3 Subscription Box Trends Driving E-Commerce

The slow death of brick-and-mortar retailers has been well documented and unexaggerated. A record-setting 102 million square feet of store space was closed in 2017, according to CoStar Group. Retailers promptly obliterated that record in 2018 by closing another 155 million square feet.

However, not all retailers are going gently into the night. As consumer preference shifts toward the convenience of online shopping, innovative merchandisers are expanding into e-commerce to compete with digitally native brands. The relative disappearance of consumer loyalty has prompted many to consider new approaches to reeling in valuable repeat customers (who account for 41 percent of retail business revenue in the U.S.). The result has been dubbed the subscription economy.

Inside the Box

Automatic renewals make shopping easier for customers. They can better budget products and services at a flat rate, and they ensure they’ll never run out of a product. And when customers don’t need to manually reorder items each month, companies can keep acquisition costs down and make their own cash flow more predictable.

According to a 2018 study from McKinsey & Co., 15 percent of online shoppers — often young, affluent urbanites — have enrolled in one or more subscription programs. Typically, these programs are monthly subscription boxes that contain health and wellness products, apparel, or personalized items.

As the subscription economy grows, here are three trends that will shape it in 2020:

1. There’s an influx of subscriptions for women.

Foodies, pet lovers, wine enthusiasts, babies, teens, etc., all have a range of subscription boxes to choose from, but women have the most options by far. About 31 percent of all subscription boxes target women, according to our collected data, and the prevalence of women-focused subscription boxes has increased by 13 percent over the past two years. In light of this, some businesses may want to consider targeting a different audience, but others may want to double down.

2. Determining the right price is key.

As more retailers enter the subscription space, determining the best price will be essential for companies looking to maintain market share without sacrificing margins. In 2019, consumers could choose from about 3,170 subscription box programs, and most were fairly affordable, at an average cost of $15 to $30 per box. Of course, this doesn’t include The Opulent Box, a luxury jewelry subscription box that costs $25,000 a month. In addition to cost of goods sold and other metrics, businesses should consider what customers need in order to feel like they are getting a good deal.

3. Ratings, reviews, and customer service lay the groundwork for success.

Companies should understand the influential power of subscription box reviews, as 97 percent of consumers say reviews affect their purchasing decisions. By partnering with websites like My Subscription Addiction or influencers who post unboxing videos on social media, businesses can gain an advantage over competitors and prove attentiveness to customer satisfaction. YogaClub, the highest-rated subscription box, commits to customer satisfaction by handling two Facebook groups dedicated to members looking to swap products they received.

Subscription boxes allow companies to increase customer engagement and cultivate loyalty in a way few other programs can. Retailers should keep these trends in mind as they implement subscription program strategies in 2020.

Georg Richter is founder and CEO of OceanX, which makes it easy for large brands to engage customers in a direct-to-consumer model by offering solutions that include a modern, high-volume fulfillment-only option and an end-to-end option that combines order management (including subscriptions), personalized fulfillment, customer care, and rich customer analytics.