Businesses Thrive When Customers Subscribe

One primary way online retailers try to differentiate themselves from their competition is through innovation; bringing new solutions to market while also encouraging improved customer experiences across various touchpoints. A study from CouponFollow shows that during the Covid-19 crisis, many US consumers have leaned into subscription-based products—with some consumers buying for the first time.

Of over 1,000 shoppers surveyed, one in five had purchased a subscription box to have products on-hand during the pandemic. The survey showed the most popular subscriptions were HelloFresh (21%), BarkBox (20%), Blue Apron (19%), and Dollar Shave Club (18%). Many retailers are taking note of this shifting behavior and data projects that by 2023, as many as 75% of direct-to-consumer brands will have a subscription-based offering.

Subscription products are no doubt convenient and research suggests that there is a chemical payoff for buying them. Opening subscription boxes are thought to release dopamine, similar to the satisfaction and feeling someone gets when they receive a text message from someone or when they gamble.

The subscription ecommerce market has grown by more than 100 percent per year for the past five years. The largest such retailers generated more than $2.6 billion in sales in 2016, up from a mere $57.0 million in 2011, according to a McKinsey Report.

Retailers who adapt to this shift in buying behavior are growing faster and seeing long term success. Over the past 7 years, companies across North America, Europe and Asia Pacific, have seen their subscription-based sales grow by more than 300 percent, representing an 18% compound annual growth rate, according to the Subscription Economy Index (SEI). Companies that are transforming into service providers via subscriptions are clearly experiencing rapid growth and will continue to do so as they iterate their offerings in years to come.

Looking ahead, the pandemic presents uncertain challenges. It makes good business sense to start planning now and ensure that your business can adapt as this new reality unfolds. Every proactive step retailers take now will help to smooth the road ahead for their subscription businesses. Subscription businesses that leverage this data to experiment and enhance their offerings – whether they are traditional retailers, ecommerce giants, technology providers, or manufacturers – will gain a greater understanding of their customers and be better positioned to scale in the current climate.

The new year will certainly bring unrivaled growth for those who commit to becoming truly customer-centric organizations, placing customer preference for convenience, simplicity, and flexibility at the core of their businesses.