Retail subscription services are a good example of how technological advances witnessed in the past decade have transformed business operations in all industries, including the retail sector. Retailers have adopted subscription services enabled by the cloud and cloud billing software such as Tridens Monetization to enhance the consistency and reliability of their shipping schedules of products to customers.
In turn, subscription services have enabled retailers to focus their efforts on maintaining an interactive win-win relationship with their subscribers. Studies indicate that subscription services have bestowed several benefits to retailers, including higher revenues, increased customer loyalty, and improved revenue predictability. Retail subscriptions offer clothing, coffee, beauty products, vitamins, books, and essentials such as new razor heads and brush heads. Unfortunately, several issues should be streamlined to encourage consumers to subscribe to these services.
According to Business Insider, even though retailers have invested immensely in subscription services, but uptake by consumers has been slower than in other industries. The largest target is millennials more interested in streaming services such as Netflix and gaming subscription services such as Arcade.
Most US internet users across the generational divide have increased their spending on subscription services immensely in the last five years. Still, most have never even signed up for a single retail subscription service. A glance at the statistics can be worrying, but it is important to note that consumers are wary regarding products that affect their physical wellbeing, such as retail products.
Unlike the gaming and streaming services, vast investment in retail subscription services within a very short period has led to market saturation even before take-off. The overwhelming number of subscriptions available to customers, which are all new and untested, creates confusion. Customers do not know which subscriptions are useful and which ones are only a waste of money. Several companies have a smarted subscription economy and are using a retail subscription to offer their customers end-to-end experience, value, convenience, innovation, and discovery.
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Retail subscription services allow retailers to experiment and innovate
Retailers are also using subscription services to take their customers on a journey of discovery. Subscription boxes are designed to deliver a surprising discovery keeping them hooked on the services.
- Target: In 2018, Target introduced a $40 quarterly box subscription, which included its Cat & Jack private-label baby apparel. As the name suggests, each box offers six to seven apparel items and a rotating gift before they hit the stores as a bonus for only $40. The element of surprise in this subscription offering highlights that Target understands that consumers seek convenience and discovery in subscriptions. Target’s $40 box also offers convenience and value because customers can return any items they do not want to keep.
- Bokksu: Japanese snack subscription, known as Bokksu, is gaining subscribers at an alarming rate only because they offer an end-to-end experience by enabling consumers to discover Japan’s rich culinary culture. Also, Bokksu offers its subscribers value by introducing new flavors regularly in snacks that have a long shelf-life and are easy to consume.
- Atlas Coffee Club: Allow customers to subscribe to one or two bags of origin coffee every month that has been farmed using sustainable and eco-friendly practices. Customers can choose roasted or ground coffee delivered with a postcard from a new country.
Focusing on the future of the Subscription Economy
Previously, retailers had to gamble on which market segment will grow more and drive sales in the future. Retail subscription services have eliminated the gamble by highlighting millennial demographics as the future of the subscription economy allowing retailers to focus their efforts. For instance, in beta form, Amazon introduced the Prime Wardrobe fashion box in 2017, allowing customers to order three items or more without paying upfront. After a week, customers decide the items they want to keep and pay for them.
This try-before-you-buy strategy effectively offers convenience and value to the millennial demographic, who are the target market, the drivers, and the future of the subscription-based economy. Also, Amazon’s Wardrobe model is designed to entice millennials because it is neither a monthly nor a recurring subscription. The success of this subscription offered an increase in Amazon’s market share of U.S. apparel by 1.5% in 2017, prompting the company to extend the Wardrobe fashion box to all Prime Members in 2018.
Target and Capture Marginalized Segments
According to Retail Dive, subscription services have expanded and diversified in the past few years to cater to even the most unique needs of consumers. Currently, there are subscription services, such as Cryptid Crate for paranormal enthusiasts, Stage Gurl offers a box for exotic dancers, and so on. These two subscriptions offer a perfect example of how subscription services allow small to medium entities to target a neglected niche in the market and prosper.
