Subscription eCommerce: Booming and Here to Stay

Subscription eCommerce is growing rapidly while creating a potential market for multi-million-dollar enterprises. The concept of Subscriptions flourished decades ago, during the time of print magazines and daily newspapers. In the digital sphere, the model was earlier widely adopted by streaming platforms and software products and is now spreading to e-commerce.

The Inception

When Reed Hastings rented out a CD of his favorite movie Apollo 13, he had to pay $40 in late fee to the renter. This incident triggered the idea of Netflix — a DVD rental service, which later transformed into an online streaming platform with more than 150 million subscribers globally. Paying a subscription fee that is almost equal to a movie ticket’s price, one can watch thousands of movies and TV shows in the comfort of one’s couch.

What else could be more gratifying for a movie buff?

In any business at any time, customers always look for convenience, personalized experience, and reliable service. This tendency is pretty much high in millennial customers, who are the major patriots for e-commerce businesses while being price-conscious. ‘Then, why not creating a curated experience for these new-age customers through a subscription service?’ — thought Katia Beauchamp and Hayley Barna, the entrepreneurs behind Birchbox.

Ever since Birchbox sent out its maiden beauty box in 2010, Subscription e-commerce has been booming and touched almost every niche of retail — from grocery to grooming and from wine to vitamins. Subscription eCommerce disrupted many untapped markets and got giant brands like Amazon, P&G, and Walmart enter the space.

During the days when the razor market in the United States was dominated by Gillette with a 72% market share, Michael Dubin saw an opportunity in the sluggish men’s grooming market. He launched his startup ‘Dollar Shave Club’, which feels like a complete men’s club with a personality. Four years later, in 2016, the subscription-based company was acquired by Unilever for one billion dollars.

Dollar Shave Club had already inspired many other startups and major corporates to launch subscription services to offer what truly matters to customers. With that being the case, the subscription e-commerce market jumped to $2.6 billion from $57 million in 2011. Though this market included media services like Netflix, curated subscription box services were accounting for 55% of the total subscriptions.

The X-factor

The success of startups like Dollar Shave Club and Birchbox has proved the potential of subscription e-commerce model. The modern subscription e-commerce industry has already been mounted up with businesses offering boxes in a variety of niches.

Analyzing the performance of the subscription e-commerce companies in the last few years, McKinsey reported that 13 percent of the companies had already ceased their operations. Clearly, a business will succeed only when it offers a value proposition to its customers and delivers services in proportion to values.

Katie Ann Rosen Kitchens, the founder of FabFitFun, leverages content to keep her subscribers engaged across all available channels. She believes that content is the key to the success of her beauty box company. Besides, she also makes sure that her subscribers receive the promised value.

Speaking about the value being created by her content, Kitchens says, “we’re fully aware that we can lose a subscriber at any time. But if members see us as more than just a box, but access to a community and valuable knowledge, then it’s hard to put a price on how much that experience is worth.”

The subscription business is all about building strong relations with subscribers. Unlike one-time buyers, subscriptions bring customers recurrently, creating more scope for businesses to interact and engage with customers, understand bottlenecks, and figure out reliable solutions to enhance their experience.

Subscription businesses should gain great knowledge of their customers to establish deeper connections and understand the potential pain points. Through one-to-one interaction and regular surveys, businesses can gain actionable insights. Rewarding loyal customers is another key aspect of a subscription business to grow in the competitive market. Brands should be encouraging their customers to stay for longer periods and spreading the word to their friends & family.

Undoubtedly, Subscription eCommerce legs up retailers to drive brand loyalty and increase the customer lifetime value with recurring buyers. However, the success of a subscription model boils down to the experience and convenience offered to the customers.

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