Box subscription services: Should retailers subscribe to this e-tail fad or pass?

Long before the pandemic, as online sales gained force, subscription services boomed. From beauty must-haves to fitness classes to weekly meals for humans and treats for dogs, almost every aspect of retail jumped into the subscription box arena.

The market became overcrowded in recent years, and consumer interest had waned. But with the onset of the pandemic and subsequent lockdown, direct-to-consumer product boxes once again picked up momentum. People couldn’t shop at physical stores and malls, and subscription services, offering everything from food to cleaning supplies, became more of a necessity than a luxury.

A recent study from CouponFollow revealed that during the pandemic, many U.S. consumers opted for a subscription-based product, some of them first-timers. What many realized during the pandemic is that these services are convenient and make life easy; simply sign up, products are delivered, and you don’t have to think about anything or put yourself in danger by leaving the house. Another subset discovered the joy of receiving monthly surprises. (We all needed some joy in 2020.)

Over the last few years, many retailers recognized a new area of revenue that could help them not only survive but thrive. Big-box retailer Walmart started a $5 beauty box subscription, and even Nike went after the kids (and their parents’ wallets and patience), offering a sneaker club so that parents could easily keep up with their children’s growing feet.

Everyone is looking for ways to gain new customers and retain existing customers, and for some retailers and brands, subscription services can offer a new, steady flow of revenue.

Research from Zuora shows that 74% of adults worldwide believe that in the future people will own fewer physical goods and subscribe to more services. While I’d recommend that subscription services be another tool in retail companies’ marketing strategy, it may not be the right choice for all retailers or brands.

Think inside the box

Before retailers commit to offering a subscription service, look at demand. Studies like this one published by McKinsey & Company show that subscription services do best if they meet a recurring need or lessen the burden of a chore; offer the element of surprise or discovery of something new; or offer access to exclusive deals or extra bonuses.

Next, retailers should consider active users because the cost to gain them is sharp, and costs to curate a box will need to be managed. In addition, it will take an almost-science-like approach to know if you’ll be able to sell all your inventory or be left high and dry with unpopular products. Also, look closely at your supply chain, which can be taxed by the process of picking, packing and shipping the boxes.

To be successful, it’s particularly important to have the manpower to manage customers’ expectations and offer a positive experience that keeps them coming back.

Fleeting fad?

Retailers must also consider what happens when the pandemic eases. Lives will go back to normal, and customers may decide they don’t need or can’t afford a subscription anymore. Here’s another interesting finding from the CouponFollow survey: Around 21% of subscription box consumers said they plan to cancel their boxes due to financial struggles caused by Covid-19, and technology boxes and clothing boxes will be the first to get the boot.

Retailers will need to fight for the market share. Consumers are of-the-moment buyers, and your subscription offerings must meet their needs at the current time.

Another necessary way to keep subscription customers coming back is to constantly surprise and delight them. You can’t offer the same products or ideas and expect the same result. Adding new products and services, and extra incentives such as deeper discounts or “surprise” gifts with each subscription could help hold interest. Another idea is partnering with other retailers and businesses to attract a new customer base. Many customers don’t necessarily have brand loyalty and often like to sample different brands. Teaming up with others adds interest and diversity to the subscription.

Whether subscription services continue to flourish or once again fade away after the pandemic remains to be seen. Thinking outside the box can only go so far, so make sure a subscription service is the right fit for your business and customers. Otherwise, cancel the idea.

To learn more about Brett Beveridge, his company, T-ROC Global, his awards, speaking opportunities and upcoming ForbesBooks launch, visit www.brettbeveridge.com.

The Revenue Optimization Companies (T-ROC Global) is home to four sales solutions companies that enable clients to fulfill all of their sales performance needs. The companies are: The Retail Outsource (TRO), Mobile Insight (MI), The Consumer Insight (TCI), and SYMBITS.

Brett Beveridge is the founder and chief executive officer for The Revenue Optimization Companies (T-ROC Global). Beveridge is a serial entrepreneur who builds businesses from the ground up. Since founding T-ROC Global, the company has evolved to become a leader in the wireless, electronics, software and retail industries.