Tips for Implementing a Subscription E-Commerce Program
There's been a huge rise in "subscription e-commerce" companies that aim to redefine shopping. Some claim to eliminate the need to shop for clothing or to visit the drug store. In any case, these services allow you to put customers’ purchases on auto-pilot. Specifically, three models are gaining ground:
- discovering new products;
- automating commodities; and
- demoing products.
Discovering New Products
The most popular model is discovering new products via boxes. For a monthly fee, a box of goodies from various brands, or a single brand, are shipped to the subscriber. The idea? Exposure to things you ordinarily wouldn't buy — at a low price.
A standout is Birchbox, which provides a monthly sampling of women's beauty products and now men's health products. Samples are sourced from numerous vendors, with each box providing the opportunity to repurchase. There's also NatureBox, which white labels its products offering "samplers" of natural snack foods.
Three competitive advantages make this model stand out:
- Huge margins: Birchbox has the mass audience to woo beauty companies to offer free samples. The margins allow Birchbox to keep costs low for consumers who happily stay subscribed.
- White-label products: NatureBox insulates itself from e-commerce giants like Amazon.com by exclusively using white-label products. The same goes for co-branded "exclusives" that pop up in themed BirchBoxes.
- Define a niche: Knowing your customers, and the competitive landscape, allows deeper penetration into a market by tailoring operations specifically around what that audience wants.
A more challenging area is the space of automating commodities. Here, brands reinvent basics (e.g., shaving products, underwear), providing consumers a price advantage or the convenience of never needing to run down to the corner store. Dollar Shave Club made a splash with its viral YouTube video. Manpacks, which promises men all the "basics" every month, is another recent entrant into the subscription commerce arena.
Commodity automation companies enjoy three advantages:
- Make me laugh: Dollar Shave Club parlayed its video into thousands of paying customers by creating entertaining content paired with a quality product.
- All together now: Whether there's a price advantage or convenience, consumers like bundled products. Bundling appeals to guys who can forget about bathroom or kitchen staples, which arrive in a timely manner.
- Keep my costs low: Price will always be a major factor with commodity goods. Whether market level or below, pricing frees people from making the weekly trip to Wal-Mart.
Demoing products moves the traditional retail experience of trying on clothes or jewelry directly to the home. A company sends a monthly shipment for a trial period before charging the customer. Two examples: Trunk Club provides men's fashion items tailored to their personal style, and RocksBox provides women a sampling of jewelry items.
Product demo companies have three competitive advantages:
- Know thy (users) self: Marketers must make their products fit consumers’ personal styles. For fashion retailers, a clear understanding of the look users desire is essential.
- Ring for help: Typically the monthly charge for a demo box is low, but the goods shipped tend to be on the premium side. The best companies in this space shift their thinking from customer support to concierge-level service to engage their clientele.
- What else have you got?: Companies that send an array of products monthly must keep their selections fresh! Maintaining a diverse inventory that meets customer profiles is key to conversion.
As the subscription e-commerce space evolves, additional business models will surely emerge. Regardless, success will always stem from an obsession to differentiate the company and create a personalized experience for customers.
Ross Beyeler is the founder and managing partner of Growth Spark, a provider of strategy, design and technology services.