The subscription e-commerce market totaled at least $10 billion in 2018, according to a report by McKinsey.
At the time, McKinsey reported 15% of online shoppers signed up for one or more subscription services. It’s safe to assume that as the use of technology has become even more ingrained in our everyday lives, that number has since increased.
So why are consumers signing up to receive products on a recurring basis anyway?
Well, the answer can be found by looking at the way McKinsey categorized subscription services: replenishment, curation, and access.
“Replenishment subscriptions allow consumers to automate the purchase of commodity items, such as razors or diapers,” the report states. “Curation subscriptions seek to surprise and delight by providing new items or highly personalized experiences in categories such as apparel, beauty, and food. Last, access subscribers pay a monthly fee to obtain lower prices or members-only perks, primarily in the apparel and food categories.”
While the data showed the opportunity for brands to grow in this space, it also noted a few challenges within the subscription business model. Specifically that it’s hard to retain customers.
The first reason McKinsey’s research lists for “consumers are quick to cancel services that don’t deliver a superior experience. This includes, but is not limited to, “poor product quality, dissatisfaction with the assortment, or a lack of perceived value.”
Additionally, McKinsey noted people cancel their services when they don’t feel like they’re getting their values worth.
The last challenge McKinsey detailed for subscription is matching supply and demand.
“Consumers are much more likely to cancel when products pile up or they can’t customize order volumes to match their actual requirements,” the report stated.
Despite challenges around customer retention, the subscription trend continues. Here are the top five industries seeing the most innovation and growth:
From renting clothes to being able to return the ones you don’t want, the retail industry has seen a ton of innovation in the form of subscription boxes. A lot of retail brands using subscription can be categorized into McKinsey’s curation and access categories.
Stitch Fix advertises themselves as an “online styling service that delivers a truly personalized shopping experience, for you and your family.”
Customers of Stitch Fix fill out a style profile, and a personal stylist will “handpick pieces” to fit said customer’s tastes, needs and budget. Each box contains a curated selection of clothing, shoes and accessories to try on at home. People are able to send back the rest in a prepaid USPS envelope. Shipping and returns are free—even for exchanges.
If a person is more interested in renting clothing, they can do so at Armoire. This women’s rental clothing membership offers an “infinite closet,” styled just for them.
American Eagle Style Drop is an online monthly subscription rental service that gives you access to hundreds of American Eagle looks for one flat fee. It works on a set-of-3 concept. Subscriptions include unlimited shipping and exchanges for a flat monthly fee.
Because food is a recurring need for people to survive, there’s an opportunity to add ease to an activity that already exists in consumers’ lives.
Innovation in this space now comes in many forms for consumers subscribing to food subscription boxes such as HelloFresh, which is a popular meal kit service delivered to front doors across the country.
Similarly, Blue Apron has a similar service, providing all the ingredients consumers need to make a delicious meal in exactly the right proportions.
There are companies that get meal or food specific, like Winc, specifically delivering wine, and Graze, offering wholesome, healthy snacks every month.
There’s a ton of opportunity in subscription services in the personal care space since many of these items often need to be replenished.
Starting at $25, Quip offers electric brushes, refillable floss, & paste that “make healthy habits easy.”
Dollar Shave Club has “everything you need in the bathroom – from razor blades to grooming products – automatically delivered to your door.”
For women experiencing periods once a month, Lola offers organic tampons. Consumers can select the exact number of each absorbency (from Light to Super+) in their box.
Most items people buy for their pet are recurring items. If it’s not a new toy, it’s probably food, litter, or baggies. Owners are buying because they have certain replenishable needs, and might also be in it for a nice surprise.
Dog owners can subscribe to BarkBox, which is a monthly surprise of toys, treats, and goodies.
As for cat lovers, they can receive gifts, jewelry, mugs, clothes, accessories, decor, books in a monthly Cat Lady Box.
If consumers are looking for a more charitable company, they can subscribe to Rescue Box. Every month, subscribers receive a box of premium products, while working with charitable partners that are on the ground tirelessly helping animals that need your help the most.
For consumers who own a bird, there’s Squawk Box. Additionally, horse owners can subscribe to SaddleBox.
People looking for collectors items can get them delivered. Often, consumers subscribe to have a surprise delivered to their door each month and that’s what's so fun about these boxes.
Disney lovers can sign up for Mickey Monthly. These monthly Disney subscription boxes can include Disney pins, officially licensed Disney items, or a Disney Parks items, and are delivered to your door every month.
Advertised as the “geek subscription box for gamers and nerds” -- Loot Crate is a “worldwide leader in fan-commerce whose mission is to unite the world through the shared celebration of fandom.”
And consumers who are adding to their record collections have probably heard of Vinyl Me, Please. It’s an album of the month club via a personalized subscription service.
Because of the number of companies offering subscription services, it will be up to marketers to figure out how to attract consumers and keep them around by making their lives easier and more interesting.