A subscription box is a recurring, physical delivery of niche-oriented products packaged as an experience and designed to offer additional value on top of the actual retail products contained in a box. Subscription boxes are a marketing strategy and a method of product distribution. Subscription boxes are used by subscription based ecommerce businesses, referred to as ‘subcom’ for short.
Subscription commerce falls into two categories: discovery commerce and convenience commerce. Both categories are meant to foster brand loyalty and increase sales, but discovery commerce is for customers who are looking to try something new, while convenience commerce caters to customers who want a specific product regularly and enjoy having them delivered.
Convenience commerce is a more effective way to maximize customer lifetime value, purchase frequency, and annual spending. Both types target a wide range of customers and cater to a variety of specific needs and interests. In addition to newer and smaller players, large scale retailers like Walmart, Amazon.com, CVS Pharmacy, and Lancôme use subscription commerce.
Since launching in 2011, Quarterly.co, which sends out celebrity curated gift boxes, has doubled in size every six months. NatureBox, which launched in 2012 to sell healthy snacks, grows by 50-100 percent every month, and dog-themed service BarkBox grew from 1,500 to 55,000 subscribers between 2012 and 2013. Birchbox, which is arguably the most recognizable service, led the subscription box trend with its 2010 launch. Birchbox’s model of providing customers with samples of personal care products in order to up-sell customers into buying the standard sizes of the sample products they enjoyed has proven to be a successful marketing tool.
Subscription commerce is particularly popular with men, because it adds convenience and guidance. Many guys readily admit that they need help looking good, and many online shopping services and subscriptions are adapting to fill this need.
Customers often receive discounts on products by buying them through subscription boxes. Many subscription boxes are offered in tiered levels of value as well as frequency of delivery. This allows subscription boxes to be affordable to a wider range of customers. Choices are minimized for customers which prevents them from becoming paralyzed and makes decisions simpler to make. Because subscriptions are automated after activation, continuing to receive the product and maintain the subscription takes minimal effort for the customer. Customers are more satisfied when the purchasing process requires less work.
Subscription boxes can be a fun experience for customers. Customers enjoy the surprise of discovering what is inside, and they discover products they not have known about or tried otherwise. This allows customers to try products and brands risk free.
Viral reviews on social media are one of the most successful ways subscription boxes are advertised. Many successful subscription box companies have left it to their subscribers to take the lead on brand evangelizing. Costs for the subscription box companies tend to be low for products, because sample products are often largely subsidized by manufacturers. Some manufacturers pay for category exclusivity and distribution of the boxes.
Product diversity helps consumers build a knowledge of different brands that exist in the market. When a consumer finds a product they prefer, he or she will often purchase this product again and develop brand loyalty. Businesses can track when customers convert from subscription box sampling to full size purchases through specially coded coupons or offers placed in the subscription box that customers can use for purchasing regular size items in stores or direct from the manufacturer.
Businesses can capitalize on anticipation. Customers enjoy products more when they have a waiting period to anticipate the product. The excitement of getting something chosen specifically for them helps maintain membership. Subscription boxes also offer good publicity for vendors whose products are featured in the boxes.
One challenge for subscription models is that customers are often afraid of contracts. This fear can be alleviated by allowing customers to sign up for a set number of months and pay upfront. This will prevent customers from experiencing unwanted credit card charges.
The grocery industry, annually grossing $600 billion, is by far the largest retail category in the United States. It has been the least disrupted by e-commerce but shopping habits are changing, and niche online grocery services that compete on convenience and selection are gaining traction. New start-up companies that focus on concierge shopping and subscription prepared meals are innovating on the online grocery model and offering services.
Many startup companies have begun to cater to geeks, gamers and pop culture fans. San Diego Comic-Con International, a pop culture and comic book convention, alone saw 130,000 attendees in 2015. Loot Crate, an American-based company launched in July 2012, with the idea of delivering ‘comic con in a box.’ The company now offers different subscription boxes that cater to different genres, including pop culture, gaming and anime.
Beauty items have traditionally not sold well online because customers want to ‘touch, try and feel’ the items they’re going to purchase. With the monthly subscription box business model, customers may pay a small fee to have access to product samples to discover new products that they may be interested in.