Skip to content

Retail subscriptions are here to stay. What can we learn?


Subscribe to the Newsletter

Keep up with the latest on how COVID-19 is affecting retail and how merchants can best continue conducting business in the time of coronavirus

sidebar-ipad

Subscriptions are nothing new. Consumers invested in subscriptions for newspapers and magazines long before the digital age. The proliferation of technology and ecommerce has boosted the possibilities and popularity of this long-lived sales strategy into a multi-billion dollar industry.

Today’s multidimensional subscription paradigm vaguely resembles the former subscription model and has replaced many individual product purchases, explains Digit Geek. The modern subscription design taps into buying habits and the increasing desire for added convenience for improved quality of life.

As of March 2018, 15% of online shoppers were signed up for one or more subscriptions to receive products from a seller on a recurring basis, according to Forbes. The article also states that the ecommerce market has grown by over 100% each year over the previous five years.

Subscription boxes and services have staked their claim in the retail revolution as another disruptive force. Retail leaders that can understand why this channel is so popular and synthesize the success factors into their own commerce strategies can thrive in the constantly changing world of omnichannel sales.

Key takeaways
  • An earlier Gartner prediction envisioned that 80% of existing software vendors would offer some form of a subscription-based business model by this year.
  • According to the PYMNTS Subscription Commerce Index, Americans spent $2 billion per month on subscriptions in 2018.
  • The subscription economy is introducing new disruptions and innovations to retail and ecommerce that can be applied to any sales and marketing strategy.

Out of the box thinking

The subscription model is a unique way for ecommerce businesses to attract customers to their products and services. Take a look at a few reasons that subscription boxes are so successful:

  • Subscription services target a wide variety of customers of varying socioeconomic backgrounds and interests.
  • This shopping channel provides a unique delivery system for new and niche products.
  • The boxes and kits offer fully customizable products and services, based on business intelligence provided by the customer to create their preferred personalized experiences.

Businesses want to offer smaller sample models to curious consumers at a reasonable price to give them a chance to experience the product, and hopefully buy more. Makeup and beauty boxes are especially successful for this reason. The chance to try more products from top brands on a frequent basis — and minimize risk by trying sample sizes before committing to a full-sized, likely pricey, product — is the main selling point for cosmetics subscription boxes.

The subscription box strategy is vital for online retailers whose customers want to get to know the company better. A subscription box full of various products that convey the brand’s overall message gives customers a way to experience the brand’s products in person before making a major buying commitment. 

The success of subscription boxes has demonstrated the power of big data and analytics to explore the buying trends of products and services that people use and refresh regularly. Items as varied as online streaming services, gasoline delivery and clothing are available on an ongoing basis as pay-per-service versus the more conventional pay-per-product method of sales.

This type of service-first commerce that stresses experiences over ownership points to a new standard for today’s shoppers. Retail leaders can take tips from the success of the subscription retail model to grow their brands, even if they don’t intend to branch out into monthly boxes.

Subscriptions + omnichannel = retail success

No vertical or industry is safe from the subscription economy’s disruption. Gartner predicts that even software is changing thanks to the subscription demand. The firm released a report in the summer of 2018 predicting that nearly 80% of software products will be sold as a subscription service by 2020.

Growth is the most attractive story to come out of the subscription revolution. But it’s not yet the entire future of retail. Retailers that base their growth on subscription services face the same threats — and more — as everyone else: large retail chain competition, customer disappointment in offerings and subscriber fatigue.

While the delivery methods and product categories are changing within the subscription economy, businesses looking to break into and grow within this channel must emphasize premier customer experiences to complement the products and services. 

Multichannel marketing can help. It’s not always easy to predict where an audience spends their most receptive time online. Interactions through podcasts, social media platforms and mobile apps are the backbone for ensuring great customer experiences. Your presence across various channels can help the business grow quickly and help your customers stay engaged between the days when their boxes arrive on their doorstep.

Subscriptions are sure to influence retail trends going forward. We can expect to see their DNA all over future products, services and channels. Prepare for the future by keeping an open mind regarding where this type of shopping can go.

Subscriptions: coming to an industry near you

As subscription-based services continue to become embedded in our modern convenience culture, they are likely to expand even further. They may ultimately include more experience-focused services, or revive industries that typically lose a lot of engagement following the initial purchase. It is a model ripe for opportunity.

Here are a few innovative ways subscription-like services are being applied to refresh once-cold industries or inject a new level of longevity into products that can quickly lose staying power:

  • Turning travel into TaaS (travel-as-a-service): Final Price launched a subscription-based app in 2017 that offers users access to the best possible hotels, flights and rental car prices for a subscription fee of $99. In 2018, BRB introduced a service in which travelers pay £49.99 per month for three surprise holidays a year. A month before the departure date, the website reveals the destination, hotel and flight details. The main selling point of these apps is taking the guesswork and tedious tasks out of finding the best deals. Pay a little bit up front, and the service does most of the heavy lifting for you. 
  • Finding profit in frequent flower delivery: The Bouqs offers a flower delivery subscription service at discounted prices for subscribers. Users can customize their deliveries with every possible variable: from flower types to delivery frequency and dates and more. Fans of fresh-cut flowers can find their favorite blooms as often as they like. 
  • Ensuring lifelong language learning: Rosetta Stone made their name in language learning software over the last three decades. While the tool has helped millions learn a new language, the learning aides were often left behind after the initial studying period ended. Rosetta Stone launched a new suite of products designed to help individuals and business teams learn a new language with continuous access. These always-on tools not only will help more people master their new language, but it also keeps the Rosetta Stone brand fresh in the minds of customers.

For existing subscription services, businesses are still ironing out the wrinkles as they go along and are working to keep customers engaged and subscribed for the long term. Features such as offering specials on a consistent basis, along with stellar product quality and customer service, are the keys to keep customers subscribing and ordering for years to come.

Embrace the changes that the subscription economy can bring. This new sales channel often includes innovative ways to reach audiences and keep the dialogue going beyond the initial sale. If your business thrives on nurturing customer relationships (and almost all of them do), some aspect of the subscription economy is sure to help you reach your goals.

Chris Martinez

Chris is a content strategist at Signifyd.