Consumers have embraced online shopping and increasingly, they love subscribing to receive a regular supply of consumer goods – razors, beauty products, meals, wine, pet food, dog toys, carefully chosen luxury items and more. If it can be sold, it can almost certainly be subscribed to. And customers are increasingly taking up subscription offers.
- About 15% of online shoppers have subscribed to an ecommerce subscription service within the past year.
- 42% of male subscribers and 28% of females have 3 or more subscriptions.
- The online subscription market has grown by over 100% in the last 5 years.
With statistics like these there’s no denying, the subscription service industry is growing and if you sell, or want to sell products online, it makes sense for you to get on board the subscription train. And with so many consumers isolated and locked-down during the world-wide Covid-19 restrictions, there has perhaps never been a better time to consider how you can make it convenient for your customers to enjoy your products on repeat.
But exactly how do subscription services work?
In your guide to subscription model types we explained that a subscription business model is where your customers (subscribers) agree to pay a fee at regular intervals to receive your products. Renewal of the fee is usually automatic, which is one of the key benefits of adopting a subscription model – predictable, recurring revenue.
Also, in the guide, we introduced you to the 3 main types of subscription models or services:
- Replenishment – the customer subscribes to receive automatic replenishment of the same or similar items. This type of subscription service is mostly used for commodities, coffee, alcohol, beauty products, pet products, vitamins and more.
- Curation – the customer subscribers to receive a box of curated items on a regular basis. This could be weekly meal kits, luxury items or beauty goods. There is often a surprise element to these boxes, which is part of the appeal – as long as the quality is maintained by the seller.
- Access – the customer receives access to exclusive items or services. Online clothing stores use this subscription type to reward subscribers with VIP deals and exclusive or early access to products.
I sell products but how do I really know a subscription model is right for my business?
In 2018 McKinsey found that subscription services appeal most to the younger, wealthier population. Subscribers tend to be between the ages of 25 and 44, living in urban areas, and have an annual income between $50 and $100k. If that sounds like your target market, a subscription model could be a particularly good option for your business. But, with the uptake of subscription services growing so rapidly, any business that sells a product could consider offering a subscription service to their customers – regardless of their demographic.
In 2020 and beyond the success of your subscription service will be influenced by;
- Finding the right price – for you and your customer.
- Your ability to offer exceptional customer service and value – so the subscriber doesn’t question the recurring fee of your subscription.
- The brand loyalty you build up by turning your customers into raving fans who tell others about your service.
- The ultimate benefit the customer enjoys from being a subscriber – mainly either convenience, curiosity, or excitement/surprise.
- The uniqueness of your offer – consumers are looking for new and exciting products and services to subscribe to.
Speaking of 2020, what are the best subscription services to start?
Skincare and beauty
If your niche is skincare and beauty, you’ll be in good company offering a subscription box to your customers. In fact, one of the first subscription services on the scene was Birchbox, which made popular the idea of selling beauty treats (mini versions) of makeup, skincare, and haircare products on a monthly basis.
There’s no doubt that the skincare and beauty market is crowded with subscription options, but buyers are still hungry for these boxes – they are just becoming more discerning according to Fast Company. To be successful in this market in 2020 you need to deliver value for sure – but buyers are also looking for the thrill they get from receiving and opening the box and discovering what’s inside for them to try out. Experience is everything and packaging is nearly everything.
Meal kits have been gaining traction in the US for the past few years and statistics indicate that nearly 20% of all US adults have subscribed to a meal kit service and nearly 4 in 10 are current subscribers. In Australia, meal kits are estimated to be worth over $300 million in annual sales and growing at a rate of 40 per cent compared to 2018.
Meal kits are most popular among young families and young millennials, who see them as a healthy alternative for out-of-home meals. They appeal to those who are time poor and wanting to make healthy food choices. Marley Spoon and Hello Fresh are two of the bigger players in the Australian market but there are more joining them all the time.
But whilst the popularity of meal kits is growing, there is still a lot of scope for growth in this market with only 6% of Australian households having purchased a meal kit in the last year.
If you can find a way to broaden the audience for meal kits and make it super easy for them to order from you on a weekly basis – this subscription service idea could be a winner for your business. Ready-to-eat meals for infants as being offered by Nurture Life is an example of thinking outside the meal kit square.
Niche product subscription boxes
Niche products make up 20% of the overall subscription market. People are also drawn to subscription boxes that cater to their hobbies. These hobby-based subscription boxes account for about 15% of the market.
Niche products for women, such as hosiery, lingerie and period boxes, account for a larger market share than clothing and fashion. In fact, boxes that cater to children’s toys and books are more popular than fashion and clothing. A trend that will continue for 2020 is that niche services subscription boxes will do best as opposed to generic items, like clothing and fashion.
Subscription boxes for Men
If you have a product with male appeal, you should be looking at turning your customers into subscribers in 2020. According to a study by the UK’s Royal Mail, the potential for growth in the male grooming subscription box market is huge. They expect that male grooming subscription boxes in the UK will grow to about 2 million subscribers by the year 2022. They also found that 30.6% of men signed up to subscription box services compared to just 24.3% of women.
Whilst women make up more than 60% of subscribers, men make up 42% in the US, remember that statistic we quoted earlier – 42% of male subscribers compared to 28% of women subscribers are more likely to have three or more active subscriptions there.
And if you needed more proof you don’t have to look further than one of the most successful subscription services in the world; the Dollar Shave Club – marketed to males. And the benefits enjoyed by subscribers to this service could be the key to your own success in this market – offering convenience and value for money.
Board Games/Old fashioned fun inspired subscription boxes
BusinessWire reports that; “The board games market is expected to grow at a rate of over 10% during the period 2018-2024. And there’s no doubt it will probably enjoy a significant boost in 2020 with so many of us entertaining children at home during the Coronavirus Pandemic.
Board games are considered one of the best ways to leave aside electronic gadgets and devices, which are otherwise keeping modern-day families busy, and get them together over an interesting game.”
This presents a unique opportunity to online sellers to offer exciting curated boxes featuring board games. And during 2019 “monthly mystery boxes” started to become popular with families and groups of friends. Concrete Playground is one company in Australia which delivers a new board game to subscribers each month.
While this niche may easily reach saturation point, boxes that provide things for families and friends to do at home may continue to grow in popularity beyond 2020.