are the next time you need a new one, you’ll stay with the brand. Happy with Ocado’s digital store? Some people may swap and chop, but most will keep going back to what they are familiar and comfortable with.
Brand loyalty is increasingly important to digital retailers - hit the right note with a customer and you could be rewarded with their loyalty for many years or even for life.
With the subscription model, brands can turn happy customers into loyal followers. They can strengthen the relationship by adding value, convenience and providing unique offers other customers aren’t entitled to.
Brands can ensure that subscribers are first in the queue for limited items or events - and ensure other brands don’t get a look in in the long-term.
Encourage extra purchases and revenue streams
Encouraging repeat purchases is vital for brands. Subscription models encourage this in numerous ways while also bringing in extra revenue streams.
Firstly, by having customers sign up to a monthly or annual fee, they are bringing in a stream that would not have been coming in before.
In the case of curation and access subscriptions, a brand is also providing tempting products or ideas that could lead to further sales.
Take the Look Fantastic Beauty Box. Customers pay £13 a month and receive creams and beauty products worth more than £50 each month from brands like Elemis and Philip Kingsley.
The consumer gets a bargain, new products before they’re launched and the opportunity to try an assortment of ranges they may not normally try. If they like one, they may go back and buy a bigger version of the product.
The brand gets to showcase different products, brands, and engage with the customer. The customer loves the excitement of the surprise of what’s in the box and remains loyal to the brand.
Chris continued: “A lot of us are very lazy or relaxed when it comes to managing subscriptions. They are easy to put one to side. They are convenient and take the effort out of too much choice but are also good for the retailer for recurring revenue.”
Mecca Beauty Box
More data, better personalisation
The better you get to know your customer, the better you can make the customer experience.
Personalised experiences help customers see that a brand is relevant to them and their life, so they will stay loyal to them for longer. The longer they stay, the better you get to know them. It’s a perpetual circle.
An online fashion brand offering a subscription box with a range of clothes in might need to ask personal questions early on, like body size, age, hair colour and favourite brands, to match and send clothes in their boxes to the consumer.
But in finding out their preferences, they can follow up the box treats with further sales or offers on the brands they like, or styles that suit them. They can target newsletters, or adverts, or ensure the customer experience is personalised further each time they visit their digital store, thanks to this valuable data.
The more a customer’s interest is piqued, the more clicks and sales there may be – and the more information you have at your fingertips.
A WORD OF CAUTION
When considering any new model for your digital business, the potential downsides should be taken into account.
Some brands find customers can get ‘subscription fatigue’ from receiving too many products, or too many boxes with items that aren’t relevant to them or that they worry about wastage.
How easy is it for the customer to cancel a subscription on your online store? Are they getting real value for money? All of these things can have a negative effect on the customer’s view of the brand - and the long-term loyalty you are striving for can be lost.
If a customer is receiving a case of wine each month as part of a subscription and doesn’t drink it all, the bottles can mount up quickly. Are there options to pause the subscription or change the delivery date? With accessories or beauty products, if customers are regularly receiving unsuitable or unwanted products, can they easily return the items or do they have to traipse to the Post Office every time they wish to send something back? If they receive a weekly recipe box, there may be a time in which the customer spontaneously goes out for dinner or is late back from work and too tired to cook. If they are throwing meals away, they may see it as money, not just food, down the drain.
It is important for businesses to calculate all these factors in when considering a subscription-based model. Customers can be fickle and churn rates can fluctuate greatly, with retailers spending money on continually finding new customers and getting others to return after they have cancelled. Brands need to consider whether a subscription model makes both business and financial sense when calculated against the cost of customer retention and the customer lifetime value.
While subscription models won’t be the right fit for every brand, more online businesses are looking at ways of incorporating them into their digital strategies.
Short term, they can lead to an increase in revenue and repeat purchases. Long term, they help build customer loyalty and personalisation.
Subscription box services can offer customers convenience and save time, by cutting down the time-consuming, decision-making process. It can help customers discover new brands. They tap into emotions and can bring a surprise, fun element into the shopping experience. Subscription models enable brands to communicate and engage with their customers in a different way and offer them discounts and exclusivity, while showcasing new products.
Today’s brands must offer their customers as many different purchase options as possible, or they will find a brand that does. Adding a subscription option at checkout on your Adobe Commerce platform can bring another element to your store – and improve the customer experience even further.
The rise of subscription services is in its early days, but the signs suggest people are already hooked.