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The rise of the curated subscription box business

When the founders of beauty subscription service Birchbox unboxed their idea to the world in 2010, they set in motion an eCommerce phenomenon that has seen curated subscription services created for almost every corner of the retail industry. We take a look at what’s driving the billion-dollar industry.

Over the last decade we’ve seen a steady increase in the subscription business model. The popularity of businesses that deliver repeat products such as shaving items and underwear to customers at set intervals continues to boom.

But while it’s handy getting a three-pack of black socks delivered to your mailbox every three months, what’s truly enticing consumers in 2017 is a beautifully presented box of curated goodies.

Data from consumer insight company Hitwise reveals that visits to top subscription box sites have exploded by nearly 3000 per cent in the United States over the past three years, and four of the top five sites offer curated goods.

The good news for eCommerce entrepreneurs is that, like repeat-model boxes, curated subscription boxes are steeped in a wonderfully simple eCommerce model. The customer signs up, pays an automated monthly, quarterly or annual fee and receives a box of curated products directly to their door.

What’s driving the trend for curated products?

The value for money, product exploration and indulgence that these boxes provide are appealing to consumers, especially those who are looking for new ways to sift through the overwhelming supply of products available to discover something great. As Joel Hauer, founder of Australian whisky subscription service Whisky Loot says, “Subscription boxes answer a new paradigm of choice” for shoppers.

“With the advent of Google, we’re all inundated with an endless supply of brands, at our fingertips,” says Joel. “With this oversupply, we very quickly aspire to be more efficient with our selection of products and so we employ curation as a service.”

The success of curated subscription boxes is largely due to the trust in the curation of products by experts. Allowing a specialised business with discerning staff choose the best products for you is a more efficient use of time and money than undertaking your own research and exploration.

“This increased efficiency combined with a new form of discovery is the essence of subscription products. It’s a ‘set-and-forget’, fun experience, which aims to surprise and delight consumers every month,” adds Joel.

Customer retention

As the percentage of people visiting subscription sites indicates, people are increasingly eager to test them out, but retaining customers once they’ve subscribed can be a challenge.

A 2016 US study by Shorr, titled ‘What Subscription Box Shoppers Want and Don’t Want’, found that the average length a consumer keeps a subscription box is just 125 days. The top reason for cancelling is that they felt it wasn’t worth the money, followed by no longer being able to afford the subscription. Conversely, 28 per cent of people said that they’ve re-subscribed to a service they cancelled, with men more likely than women to change their minds.

To slow the drop off, businesses should consider a number of tactics including loyalty incentives, the ability to customise a box to suit a consumer’s own taste, and keeping ahead of trends to stay fresh and relevant.

“Personally, we are striving to introduce new lines to our subscription offering, and branch out into product up-sells and cross-sells, which allow us to introduce existing customers to more products we think they’ll love,” reveals Joel.

The future of subscription boxes

For as many successful businesses popping up in the space, just as many are failing, due to saturation in the market and the challenges of scaling their service to meet demand.

Another threat to subscription boxes is large-scale retailers, who are beginning to sit up and take notice of the thriving business model. Amazon has filed for a meal delivery service trademark following its acquisition of Whole Foods, while beauty retailer Sephora set up Play! By Sephora, sending subscribers makeup and beauty samples, plus bonus extras like Spotify playlists.

With the inventory already in place and a loyal customer base ready to tap in to, Sephora and Amazon could blow the smaller players out of the water. The key then to survive against major competitors, suggests Joel, is a focus on further differentiation and education.

“I can only see the subscription business model increasing in popularity over time, and differentiating itself further against mainstream eCommerce businesses, with a continued focus on education and exploration.”

 

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