Subscription Boxes: Fab or Fad?

July 24, 2018 Rachel Schulties

What’s better than shopping instore? Online shoppers might argue that having a customized selection of their favorite items shipped to the front door provides the most convenient shopping experience yet.

According to McKinsey, nearly 15% of online shoppers register for subscriptions.

Who is the subscription box audience?

The audience for subscription boxes is online shoppers, specifically U.S. shoppers. The U.S. makes up 70.2% of global subscription box sales. Within that category, the main focus is on female consumers, though men aren’t far behind, settling in at a 60/40 ratio, respectively, according to Forbes.

Forbes also stated men who subscribe are “more likely than women to have three or more active subscriptions.”

Many box subscribers have college degrees, lean toward liberal politics, have a household income between $50,000 and $100,000 and have young children in the home.

Are subscription boxes successful?

The short answer is yes. At least so far.

According to McKinsey, the largest subscription program retailers “generated more than $2.6 billion in sales in 2016, up from a mere $57.0 million in 2011.”

But Forbes states the industry has become saturated with the number of subscription programs rising 40% in a year to 3,500 options. As a result, traffic growth for subscription program sites slowed, rising only 3% year over year in Q1 2018 after climbing 10% the year prior.

Why have subscription boxes been so successful?

Subscription boxes excel because consumers willingly provide crucial data to brands in order to receive products they’re interested in and subscription companies respond by matching their desires to appropriate products.

As consumers’ tastes change, the products in their boxes can change, too. Because many subscription services are customizable, consumers don’t grow out of the service. Instead, the service grows with them.

Plus, subscription services get to know their consumers so well through form fills and customization. Consumers provide data related to their location, clothing sizes, dietary restrictions, general interests and more, resulting in incredible first-party data for subscription companies. For example, because Stitch Fix, a clothing subscription I love, knows consumers’ sizing and interests from form fills and consumers’ preferences from what they return and what they keep, the brand has the insight to tailor products and offers for their consumers. If I have a special event this weekend, I’ll order a box because I know their stylists will select something that not only fits the event well but also fits my body well, too. They’re so good at giving consumers exactly what they want that they claim 80% of consumers who try the service request another box within just three months.

Which subscription boxes are popular?

Last year, according to Forbes, 35% of subscription program site traffic was to beauty boxes while a total of 4% was to subscription box sites for kids and pets. Other popular categories include apparel, food and lifestyle.

Some of the most popular subscription boxes are:

  • Dollar Shave Club. Dollar Shave Club provides shaving essentials, including razors, creams and more. After purchasing the starter set for $5, users can pay $3, $6 or $9 for fresh blades every month or upgrade to the restock box, which ships every three months. Consumers can customize what goes into boxes and can cancel at any time. Click here to see reactions from a recent Dollar Shave Club Ad.
  • Ipsy. This monthly beauty box gives consumers five trial-sized products for $10 a month, with free shipping in the United States. With Ipsy, products are customized based on consumers’ physical attributes, makeup experience, favorite brands and preferred products, all stored in beauty profiles consumers create upon registration. Some view Ipsy as the original beauty box, as it debuted in 2011 before competitors like BirchBox and SephoraPlay.
  • Blue Apron. This food subscription delivers responsibly-sourced ingredients with one-pan recipes so consumers can whip up meals in just a few moments. Blue Apron uses recyclable ice packs and packaging to keep expertly-portioned food fresh in the mail. Consumers can choose from two-person or family plans, disclose dietary preferences and more. Blue Apron delivery services start at $7.49 per serving and consumers can cancel at any time.
  • Stitch-Fix. Stitch Fix offers consumers new clothes every month. With each box, consumers can keep what they like and send back what they don’t. This popular clothing subscription service starts consumers with a $20 styling fee. With that fee, consumers receive a $20 credit which can be put toward purchasing their favorite items.

Are subscription boxes fab or fad?

As the market becomes more saturated, could larger brands push smaller brands out of the subscription service industry?

Big names like Amazon and Target have begun offering their own services. Amazon’s subscription box is a convenient delivery service, making millions of products available at consumers’ doors. Unlike typical subscription boxes, this package isn’t preset and can be adjusted based on consumer needs. Consumer A can request two dozen apples every six months while Consumer B requests a pack of AA batteries once a month. The more a consumer subscribes to, the more they save. Target offers a similar subscription service to Amazon, where consumers can basically have groceries and regular supplies delivered to their homes. The brand also offers more standard subscription boxes for books, arts and crafts, baby supplies, beauty and more. Plus, consumers save 5% with every Target subscription and receive free shipping and free returns.

When asked about competition like Amazon, Stitch Fix CEO Katrina Lake noted that she isn’t worried about Amazon’s new wardrobe service. “We’re focused on a very different value proposition, which is not, what’s the cheapest and fastest? [Like Amazon’s] It’s, how do I get the things that are right for me and my style and my body? I don’t see any other e-commerce player really attacking that value proposition in apparel,” Katrina Lake, Stitch Fix CEO.

Subscription boxes (and their convenience) have found success in multitudes of categories, pleasing women, men, kids and even pets. From food to hair brushes to dog toys, consumers seem to love ordering everything to their front doors.

 

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About the Author

Rachel Schulties

Rachel Schulties is the Executive Vice President of Agency Services at Digital Media Solutions (DMS), an industry leader in providing end-to-end customer acquisition solutions that help clients grow their businesses and realize their marketing goals. As the leader of the agency team, Rachel oversees client relationships, agency services, the award-winning Sparkroom performance technology and technical support function that helps clients boost performance and redefine the win. Since its inception, DMS has evolved into a full-service performance marketing company that services firms within highly complex and competitive industries including mortgage, education, insurance, consumer brands, automotive, jobs and careers. DMS has achieved incredible year-over-year growth, which has earned recognition on the Inc. 5000 list in 2014, 2015, 2016 and 2017.

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