Subscription e-commerce companies such as Stitch Fix, Dollar Shave Club, and Blue Apron comprise a fast-growing sector of online selling. According to a McKinsey survey, 15% of online shoppers have signed up for one or more subscription services. Cancellation rates are high, however, with consumers quick to bail if the services don’t deliver a superior product or experience.
Subscription box website visits have jumped from 700,000 in 2013 to 21.4 million today, a 3,000% increase. This strong growth has attracted a lot of mainstream players like Procter & Gamble (Gillette on Demand) and Walmart (Beauty Box), as well as triggering many acquisitions. Unilever, for example, in 2016 purchased Dollar Shave Club for $1 billion.
Subscriptions aren’t new, of course. Magazines and newspapers have long used a subscription model, though the growth rates of modern startups are eye-catching. Birchbox, for example, launched in 2010 and grew to 800,000 members in less than three years. It took the Columbia Record Club 40 years to reach that level.
So why do consumers like subscriptions so much?
First, let’s look at the three types of subscriptions — replenishment, curation, and access.
Replenishment subscriptions allow consumers to automatically receive consumable items that they have to purchase anyway, a great convenience.
Curated subscriptions surprise customers by choosing the items based on algorithms derived from data supplied by customers. Stitch Fix is the best example of this model, which asks new customers 51 questions to determine the individual style and then selects clothing accordingly.
Access subscribers receive a discounted price by virtue of membership.
The typical subscription-box visitor is in their early forties, lives in an urban environment, and makes slightly less than $80,000 per year. Sixty percent of them are women.
All is not perfect in subscription-world, however. Customers are quick to cancel their subscriptions, with up to 40% having done so at least once in the past.
Subscription boxes are a great e-commerce sales model if consumers’ high standards are met.