The subscription box industry has been booming, and it looks like this trend is likely to continue. But, what’s really in store for subscription boxes in the coming year?
Subscription Box Services: The Facts
First, check out these compelling facts about subscription services.
Subscription businesses have boomed by nearly 100% every year. Sales in 2016 were $2.6 billion, which was a huge increase from $57 million in 2011.
As of February 2018, there were around 7,000 subscription box companies globally, with nearly 70% of these in the United States.
Gartner, the Global Research and Advisory Company, found that by 2023, 75% of all companies that sell direct to consumers will offer some type of subscription-based service.
Entertainment is one of the most dominant aspects of subscription services, with streaming subscriptions at an all-time high, with 55% of homes in the U.S. spending $2.1 billion a month on streaming services.
Subscription Box Services: The Origins
From 2010 to 2011, the subscription box industry began getting attention, with companies like Birchbox, Ipsy and Dollar Shave Club leading the pack. They were then followed by others who jumped on the subscription box train — and wanted a piece of the subscription box pie.
So, now you’ve had some background on the subscription services, here are the 10 subscription box trends for 2020.
1. Experience will continue to rule
Thinking Inside The Subscription Box is a study by McKinsey. It found that consumers want fantastic end-to-end experiences and are only willing to commit to subscription boxes where their recurring payment gives them concrete benefits, like reduced costs and personalization.
The specific definition of a great experience will be different for each brand. This is why it’s important for you to understand your customers’ unique desires and needs.
To accomplish this, you should engage with your customers in real-time. You need to make use of feedback and data to tailor your subscription products to ensure they offer long-term value.
If there’s one generation that cares about experiences above all, it’s millennials. Unfortunately, they’re known as the ‘ME ME ME’ generation and they’re all about choosing experiences over goods.
Therefore, the best subscription boxes for 2020 will be the ones that help to meet a genuine need as opposed to just giving people more stuff.
2. Men will take out more subscriptions
The McKinsey study discovered that the age of subscribers is normally 25 to 44 years old with incomes of $50,000 to $100,000. They also found that women make up more than 60% of subscribers and males make up 42% of subscribers.
However, these 42% of male subscribers compared to 28% of women subscribers are more likely to have three or more active subscriptions.
The most popular male subscriber boxes include:
This could mean that men prefer the convenience of automated recurring payments since this comes with less responsibility. To follow this trend for 2020, your subscription box should appeal to male consumers as well as female consumers.
This trend of male subscribers having more than two or three subscriptions isn’t just reserved for the U.S. market.
According to a study by the UK’s Royal Mail, there’s a great potential for growth in the male grooming subscription box market. They expect that male grooming subscription boxes in the UK will grow to about 2 million subscribers by the year 2022. They also found that 30.6% of men signed up to subscription box services compared to just 24.3% of women.
3. There will be an increase in worldwide expansion
According to the Royal Mail’s survey, a trend in the subscription box business model is that it presents opportunities to expand internationally. They found that nearly 90% of subscription businesses make some of their sales abroad.
U.S. brands, including Birchbox, Harry’s and Dollar Shave Club have already entered into the UK market with some success. The UK subscription box, Graze, which offers nutritionist-approved snacks, has received more than 150,000 U.S. subscribers within just three months when it launched in the U.S. in 2014, and it continues to be a major player when it comes to U.S. snacking.
Given this international aspect, you should think about taking opportunities to expand into global markets.
4. Traditional retailers will continue to venture into subscription boxes
Amazon has also got in on the act and has around 18 different types of subscription boxes. Other major brick-and-mortar retailers are likely checking out the subscription box scene before they dip their toes in the waters.
A successful subscription box service can provide a lifeline for struggling brick-and-mortar retail businesses. Large retailers can become major players in this market.
They have the buying power to curate a wider range of products while offering huge discounts. They can also use their market share to buy existing successful subscription box businesses, like Unilever’s acquisitions of Dollar Shave Club for $1 billion.
5. Quality will win over quantity
Research shows that, sometimes, less is more when it comes to subscription box services.
If subscription boxes are packed with too many products, this could turn some people off. The choice can overwhelm them, and then they’ll just feel like getting rid of the whole subscription box instead of choosing what they want.
Even though subscription boxes can be perfect for people who are indecisive, too many products can have a negative effect. This is where personalization comes in.
Subscription businesses, like Dollar Shave Club, have got the quality over quantity right. They provide a small amount of high-quality options at good prices, so the consumer can quickly customize according to their tastes.
6. Niche products will continue to reign
The subscription box market is being led by niche products such as coffee, milk kits, tea, etc. These niche products make up around 20% of the overall market. People are also drawn to subscription boxes that cater to their hobbies. These hobby-based subscription boxes account for about 15% of the market.
