One Year Later: Subscription ECommerce Services are Still on the Rise

It’s the one-year anniversary of the release of Sign Me Up: Why Subscription-Based Models are on the Rise, and subscription ecommerce services have only increased in popularity since.

Research shows that 15% of online shoppers have signed up for one or more subscriptions, to receive products on a recurring basis through monthly boxes. I, for one, have increased my subscription sign-ups since writing the thought leadership piece, my appreciation for the data collection methods and customization tools ignited by the research.

 

Convenience Commerce Models Continue to Improve

When my veterinarian recommended that I switch my dogs’ food to something healthier and more natural, I immediately opted to forego the frozen food options available in my supermarkets and pet stores and instead researched best dog food subscription services.

When my dogs were eating dry food, I had subscribed through Chewy for automatic deliveries every six weeks—a convenience commerce model—an option for consumers who enjoy a consistent restock of favorite products that they plan to continue using. I had become dependent on the set-it-and-forget-it mentality Chewy offered me, knowing I didn’t have to worry about choosing and re-ordering food for my pups. This is the mindset that many consumers are in when signing up for subscription services. Committing to a paid plan every month does dampen demand, but the end-to-end experience and automated purchasing outweighs that negative.

I was in that same mentality when I began the search for new dog food for my dogs, and, after conducting research typical for a Millennial, I chose The Farmer’s Dog, a weekly subscription service that sends fresh food directly to my door. Similar to Blue Apron, or Hello Fresh, the company packs its food in a way that it stays fresh throughout the delivery process, perfect for consumers (and their pets!) who want healthier, fresher foods. Though a higher price point than what I was looking for, the personalization to my dogs’ needs and the convenience of delivery outweighed the less-than-ideal price. It also helps that I can cancel at any time, a feature many subscribers look for before hitting the sign-up button.

Can we get turn? Traditional retailers and their struggle to figure out how to entice customers to sign up for their subcom service.

Since we last spoke, some traditional retailers have attempted to step into the subscription services ring with their own subcom services. Ann Taylor, for example, launched its own service in 2017, and Express launched a rental subscription service in 2018.

Many big box stores found the personalization and customization method of subcom services appealing—when consumers fill out surveys that list out their interests and clothing preferences, traditional retailers that are struggling with declining foot traffic gather all the intel to cater their fashion lines according to public interest.

As beneficial to retailers as it may be, consumers are not responding in the way many have hoped to the subscription services. J.C. Penney and Gap both closed the doors on their subscription services, facing low signups and low interest to maintain the services monthly. This issue is not big-box retailer specific, however, as many subcom services struggle with the same problem—how to maintain customer loyalty and convince consumers their products are needed every month. A McKinsey survey of 5,000 U.S. consumers last year found that 40% of e-commerce subscribers have canceled their subscriptions.

Customer Experience: The Key to Subscription Commerce Success

Though it can be argued that I am subscription services’ favorite supporter, I have cancelled a few subscriptions in the past year, namely a healthy snack delivery that shall remain nameless. While I was keeping up with the deliveries when I first signed up, after a few months I found myself looking at a giant pile of uneaten snacks in the corner, bringing them in for co-workers, or begging my boyfriend to eat them so I didn’t feel like I was wasting money. Finally, after feeding some bags to my dogs just to see if they would like them, I hit the cancel button.

Consumers are quick to cancel subscription services that don’t deliver a superior experience—for example, because of poor product quality, dissatisfaction with the assortment, or a lack of perceived value. For this healthy food delivery service, I fell into the latter category. I enjoyed a few healthy snacks here and there but not enough to warrant committing to a monthly delivery. A key challenge for all subscription e-commerce providers is matching supply and demand; consumers are much more likely to cancel when products pile up or they can’t customize order volumes to match their actual requirements. To be fair, I wouldn’t even be able to program in how many snacks I would have liked delivered; it could change daily or weekly.

No regrets--it was definitely worth a try.

STREAMING MEDIA SERVICES ARE HERE TO STAY

While I don’t know how long I will commit to The Farmer’s Dog, I do know that I don’t plan on canceling any of my streaming services anytime soon. Streaming-media subscriptions have been popular for even longer than subcom services, with 46% of consumers subscribed to an online streaming-media service like Netflix or Spotify. According to an RIAA report, paid subscriptions to music streaming services hit a new high of 50 million in 2018.

I am a faithful user of Spotify premium, listening to Release Radar every week to hear the new songs the Spotify data algorithm chose for me. Just as my dogs look forward to their weekly delivery of fresh-mixed turkey and vegetables, I look forward to my new music recommended just for me based off my tastes, preferences, and listening history.

To learn more about subcom models, and how to use data to capture consumers like they have, download, 

Sign Me Up: Why Subscription-Based Models are on the Rise.

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