What retailers need to know about subscription boxes



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Subscription-based commerce What retailers need to know about subscription boxes

Published on 18.03.2020 by Markus Peter, Organizer, Connecta, Post CH Ltd

Subscriptions with online retailers are all about convenience. Blacksocks is one of the first providers in Switzerland to have built its business model on a subscription system and enjoyed major success. But there are a few points to consider when it comes to subscriptions.

The British logistics provider Whistl conducted a survey on the topic of subscription-based services and identified the most important points that online retailers should bear in mind when launching subscription boxes.

The study demonstrated that 86 percent of the 1,000 surveyed customers bought themselves a subscription. The three most important categories were beauty and body care, food and male grooming. Subscriptions thus follow the trend of consumers sending themselves gifts to ensure they receive exactly what they want. Retailers would do well to take this into account before major holidays.

When subscriptions are bought for others, the most popular categories are food, beauty and body care, and art and crafts.

The top three categories for self-gifting. Source: Graphic based on Whistl.

Which purchase incentives trigger a subscription order?

The study also showed that the decision to purchase a box subscription is based on various influencing factors. Besides self-gifting, these are the opportunity to try out something new, receive a discount or a gift. It’s evidently also important for subscriptions to be flexible. Customers must be able to suspend or cancel the deliveries at any time.

The hurdles in the subscription business

There are clear differences between time-limited subscriptions and open-ended ones. If a subscription is time limited, 44 percent of those surveyed do not opt to extend it. As such, it’s important for providers to know why subscribers do not want to prolong their subscription. This will enable them to take suitable measures to persuade customers to take out a new subscription.

For open-ended subscriptions, the major hurdle comes when the annual subscription invoice is issued. It would be a good idea for online retailers to consider offering another goodie with the invoice. Everyone knows the frustration with telecom companies who promise ridiculous benefits right up until you take out a subscription. But once you’re subscribed, they have no interest in making you any more special offers. This leads to frustration in consumers and makes it unlikely that they will subscribe again.

If you consider the costs for acquiring new subscribers, extending a subscription is considerably cheaper and you can still incorporate a goodie without much effort.

It’s also worth considering if the subscription should be automatically extended if no response is received from the customer, or whether to advise them about the process.

How can you reach potential subscribers?

The study demonstrates that the most effective way to reach new subscribers is via social media. Referral marketing and online searches also seem to work well. Woman appear to respond particularly strongly to subscription offers on social media whilst men are more likely to respond to traditional marketing.

The most effective source to create awareness. Source: Graphic based on Whistl.

Why do subscribers leave?

Here are five major reasons why subscriptions are cancelled: too expensive, feeling disappointed about what is received, bored with the product, expiry of the discount period and lack of need for the product.

Online retailers should consider whether they can launch subscription offers based on their range of products and services. Looking into such offers is well worth the effort for reasons of customer retention alone.

Interesting

Markus Peter, Organizer Connecta, Post CH Ltd

Markus Peter is responsible for organizing Connecta Bern, the annual digital festival held by Swiss Post and PostFinance. He also lectures at a number of universities of applied sciences.

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