Niche products for women, such as hosiery, lingerie and period boxes, account for a larger market share than clothing and fashion. In fact, boxes that cater to children’s toys and books are more popular than fashion and clothing. A trend that will continue for 2020 is that niche services subscription boxes will do best as opposed to generic items, like clothing and fashion.
7. Personalization will remain king
The McKinsey report found three different types of subscription boxes:
- Replenishment. These types of subscription boxes offer a ready supply of products. Billie (a female shaving company) is an example of this.
- Curation. These boxes offer customized and personalized items based on what the consumer prefers – for example, Birchbox.
- Access. These offer exclusive selections or discounts on products a consumer normally buys, such as The Farmer’s Dog.
Curation-type boxes is the most popular category of subscription boxes. This is followed by replenishment and then access.
The McKinsey study found that 28% of respondents said that a personalized experience is the most important factor for them remaining a subscriber of the boxes. Consequently, consumers are very quick to cancel a subscription box that doesn’t deliver on a personalized experience.
For evidence that personalization is the way to go with subscription box services, brands like StitchFix experienced a 25% increase in customer acquisition in 2018. They designed a digital questionnaire along with lifestyle quizzes for customers before signing up.
This means that they’ve got a detailed understanding of what their customers want and then tailor the subscription towards these preferences.
Subscription box services could take a leaf out of the book of general subscription services, like Netflix. They offer suggestions according to the content their customers have watched previously. Based on viewing patterns, Netflix sends notification emails with messages such as “we just added a movie you might like.”
The key is to pay attention to paying people — both your new and existing customers. Analyze your customers’ comments and feedback and adjust their products in relation to their preferences.
8. Artificial intelligence (AI) will play a larger role
Subscription box businesses have a vast amount of data available at their fingertips. The businesses that will survive in this market are the ones that can use this data to boost the power of personalization.
Custom-picked products no longer mean they’re chosen by human hands. Instead, artificial intelligence (AI) ‘learns’ about a customer’s preferences through different touch points, like what a customer keeps and returns. Frank and Oak’s Style Plan combines AI and stylists to choose the best options for their fashion subscribers.
The AI trend in subscription box businesses isn’t only going to be limited to better curation of products. It can extend to chatbots and cognitive intelligent videos and photos.
9. Personal recommendations and reviews are must-haves
McKinsey discovered that word-of-mouth recommendations and great online reviews are triggers for new consumers to sign up for subscription services. This is especially the case for curation and access type of subscription box services.
As well as attracting new customers, reviews also help with customer retention. Take HelloFresh, for example. They encourage subscribers to rate their meals with stars as well as leave comments. This type of feedback is invaluable for product development as well as providing personalized meals.
McKinsey has also found that consumers waste no time in cancelling services that they believe don’t live up to their promises or deliver a poor experience.
A poor experience could be anything from:
- Being unhappy with their products and offer.
- The customer can’t see the value.
- Poor-quality products.
Businesses will have to continually provide excellent value for money with their subscription boxes. If they don’t, their customers will be off. Customers are also more likely to churn if the products they’re buying aren’t customized enough, so products end up piling up in their homes.
As churn continues to be one of the greatest challenges of subscription box businesses in 2020, it’s up to businesses to keep customers engaged in different ways. They need to think outside the ‘subscription box’ of new ways to diversify their offerings and also cater to consumers’ needs.
The effects of churn can be devastating. Even a small percentage of churn can have very negative effects on a company’s bottom line.
Customer engagement can reduce churn and include ideas, like sharing content, to make their customers part of the brand. For example, a shaving subscription box business called Cornerstone produces a 15-minute male lifestyle magazine and has reported that this value-add has reduced customer churn.
Gravy: The Answer to Subscription Box Churn
As customer churn continues to be a burning issue, subscription box businesses need to move way beyond the dunning-type of software. As part of your customer churn strategy, you should think about partnering up with experts who understand the psyche of subscribers and have a full-time focus on retaining customers and recovering missed payments.
This is where Gravy comes into play. Our expertise is to make the most of technology and the power of human empathy to boost your subscription business. We work with subscription-based business owners to, first, work out the true cost of customer churn and, more importantly, get payments and customers recovered and reengaged.
To date, the businesses we serve have been on the receiving end of more than $20 million (and counting) — and countless reengaged, repurchasing and re-enjoying customers.
You can continue to be the preferred subscription box of choice for your customers in 2020 and beyond, and we can help make that a reality by saving your failed payments — and retaining your customers — in 2019 and beyond.
Book a free chat to explore how we can partner to make this next year your most profitable yet.