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Can Subscription Models Work For Ecommerce?

Can Subscription Models Work For Ecommerce?

What is Subscription commerce?

Oh, so you don’t know what subscription commerce, also known as SubCom, is?

Well, think about magazine subscriptions but just for about anything, even for undies! Yes, undies! That’s what subscription commerce is.

Subscription based ecommerce companies are certainly not a new concept, still they are surfacing like a new concept in the online world. With some of the most popular subscription based companies, like BirchBox and FabBag, new versions of the same things keep surfacing every day.

fab bag

Before we dive in that whether this real world model would work in ecommerce or not, let’s tell you about the three models that we’ve seen gaining grounds in the recent times. They are – Product Discovery, Commodity Automation, and Try Before You Buy.

Product Discovery: It’s all about being more competitive!

The most popular ecommerce subscription model is that of Product Discovery. Choosing this model means receiving a pretty box filled with samples of various products of the same brand for a monthly rate. The idea behind this whole concept is to offer, also at a lower cost, you an insight into an array of products that you will not generally buy.

BirchBox that indulges in Product Discovery ecommerce subscription model offers monthly sample of women’s beauty products and men’s grooming items. Such companies source products from numerous vendors and arrange them in each month’s box, while giving you an opportunity to repurchase the items.

Beyond the bounds, there are other companies, like BakeBox, which aims at discovering baked treats from all over the town and delivering directly to your home every month.

Buy-the-Best-cake

But, the big question is, what these product discovery companies have in box for people? We’ve discovered two cut-throat benefits:

#1 Colossal Margins on Samples

Sites like BirchBox garner enough visitors and influence on the market, that beauty companies are more than happy to send free samples to get it in front of paying consumers. You can imagine the margins on free products, right? This, in turn, allows BirchBox to keep the cost of samples low – an amazing factor for customers to stay subscribed.

Birchbox

#2 White-labeled Products

Companies, like NatureBox, safeguard themselves from giants like Amazon by keeping their product white-labeled. This trick let them stay stable in the price war as they’re the only one in the market selling their products.

NatureBox

Also, the same applies for any co-branded absolutes that appear similar to the themed boxes that Fab Bag offers.

Commodity Automation: If you have memory issues!

Though, a tough zone to compete, however, no lack of participants make it going for commodity automation.

In this square, people are basically reviving the essentials, such as undies, shaving kits and even a cup of tea. What strikes customers is either the price factor or the idea of never having to go to the store for picking up their basics.

The company that created a stir in this section is Dollar Shave Club that aired a video about their products on YouTube which even went viral.

There’s another one called ManPacks that promises to deliver manly goods each month.

Chotu Chai Wala is a unique platform that drop-ships a refreshing cup of tea right at your doorsteps as per your subscription. Because when tradition meets technology, it’s a win for society.

ChotuChaiWala

So, how commodity automation wins hearts? Look at two points mentioned below:

#1 Everything bundled together

Believe it or not, everything is a pleasure if it saves us from making frequent rounds to the market, and we like getting things bundled together. Also, it’s quite tempting for a guy to receive all his goodies from one place each month.

#2 It Saves Me Money

Price will always remain a big factor with commodity goods. Commodity automation companies bundle up the necessities for one area of your life, and while suiting your pocket.

Manpacks

Try Before You Buy: We know you love it!

How will you feel if you get few premium samples delivered at your doorsteps each month on a highly reasonable price or even for free? Awesome, right?

Product demo promises to deliver traditional retail experience of trying clothes, beauty products, jewelries to your home.

There are companies that send a monthly box of goodies to try. If you don’t like those products or if it doesn’t match your requirements, you have the liberty to return them before you’re charged. For Example: RocksBox understands the needs of women and provides them a sampling of jewelries to try at home.

Rocksbox

Enchantess offers deluxe beauty samples at home to the subscribers, and that too at a decent price.

So, how these product demoing companies are able to leave an imprint on our minds? Consider these two factors:

#1 Know the users

The key to become people’s favorite is to deliver products that matches the mood and requirements of people. This acumen comes from detailed surveying and profiling to match body type, mood, requirements, etc.

#2 What else?

You have to make sure that the products that you send each month are fresh. It’s a must to have a diverse inventory to consistently offer new products to your customers that meet their unique profile – a key to successful purchase conversions.

enchantess

We also asked our experts their opinions on the sustainability of subscription model of ecommerce.

William Bauer of RoyceLeatherGifts, says that, “Yes – the model is sustainable, and will be successful for two key reasons: 

1) It benefits retailers for revenue forecasting.

2) It benefits consumers who live for instant gratification but enjoy the products more when they have to wait.”

So, do you enjoy the wait?

Universal-Yums“Subscription ecommerce is younger. It has only been around for 5 years with the launch of Birchbox in 2010. No doubt, there is a huge potential for growth, however, companies need to ensure that there is value delivered in one of two ways: Curation or Convenience.” comments, Monique Bernstein, Co-founder, Universal Yums.

Yes, we agrees that curation is an important factor on which companies focus. Assembling items in a pretty box each month with a well-designed info card is nothing but a part of curation. However, it should also be considered that curation can only be a viable differentiator for subscription companies if they are offering something truly unique. It’s not the presentation that matters; it is the contents inside.

Surprisingly, convenience is a lesser touted benefit for subscription services. At present, it mostly focuses on money saved as in the case of Dollar Shave Club.

Monique gives an example that a service that can project exactly when you will need to replace that last roll of toilet paper or that bar of soap, and delivers the same on that very day. However, this will require a lot of more customization to the individual, and this is why this particular benefit for subscription commerce has not taken off, yet.

ThreadLabWill Hench, Co-founder of ThreadLab, a men’s clothing eCommerce service tested a few versions of subscription.

#1 Subscription works best for convenience around disposable/consumable products that consumers buy often (food, wine, beer, liquor, razors, cosmetics, etc.) It makes sense – we get stuff, we use it up, we need more and we want a faster/easier way to replenish.

#2 Subscription does not work well for products where consumers value variety, uniqueness and or style (luxury fashion, styling, apparel, accessories). We have seen many business failures and pivots due to high rates of customer churn.

On the other hand, Keith Anderson, VP, Profitero says that, “There will also be continued growth from specialty retailers and vertically-integrated brands (like Dollar Shave Club, Barkbox, Naturebox, etc). Eventually, “subscription fatigue” will become a risk for these more niche providers, and a subscription aggregator that serves a similar role as Amazon may emerge.”

As the SubCom continues to evolve, we expect to see emergence of more business models. Seeing the success of subscription model, it’s hard to deny the fact that people are loving it more. They await their goodies each month!

Grover-and-Friends-subscription-box

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

Author

Saurabh is the Founder of TargetingMantra. An alumni of University of Illinois, he helped develop personalization systems at Amazon.com and its subsidiaries like IMDB, Lovefilm, Audible, Shopbop and Zappos. At TargetingMantra, he takes care of the Product and Technology.

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