If you scroll through any social media site, you’ve probably seen people vlogging monthly subscription boxes unveilings. While these promotional posts may end up looking the same after a while, the companies behind them are raking in big bucks from consumers’ monthly card charges.
“A subscription business is a company that sends you a package, usually once a month, of items they’ve picked out for you,” according to a Forbes definition. In 2017, companies like Ipsy, Blue Apron, and Dollar Shave Club climbed the charts as the top subscription sites defined by the number of users per month.
With so many new companies on the market, it’s hard to separate the hype from the here-to-stay.
A brief history of the subscription box
In 2010, Birchbox was the first company to launch a subscription box on the market. As with many current box services, Birchbox focuses on beauty and grooming. Its two founders began the company after seeing a gap in the market on how to research and get the best products. The idea for the subscription came from their beauty-editor friend who would pick out products for them. When they realized that other women might like the same thing done for them, they jumped on the opportunity.
From there, copy-cat companies flooded the market. When Glossybox launched in 2011, they mixed sample- and full-sized products at a higher monthly price. These were followed by other beauty services from companies like Em Cosmetics and Ipsy and then expanded into other products. In 2013, Target debuted a monthly box for only $7 that focused on themes like beauty, pet, baby, and wellness.
In 2017, Forbes broke down subscription boxes by category, with Beauty being the most popular by 35% and Pets and Kids being the most niche market at 2%. Other types included Food, Apparel, and Lifestyle. In 2017, there were already 5.7 million monthly box subscribers in the United States. The index from Hitwise showed those who held a college degree, were female, and had children between three and five in the household were more likely to be subscription customers.
The current market
By 2018, the e-commerce market had grown by more than 100% and generated more than $2.6 billion in sales. The top sites altered slightly to include Amazon Subscribe & Save in the number one place, as well as newcomers like HelloFresh and JustFab. The overall highest subscribers also varied somewhat by gender in 2018. Interestingly, for both women and men, the top three boxes include Amazon and Dollar Shave Club. The third option for women was Ipsy, whereas the men chose Harry’s.
Despite this, Forbes reported “only 55% of online shoppers who consider a subscription service subscribe,” which begs the question: Is it all hype?
The markings of a successful subscription box
The Forbes data above shows the highest subscription numbers, which offer one way to measure a brand’s success. However, subscription box success is also about how the products, marketing, and services resonate with the consumer. There are somewhere between 2,000 and 3,000 different box services on the market, which makes standing out a difficult task.
An Impact article listed the top 10 most popular subscription services as Try the World, Freedom Japanese Market, Frank and Oak, Firstleaf, NicelyNoted, FabFitFun, Blue Apron, Birchbox, MistoBox, and Barkbox. Their top 23 total on the list veered slightly from the most popular according to the Forbes data. However, the boxes they chose address the niche market trend. This same article breaks successful brands down by four categories: Targeting & Personalization, Curiosity, Value & Convenience, and Delight.
Target & Personalization
Targeting & Personalization are essentially how subscription boxes got their start. Birchbox began with beauty products they explicitly curated for their users’ interests. Most boxes today have a theme. From beauty to pets to back-to-college, there are countless ways to personalize a subscription box. Many of the most popular boxes are such because of their micro-targeting. Targeting is often by gender, location, interests, or any number of combinations—as Impact’s list shows, sometimes the more niche, the better. After all, personalization marketing is all about customization.
The Curiosity factor of these boxes is simply the monthly surprise(s) that users receive. Some services, like FabFitFun, give users a preview of some products in their box while keeping others a surprise. Others, like Blue Apron, don’t leave anything to surprise but might offer unique options, whereas boxes like Try the World operate solely on surprise. Yet, even when you are in charge of picking every element, curiosity is still a factor when the box arrives. How will it be packaged? How will the product feel? Smell? Will there be discount cards or exclusive deals included in the promotional materials?
Value & Convenience
The next successful marker is Value & Convenience. Subscription boxes vary widely in their cost. But it’s the cost-to-value proportion that is important. If your customers feel as if they are getting a great deal for the monthly price tag and continue to pay it, you are doing something right. Convenience is also an important factor. According to Impact, “last year, replenishment-based subscriptions…accounted for 32% of boxes.” Replenishment services like Dollar Shave Club often replace the need to purchase specific items each month at the store, saving users time and giving them easier access to better items.
The last category is perhaps harder to measure, but necessary for any successful box: Delight. When a customer is genuinely excited to open their box each month, the cost becomes secondary. Excellent examples of user delight are getting and gifting candy with Candy Club monthly hot sauce subscriptions at Fuego Box, curated stationary at Nicely Noted, and novelty products at Quirky Crate.
