The New World of Subscription Shopping

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The New World of Subscription Shopping

By Achim Schneider - 11/22/2017

Today’s fast-paced economy leaves consumers with little time for shopping, which has prompted the growth and resurgence of subscription-based business models. The market is already well established, touching several verticals such as food and consumables, clothing and accessories. Well-known examples include BirchBox, Blue Apron and Dollar Shave Club.

The appeal of subscription-based business models for consumers is simple: it delivers an experience that goes beyond a traditional one-time purchase. Consumers no longer need to waste time visiting stores, browsing through racks, searching for ingredients or even ordering online, because the goods are delivered right to their door on a regular schedule.

According to research conducted by Shorr Packaging, more than 2,000 subscription box services existed in the U.S. in 2016. Additionally, visits to subscription box websites grew by more than 3,000% in recent years, from 722,000 in 2013 to 21.4 million visits in 2016. The shift to these models reflects an industry-wide change in how consumers interpret value. They want to be in control of their experience. The subscription model gives them the flexibility and personalized experience they have come to expect. Hence, to maintain market share and grow their businesses, brands need to adapt their business models to provide the experience consumers want.

For example, when consumers go to a store, they expect a curated experience that includes both convenience and personalization. A recent Accenture study confirms this notion, finding that 65% of consumers are more likely to shop a brand that knows their purchase history and offers relevant recommendations. As a result, many subscription services collect specific preferences so consumers can receive personalized products each month without having to think about it.

For brands, subscription-based business models benefit the bottom line in a number of ways. A recent study by SAP and the CMO Council found that consumers are willing to share data in exchange for value: if it saves them money (77%), time (49%) or makes their life easier (47%). Knowing that subscription-based services are focused not on selling a product and moving on to the next customer but instead on long-term customer interaction, brands get unlimited access to customer data they can leverage to continuously improve the model.

As consumers share information on their likes and dislikes, brands learn more about each individual. Successful brands will utilize this data by analyzing it in real-time to cater to consumer wants and build stronger relationships. This can be done by offering more personalized recommendations, products, or discounts on reviewed items. With 70% of consumers willing to share data with brands to personalize their shopping experience, everyone wins: Brands learn more about their shoppers, and consumers receive personalized products and touch points.

Is a subscription model right for your business?
Well-established brands have plenty of opportunities to build their own subscription models because they already know how often their consumers buy and how much they typically spend. But when brands move into a subscription model, it's important to understand how the traditional model changes. Consumers are now purchasing a service instead of just a product, and their expectations have shifted.

These modifications have a direct impact on the underlying business processes and, therefore, infrastructure is needed. By investing in a digital core — an end-to-end IT infrastructure that provides real-time visibility across all business segments — brands can consolidate each touch point to create dynamic consumer profiles. With these profiles, brands can harness the data they're collecting (likes, dislikes, sentiment analysis, etc.) toward defining each consumer profile and, in turn, making each experience personal.

As the consumer goods market continues to transform, brands will further cater to unique consumer unique needs by providing individualized shopping experiences. As more businesses embrace this digital model, there are great opportunities to capitalize on subscription-based business models.

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