By Robert Woo
American consumers, if not global consumers, have become Subscription Nation. Sure there are the staples: Netflix, Spotify, cell phone plan, health insurance (kidding); but we’ve only recently been on the subscription box kick, and its impact has been shaking up eCommerce.
According to Fuel by McKinsey, the subscription eCommerce market is worth about $10 billion (and that’s not even counting Amazon Prime and its “subscribe and save” portion). For an industry that’s been around for about a decade or so (most of the players much less), that’s impressive growth. In fact, the average active subscriber of such services has two subscriptions, and over a third have three or more subscriptions. This shows that once a consumer gets a taste of the convenience and joy of receiving monthly packages, they get hooked.
The psychology of subscription boxes
A 2018 study by McKinsey & Company broke down the subscription box companies into three categories: replenishment, curation, and access. These also neatly fit the psychological reasons consumers love to shop this way:
Replenishment is all about convenience. Who wouldn’t want something they constantly buy anyway arriving on their doorstep? If you buy into the idea that we all get Decision Fatigue, that’s one (or seventeen) fewer items to think about when it comes to shopping. As you can see, about a third of people subscribe for this reason.
Skipping ahead to Access, that’s a much smaller sliver because these consumers are subscribing to be a part of a community and get/earn bonuses. Sometimes, the only way to get certain items is to be a subscriber, and these people are willing to pay a premium to get a discount… and that’s not as counter-intuitive as it sounds. After all, you can’t watch Stranger Things unless you have Netflix (or know someone’s password).
But the bulk of subscribers are all about Curation, aka, the Christmas Experience. They want to be surprised, and that anticipation and the eventual act of unboxing (which in of itself is a hugely popular topic on YouTube), is what gets them hooked.
Even for the low-key “replenishment” category, which includes Dollar Shave Club and Ritual, consumers ranked the novelty-seeking aspect of “personalized experiences” as one of the top three most important considerations in choosing a subscription box service. For the “curation” category, it was the most important aspect. — Pitchbook.com
And if your business can get your customers to eagerly anticipate a surprise each month? You’ve got yourself a steady revenue base.
Businesses hitting big with the subscription box model
This graphic from Hitwise (via Forbes) shows the top subscription sites seeing massive amounts of visitors. The same article cites that:
The online subscription market has more than doubled each year over the past five years, with the largest players among them generating more than $2.6 billion in 2016 sales, up from just $57 million in 2011, according to the McKinsey study.
When a business is seeing billions in subscription sales, it perks up some ears. And who wouldn’t want to get …read more
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