The E-Commerce Subscription Secret Sauce: What Big Brands Need to Do to Succeed in the Direct-to-Consumer Market
Big brands are hungry for a piece of the e-commerce subscription pie, which is now worth $10 billion. As such, a number of big brands, including Nike and Walmart, are looking to get in on the e-commerce subscription business. However, a recent study conducted by Reach3 Insights found that big brands have a major disadvantage in this space as they lack brand awareness when compared to companies that specialize only in subscription box services.
For example, in the meal kits category, Blue Apron, Hello Fresh, and Home Chef are the most recognized brands, while Walmart, which launched its own meal kit service last year, was rarely mentioned.
In order to achieve success in the e-commerce subscription space, brands must first make the product — and the experience — unique.
Purchases in the subscription box market are driven mostly by emotion despite their inherent functional benefits. Comparatively, convenience didn't matter as much to consumers.
Reach3 also found that the experience of getting unique products or something fun and new are the top motivators for subscription-box purchases. On the other hand, some of the more pragmatic reasons such as saving time or money are deemed less important.
As such, companies need to emphasize the “unboxing” experience they provide their customers. Is there enough excitement or novelty in your offering for people to continue subscribing? Packaging can also help elevate the experience you provide subscribers.
Offer Flexibility, and Communicate Clearly
Consumers in the subscription box market tend to be commitment-phobic, as 52 percent said they're not very keen on services that have a long commitment. Furthermore, 50 percent are concerned they might get stuck with products they don’t really want.
Price is another top consideration: 51 percent said they're concerned about the affordability of subscription box services.
These findings suggest that companies can grow their subscriber base if two things are in place: first, flexible terms that allow consumers to return products they don’t want and to cancel at any time and, second, by making these terms clear in their communications.
Consider extending this flexibility within your pricing structure as well. Since many people are concerned about affordability, offering different pricing tiers — perhaps by cadence of delivery — may make sense for your business, and could have an added benefit of easing current nonsubscribers into your ecosystem.
In short: people want clarity on what they can expect from your company. The more transparent you can be about your terms, return policies and pricing, the better.
Invest in Marketing and Insights
It’s impossible to win in this increasingly crowded space without building a brand that resonates with consumers in a meaningful way.
However, this doesn’t mean your product has to be inherently exciting, as evidenced by the success of Dollar Shave Club, which has become a billion-dollar business selling razors. Rather, the company succeeded because it created a fun brand that resonated with its target audience.
Additionally, capturing ongoing customer feedback on everything from the experience to promotional materials can give companies valuable insights into how to build a stronger brand. Leading direct-to-consumer (D-to-C) brands already know this. Stitch Fix, for instance, has relied on data and customer feedback to improve its offering. To succeed in this space, companies need to make the same investment in insights.
In many ways, building a successful business in the D-to-C space isn't any different from finding success in other channels. It requires offering a great product, understanding the end-to-end experience, and building a brand that emotionally resonates with consumers. However, with hundreds of brands competing in this space, companies need to continuously optimize their tactics to retain their existing customers and bring new ones into the fold while they still can.
Jon Dore is senior vice president and founding partner at Reach3 Insights, a purpose-driven insights consultancy accelerated by modern technologies, immersive experiences, intelligent analytics and game-changing deliverables.
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