After all, if your customers aren’t delighted by their box or getting something of value from it—convenience, joy, usefulness—what are they getting from it?
Those missing the mark
On the flip side, companies are failing when they are all over the board on their target market, do not offer a valuable product, and do not spend time curating products that bring delight and curiosity to their customers.
Subscription boxes that veer too far into the micro-target category can also miss the mark. Examples of this are very specialized boxes like the Mushroom of the Month Club or Box of Goth that serve markets that are maybe too niche. With the thousands of options on the market, it’s vital for brands to create a subscription box that’s unique, useful, and keeps customers coming back each month.
Two of the more significant problems, even amongst popular boxes, are unclear value and overbuying. Specifically, for those boxes that offer surprises each month, it can be a thin line to toe between providing your customers value and simply filling their boxes. Discerning customers will know their prices and be able to quickly tell if the value you give each product is accurate. Overbuying also comes back to customer value. A Money Crashers list used BarkBox as an example because their monthly subscription comes to about $350 per year, which they say is “a lot more than you’d normally spend just for toys and treats” for your dog. If customers feel their monthly (or yearly) value is not up-to-snuff, they are more likely to discontinue their service.
So, your brand wants to try it out. What’s next?
If, after reading the above, you are ready to try this out a subscription box for your brand, you’re likely planning out your next steps.
Your first goal should be on your customers. Nadia Boujarwah, the Co-Founder of Dia & Co., put it this way: “Sometimes what gets lost in personalization is the person …to succeed in the long term, you must remember your customers are humans, driven by deep needs and desires.”
We’ve put together a hit list to help you get started.
Figure out your category
Subscription boxes fall under four main categories, which can help inform how you set up your box.
- Sample Box: Where each item in your box is a sample size of the larger theme. Birchbox is a good example.
- Replenishment Programs: Where the same products arrive monthly, bi-monthly, or quarterly like Dollar Shave Club.
- Specialty Deliveries: These include more exclusive or novelty items that companies like Loot Crate offer.
- Curated Content: Where customers receive items that are specifically curated and chosen for their style and needs, like FabFitFun.
Find the sweet spot for payment
The next step is deciding what choice you will give consumers when it comes to payment. Subscription boxes usually charge monthly, but many boxes now provide the option for users to save money and pay annually. You can also calculate monthly recurring revenue (MRR) from subscriptions that are bi-weekly or quarterly.
Understand your customers’ pros and cons
Don’t overestimate your box’s value and underestimate your customer. Money Crashers put together a great list of the types of questions consumers ask themselves before signing up for a box. These include: Are these items you can use? Is it more than you need? Can you afford it? And how much control do you have? Attempting to answer these questions for your customers while in development can save you time later. Plus, it can make for better customer service later on.
Create a full customer experience
From first choosing items to the all-important unboxing experience and, of course, the products themselves, the user experience should be entirely thought out. If you already have a brand and are adding a subscription box to it, it’s important to integrate with your current brand. The key is consistency across all channels. Brands like Target have hopped on the subscription bandwagon but kept their main brand voice. The unboxing experience is also a big deal for your customers. A Retail Customer Experience article sums it up perfectly: “When the box arrives, it’s like receiving a gift, so the appearance of the box and packaging is paramount.”
Curate a valuable box people come back to
Customer retention is a massive undertaking for subscription boxes. Once you’ve found your niche market, created the full customer experience, and understood your consumer’s possible pitfalls, it’s time to turn to retention. An entrepreneur.com article showed “online retailers spend almost 80 percent of digital marketing budgets on acquiring customers,” and often throw retention to the wayside. If you make your customers feel that their products are valuable and they are valued, it can go a long way. Other tactics for retention include excellent customer service, fast delivery, and customer rewards.
Hype or here to stay?
Of the thousands of monthly subscription boxes on the market, there are a lot of considerations when it comes to jumping in with your own. One consideration is if the boxes are purely a hyped-up trend or if they are here to stay.
It’s possible that, of the various types of subscription models, some will stand the test of time and others will fall to the wayside. Forbes reported that replenishment-based services have a 65% conversion rate, whereas curation has 52%. Additionally, the study “found that 40% of e-commerce subscribers have canceled their subscriptions,” so retention and customer service may be a problem.
Another future consideration is if existing retailers will push out smaller subscription companies. A current example of this was when Amazon acquired Whole Foods and “filed for a meal delivery service trademark” right before Blue Apron went public. Likewise, Sephora can pose a threat to other beauty boxes and so on with big retailers. It may just be that companies like Cratejoy, which are essentially the Amazon of subscription boxes, will come into play more in the future.
It’s perhaps not possible to completely predict the future of monthly subscription boxes, but current promising trends indicate that this hype has staying power.