Subscription-Based Businesses are Booming

subscription services boomingRemember back in the day when when your parents received an apple in the mail every month as part of a holiday gift from a far-flung relative. Turns out Aunt Ida was onto something. Today subscription boxes have moved beyond gifts and are now big business. Hitwise estimates there are 5.7 million subscription box shoppers in the US.

Currently, it seems that success in the subscription-based business isn’t dependent on what’s being sold, it’s simply a new way of selling existing products – regardless of the product category.

Some products are consumables/expendables. These are products that consumers want the convenience of replenishing on a regular basis without a hassle. Think soap, toilet paper, pet food. Groceries, farm produce boxes, and meal kits can also fall into this category. However, food and meal prep kits and delivery service are more often in the category of inspirational boxes – much like beauty and apparel.

Changing Tech and Behaviors Fueling Growth

Technology didn’t create the subscription model, it just ignited it. Savvy marketers adapted to consumer’s new behaviors and figured out a new way to get them to look at products and services. Consumers tastes and behaviors have changed and many of the subscription services in the inspirational bucket seek to offer a surprise or exposure to new products.

But there is still a delicate balance between giving people want, personalization and surprising them enough to keep them interested. That means mining data and continually asking questions of customers to deliver a valuable curated experience. Still, customers often have an emotional arc in dealing with subscription services. There is a discovery process and when that ends, customers often cancel subscriptions. The key to enhanced profitability for subscription businesses is selling products that are good enough to lengthen the life of the average subscription.

“Minimizing customer churn is critical for success with a subscription-based business regardless of the category” Rick Gardiner, Founder and CEO of iAffiliate Management, says. “Innovation, personalization and effective customer engagement are a few areas we’ve seen help our clients manage churn and increase customer lifetime value.”

subscription based services are booming

The Concept is Appealing

And while subscription consumers may lose interest in one service over another, data shows they like the concept. Consumers who are subscribers are four times more likely to subscribe to multiple boxes. They are also more likely to susbscribe to boxes in different classes of products than other consumers, according to Hitwise.

Right now subscription services are enjoying growth. However, they may face future challenges from retailers who have the inventory to offer such services themselves. Recently, Amazon filed for a meal delivery service trademark. This happened just a few weeks ago right after acquiring Whole Foods. And right before Blue Apron went public. This is a prime example of the threat from retailers.

As the online subscription market matures, there is likely to be some consolidation. However, the players who can move faster, ad innovate will succeed.