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BizReport : Ecommerce archives : September 24, 2013

How subscription models may change ecommerce

There is a growing trend in the ecommerce space and it isn't just about discounts or simple payment options: it's about the subscription. And, many of the new crop of subscriptions aren't content-based. From cosmetics to pet supplies and lingerie, 'shipping a box' is becoming big business.

by Kristina Knight

Kristina: Tell me about the Ship A Box trend.

Maria Haggerty, President, Dotcom Distribution: Dotcom currently has three clients that are subscription-based and they all have a slightly different spin on it.
• Birchbox has pioneered a sample subscription program whereby the customer orders a monthly subscription of cosmetic samples. The samples are curated based on the customer's age, skin type, hair color, etc., and Dotcom Distribution assembles and packages the products into beautiful sample boxes. Each month, the customer receives a pretty pink box loaded with all types of new products to try. The customer can then buy full-size products of the sample size items through Birchbox's website. Birchbox also curates unique products for its men's box.

• PetFlow is a pet food and supplies retailer that allows pet owners to "autoship" pet products each month so they never have to lug heavy bags or cans home. They've launched a monthly subscriber-based gift club call "Spoiled Rotten." Each month, the subscriber's pet is sent a box of hand-picked treats, toys and accessories.

• Adore Me is a lingerie e-retailer that is using a subscription model to disrupt how women purchase intimate apparel by curating a new selection each month that consumers can purchase at a discount. The customer can pay full price (usually 25% more) to purchase anything on their website individually or "opt in" to the subscription model, where they go to the site monthly to pick out their lingerie choice at a significantly discounted price. If they don't see anything they like, they can skip that month. The overwhelming majority of customers choose the subscription model. The brand experience includes beautifully packaged items that arrive as a monthly "present" to each subscriber.

Kristina: Magazines, newspapers and even some publishers have long subscribed to the subscription model (pun intended), why is this model just now pushing into the retail space?

Maria: I think in part, the Internet has really made these models viable. In many ways, the Internet has convinced a new generation of consumers that they do not need to go to the store. These consumers have embraced the convenience of Internet shopping, especially when it is advantageous. In particular, there has been a shift in how consumers purchase consumables. Whether it is pet food, razor blades, soap or intimate apparel - if the consumer needs to purchase the item with any frequency, they prefer the online experience versus the inconvenience of offline shopping. And when they can sign up once and automatically receive the product each month - even better.

Kristina: What are the benefits? The downside?

Maria: The benefits are an ongoing relationship with the customer and easily forecasted recurring revenues. The downside in any subscription model is buyer's remorse and returns. E-retailers must continue to provide value to maintain their subscriber base.

More from Maria tomorrow, including how to build a strong subscription model.

Image via Shutterstock

Tags: Dotcom Distribution, ecommerce trends, ship a box trend, subscription ecommerce, subscription model

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  • Sara

    It's important to also note, that many start-ups have started as subscription models but moved away as it wasn't a viable, long-term business model. After getting some marketing benefit from pursing a non-traditional selling strategy, companies realize that women don't necessarily want or need a $40 pair of shoes every month, or bras for that matter, and then they are forced to find some other solution, that gives them high margins (which tends to be difficult).

    Also, I wouldn't call this a growing trend – I think it was popular a few years ago and now companies are either moving away from the model (shoedazzel), or are finding new markets where they can find new customers to have pay for the first couple months, before they (these new customers) realize they don't know what to do with the random samples they are getting every month, and cancel.



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