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BizReport : Ecommerce archives : December 02, 2016

Expert: Why brands should consider the subscription box

Over the past year, subscription box services have blossomed across the Internet - moving from culinary-based cooking boxes to makeup and books and even items produced on the small-scale from emerging countries. One expert weighs in on what the subscription craze could mean for your business.

by Kristina Knight

Kristina: Subscription box services have shown a huge uptick over the past year. What is driving this growth?

James Gagliardi, VP of Strategy and Innovation, Digital River: You certainly can't avoid talking about the Dollar Shave Club phenomena. Not only have they created a great product at a great price, but the convenience aspect and creative marketing have factored into the brand's success. The value proposition is just too good for people not to try. Distilling those elements outside Dollar Shave Club to any replenishment products--set it and forget it--is a key aspect of having success with subscription services. People who take advantage of these type of services feel like they're members of a club rather than subscribers. That's how these clubs are being marketed or packaged. And the curation that many of these programs offer appeals to people who are open to experimentation, who want something outside the norm and who are willing to pay for some expertise -- Barkbox for a variety of things for your dog; Unboxed Love for date night in a box; and even curated clothing services. I personally subscribe to Tasting Room for wine. There's excitement when the box comes and you open it up to see what's inside.

Kristina: Is now the right time for a retailer to get involved with this type of subscription service?

James: The short answer is yes. Experimentation is important, especially in retail, to create an ongoing experience. The subscribe-and-save concept is the convenience play, which is perfect for things like diapers, so I don't have to go to Target and pick out those products on an ongoing basis. The other element at play is the surprise and excitement of the curated boxes, like Target's beauty box. You don't know what's going to be inside every time. The question every retailer has to ask, however, is whether they have the critical infrastructure to support a subscription service.

Kristina: How can checkout/cart abandonment data be used to improve subscription models?

James: This goes into a deeper discussion of things like churn rates. In this case, you're looking at forced and unforced churn. Let's say the average customer uses Spotify for 18 months. What happens between 10 months and 18 months that makes them lose interest in that service? I think it's less about checkout and cart abandonment and more about the ongoing value you're providing. At one point, I was in three different wine clubs. If I'm getting red and white every month, and I'm dumping out 50 percent or more of the order because it doesn't taste very good, that shows a lack of expertise in curation services. The successful wine clubs provide additional value in curating wines to my taste and educating me about wine.

More from James and Digital River next week, including tips on how to build a strong subscription box strategy.

Tags: Digital River, ecommerce trends, subscription box tips, subscription box trends

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