What is subscription commerce?

It seems as though you can’t scroll through Instagram or watch a YouTube video today without seeing an advert for another subscription box service. Once upon a time, a subscription meant paying weekly for your newspaper or milk delivery, but it’s a wholly different story nowadays.

Thanks to the boom of subscription box services over the last decade, consumers can get their monthly fix of practically anything, from coffee to dog accessories, hair products to posters, video games to books.

What is subscription commerce?

Subscription commerce refers to a business model in which the consumer will pay a regular fee – generally weekly, monthly, or yearly – in return for products to be delivered to them on or around the same time each week or month. There are two main types of subscription commerce: convenience and discovery.

Convenience commerce is the more traditional subscription. The same goods are delivered on a regular basis to help the consumer save time and effort. It means they won’t have to go to the supermarket or to the newsagents, or trek halfway across the country for a particular magazine.

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Discovery commerce, on the other hand, helps consumers to find new exciting products. Subscription services often curate a selection of offerings each month and ship them out to their customers. This could be a brand new set of products each month, or a rotation of fan favourites.

The demand for subscription commerce is at an all time high, with the market estimated to be worth $72.91 billion in 2021. By 2026 – and no, this isn’t a typo – the industry is predicted to be worth $904.2 billion.

Why is subscription commerce so popular?

While we’ve established that subscription commerce isn’t a particularly new phenomenon (plenty of our grandparents will likely have – and always had – their newspaper delivered), the age of the subscription box has only really taken off in the last decade or so.

Let’s take a look at why more and more consumers are more than happy to spend their hard-earned cash every single month on bundles they may – or may not – need.

Convenience

This is the big one, of course. The digital age makes it simpler than ever to subscribe to new services. A well-designed website with clearly presented information, great images, and auto-fill payment forms puts up very few barriers to get in the way of a purchase.

New subscriptions can be purchased in minutes, from the sofa, using a smartphone. The only thing consumers really need to worry about after that is cancelling a subscription if they no longer want to use the service. The rest takes care of itself.

Removes indecisiveness

As consumers, we’re led to believe that having more choice is a good thing. That might be the case, but we’re also prone to being indecisive. When online shopping, consumers are met with an unending selection of products to choose from, and the effort it takes to wade through the heaps of different options can cause people to put it off until a later date, or worse, not go through with a purchase at all.

Too much choice can also lead to buyer’s remorse. Most consumers will consciously or subconsciously weigh up the pros and cons of multiple options before making a purchase. Just because one item has more pros than another on a Monday morning doesn’t necessarily mean it will on Monday afternoon.

When a business chooses to offer a handful of subscription boxes rather than dozens of unique products, consumers don’t have as much wiggle room to be indecisive. Additionally, they’re less likely to cancel an order or return a product because they’ve had a last minute change of heart or have found something more suitable elsewhere.

Unpredictability

Normal life is full of predictability. This, for the most part, is reassuring, but there’s still a part of each and every one of us that craves adventure, something unexpected, and a little delve into the unknown.

Many subscription boxes tap into this feeling. Although a company will normally offer a particular genre of product, such as food, skincare items, or stationary, the specifics each month are most effective when they’re a surprise.

When the items are of consistently good quality, it keeps customers engaged and coming back for more as they’ll look forward to new surprises and unique finds.

Personalisation

Many subscription services give consumers the opportunity to personalise their packages each month. This can be done in a variety of ways, whether it’s through manual input from customers, machine learning to automatically recommend specific products, or by gathering feedback from customers.

Unboxing experience

Successful businesses in the subscription box sphere don’t simply bundle a collection of items into a box and ship them to where they need to be. Instead, they use a mixture of strong branding and cleverly designed packaging to make the unboxing experience as memorable as the products inside.

When careful consideration is given to outer packaging (first impressions count), inner packaging, box size, messaging, and so on, customers will look forward to the dopamine hit time and time again.

Pros of running a subscription box service

Given the wild success of so many of today’s subscription box companies, it’s easy to see why hundreds of new services pop up around the world every month. Whether you’re a budding entrepreneur or established business tycoon, there’s plenty of pros of running a subscription box service.

The word spreads

Subscription box companies tend to keep customers engaged for longer. Regular deliveries have a greater impact on somebody’s life than an occasional one-off purchase, and as a result, customers are more likely to bring your service up in conversation when speaking with family and friends.

The nature of a subscription service makes it easier to offer referral schemes. Whether that’s giving both the new and current customer a free box, a discount, or bonus items for referral, there’s plenty that businesses can do to encourage customers to spread the word.

Less nurturing

Conventional eCommerce businesses usually need to nurture existing customers quite a bit to encourage them to make another purchase. Email campaigns, discount codes, and other modes of contact can take up significant time and resources.

Generally, if a customer is happy with the stuff they receive every month, it’s not as important to manually keep them engaged with your brand. The monthly item drop mostly takes care of that for you.

Reliable income

When you charge a set amount for subscription boxes each month, it can be easier to set targets, forecast growth, and manage your business’ finances properly. You can expect customers to pay the same amount on the same day every month, rather than having orders of different value come in at any time.
While the margins of products you include each month will differ, of course, you’ll likely be planning these months in advance and so costs can be estimated pretty accurately.

Cons of running a subscription box service

Of course, like everything else in business, there are certainly some cons to be aware of if you’re considering starting a subscription commerce business.

Competition

The great subscription box revolution means that many gaps in the market have already been plugged up. Trying to find your footing in popular industries such as health and beauty or food and drink will mean competing with some established giants. For most industries, you’ll need to find your niche, which will only get more difficult as time goes on.

Pre-established businesses also have more buying power when it comes to securing the best products for their boxes. This could mean higher margins due to buying in bulk, or exclusivity deals for the most exciting products.

Can be difficult to keep innovating

How often can you capture lightning in a bottle? That, after all, is part of what keeps customers renewing their subscriptions each month. It can be difficult to maintain the same level of quality and excitement each and every time your customers unbox their package, which can lead to people cancelling their subscription with you.

Customer churn

Leading on from the previous point, grappling with customers coming and going to and from your subscription services is a big challenge that subscription commerce businesses need to deal with. While it’s true that customer retention is easier and lifetime spend is often higher for subscription services, it can be hard to recover from an influx of cancellations.

Interested in subscription box fulfilment?

Whether you’re preparing to launch a new subscription box service or have been in the game for a long time, James and James Fulfilment can help. We have been picking, packing, and shipping subscription boxes across the world for over a decade, and have the tools and experience you need to keep customers happy, engaged, and excited about your brand.

Get in touch with us today for a no-obligation consultation about our subscription box fulfilment services. We’ll explain how we can help you, give you a demo of our award-winning fulfilment software, and even invite you to one of our facilities so you can watch how we pack subscription boxes for our other clients.