Even though humans have a wide range of interests and hobbies, societal norms have marginalized several groups. Any business that exploits the benefits offered by subscription services to enable marginalized groups to pursue happiness will undeniably entice that niche and capture a small but loyal segment in the market. For example, in the case of Stage Gurl, the needs of ‘exotic dancers’ were previously marginalized by big companies allowing this small entity to step in and capture their share of the market regardless of the size. Other retail subscriptions targeting marginalized consumers include;
- Stitch Fix: Regarded as the trailblazer of the subscription model, Stitch Fix expanded its regular subscription offerings in 2018 to include men’s business box, Stitch Fix Kids box, and Stitch Fix Extras for women. Extension of the company’s subscription offerings allows subscribers to add small but essential items such as socks, bras, and underwear to their regular shipment. The convenience offered by the extended offering enables the customer base of Stitch Fix to grow by 30%.
- Ritual: The subscription offered by Ritual allows women to order a 30-day supply of multivitamins or prenatal vitamins that are vegan-certified, gluten-free, sugar-free, and contain only the essential nutrients required by the body.
Subscription has enabled retailers to offer customers a VIP experience by customizing products, services, and solutions based on customers’ tastes, preferences, body shape, etc. Among retail subscriptions offering customers VIP experience includes;
- Boxed: In April 2018, Boxed introduced the Boxed Up subscription service for $49 per year and membership perks to reward their premium and big-spending subscribers. The company understands that consumers want a VIP experience in subscriptions, as evidenced by Boxed Up prioritizes free shipping of orders of premium members over $20 along with 2% rewards, gifts, and exclusive deals. Offering VIP customer service is the key to success in a subscription economy.
- Dailylook: Offers a personalized subscription for a stylist and a curated selection of clothing and accessories customized to the customer’s body shape, style, and other preferences. This subscription has enabled the company to sell 96% of all inventory at full price.
- The Vitamin Shoppe provides a custom assortment of supplements and vitamins based on customers’ online assessments.
- Book of the Month: Subscribers get one new hardcover book each month chosen from a selection of judge-nominated books.
- Bookabuy: This monthly and fixed-term subscription service offers customers a personalized reading journey from books that are tailored based on readers’ unique preferences.
Retail subscription offers companies an invaluable opportunity to innovate their services to offer value and convenience to customers.
- Gap: In October 2017, Gap launched the BabyGap Outfit subscription box and expanded it a month later to include the Old Navy subscription box geared toward kids. In April 2018, it expanded the BabyGap Outfit subscription box further to include Bedtime Box offering sleepwear for kids for $49. Constant innovation of its subscription offerings enabled the company to attain one of the highest subscriber retention rates in the apparel industry. Focusing primarily on children’s apparel is a highly effective strategy because kids grow up faster and require new clothes regularly.
- Walmart: The retail giant introduced the InHome subscription service, allowing customers to buy a smart lock or garage door kit which uses technology to create an access code for one-time grocery delivery.
- Vinyl Me, Please: Subscription offers customers one deluxe-edition record exclusively from an artist of classics, rap, hip hop, or essential genres.
Issues in Retail Subscription services
Another issue contributing to the slower uptake of retail subscriptions is the lack of understanding among retailers on what exactly customers want from their subscriptions. According to a McKinsey report, an analysis of the most popular retail subscription services highlight all share specific features such as convenience, insightfulness, and the level of interaction offered regardless of the products rendered. This highlights that customers seek end-to-end experience in their subscriptions, which is the main selling point retailers need to focus on.
Unfortunately, some retailers are obsessed with pushing products onto customers using recurring subscription services, discouraging new subscriptions, and dampening demand. The only reason why a customer would subscribe to a recurring subscription is if it offers value with an amazing end-to-end experience. Otherwise, it won’t differ from online shopping with a free delivery service. Companies that understand what consumers want from their subscriptions have emerged as the pace-setters in a subscription economy.
Retail subscription services and Tridens Monetization
Tridens Monetization offers retailers the capacity they need to adopt the subscription business model effectively and promptly. It offers retailers the flexibility and agility to adapt to prevailing situations in the industry, such as changes in business models and revenue streams. Retailers that seek to bill subscribed customers based on monthly, quarterly, yearly, or recurring subscriptions should use Tridens Monetization.