Subscriptions continue to be an attractive model for companies and consumers alike, a trend that is predicted to dramatically accelerate in the future.
Analysts predict the global subscription eCommerce market to reach $478 billion by 2025, growing at a compound annual growth rate (CAGR) of 68% from 2019-2025. To put those numbers into perspective, the eCommerce market, which has experienced tremendous growth in the last year, is predicted to grow at a 6.3% annual growth rate from 2021-2025.
Consequently, it’s projected that by 2023, up to 75% of DTC brands will offer subscriptions to their customers.
So why is subscription growing so rapidly? There are probably many reasons, but we believe three trends are driving this growth.
Three Trends Accelerating The Adoption Of Direct-To-Consumer Subscription Models
The Pandemic Expanded The Horizon
I am sure you’re not surprised this made the list, I mean, what eCommerce trend has the pandemic not accelerated? I am also pretty sure I am not the only one who had difficulties finding essential products at the grocery store last year, or, who stopped going to the store altogether in favor of online groceries.
After experiencing a pandemic, having access to an uninterrupted flow of products that you love and need becomes very appealing. No doubt, last year was a great year for coffee companies with a subscription program.
But beyond essential products, we’ve also seen new verticals enter the market. You can now sign-up for a murder mystery subscription box and receive clues every month to move your investigation along, or spruce up your home one box at a time with seasonal-themed decorations.
We anticipate this is only the beginning. More innovative and creative subscription models will pop-up over the next few years as more brands start their own programs.
CPG Companies Are Moving To Subscriptions
DTC brands have undoubtedly played a role in the rise of subscriptions during the last decade. Brands like Dollar Shave Club, BirchBox, Hubble, and StitchFix made subscriptions sexy again, capturing the attention of millennials and early adopters.
But by 2018, a McKinsey study revealed that only about 15% of consumers subscribed to receiving products on a regular basis. Despite growing in popularity, the diffusion of subscriptions still hadn’t reached sustainable levels of adoption (aka early majority).
However, with consumer packaged goods (CPG) going direct-to-consumers (DTC), we believe this will change quickly. Last year alone, we’ve seen a few CPG brands launch their own subscription programs.
In Q4 2020, Coca-Cola launched “The Coca-Cola Insiders Club” and in less than 3 months the number of new members had surpassed the brand’s expectations, they soon had to ask customers to join a waiting list. Coca-cola’s main competitor, Pepsi, which has already launched two direct-to-consumer sites in 2020, probably won’t be far behind.
Fashion retailer Nordstrom is also experimenting with subscriptions. In 2020, the company launched the “Trunk Club”; a clothes subscription box personalized to the customer’s style (you can even make an appointment with a personal stylist) that can be delivered whenever the mood strikes; there is no monthly cadence or commitment required.
Sticky Consumer Behavior
Once you get used to the convenience, savings, and flexibility offered by subscription programs can you truly go back? Probably not.
It’s one thing if the product or experience that you subscribe to deteriorates over time, but if you keep seeing the value in your subscription – either because of the savings it provides, because you can’t get enough of the product, or simply because you believe in the cause the company supports – the decision becomes a no-brainer.
Making sure your subscription program doesn’t deteriorate and keeps delighting customers, every week, every month, or, whenever your customers receive their products, is just one of the services we offer.
The Stable’s Subscription Offering
At The Stable, we help brands prepare for the future of eCommerce, and we believe that subscription is a part of it. We’ve worked on numerous subscriptions for brands spanning different industries, including food & beverages, health & wellness, fashion & apparel, accessories, and beauty. We’ve learned along the way that no matter your industry, or brand life stage, subscriptions can be a valuable and powerful tool to grow DTC brands.
How It Works
- Program Modeling
There are three key subscription models: replenishment, curation, and access. When taking on a new project, we pair clients with a strategist and data scientist to guide them through a discovery process. During this phase, we identify which model will work best for them based on who their customers are, what type of products they sell, and how often their customers purchase from them.
- A Best-In-Class Subscription Dashboard
We partner with leading subscription tools like ReCharge, Bold, and Ordergroove (all Shopify approved vendors). Our experience building and optimizing subscription dashboards allows us to quickly and efficiently put forward the right features to create a user-friendly experience that delights customers and keeps them coming back.
- Data-Driven Approach & Roadmap
Our ongoing retainer is designed to continue fine-tuning your customer dashboard and help drive adoption, mitigate churn, increase average order value and purchase frequency.
We follow a data-driven approach, starting with setting up tracking, to understand the impact of new features on core business metrics. Then, using learning from monthly analysis, we evaluate, prioritize, and propose updates to your strategic roadmap.
Following this methodology we’ve seen brands that make between $1m-$2m in annual GMV generate up to 73% of their DTC revenue through subscriptions, making it a critical channel to drive revenue.
Check Out Our Work
We built Native’s subscription dashboard from scratch and has worked since then on continuously optimizing it to offer a premium customer experience. One of the custom features we created for them is called “Build Your Pack”, which allows customers to personalize their subscription box and alternate between classic, seasonal, and sensitive deodorant scents.
BRCC was already on Recharge when they became a The Stable client but their program still had room to grow. They partnered with us to redesign the customer experience and create a more intuitive path to purchase, highlighting the benefits of their program and making it easier for customers to personalize their subscription right on the product page.
Are you interested in starting or optimizing your own subscription program? Or maybe you’re still exploring your options, looking to get an external point-of-view before making a final decision? If so, contact us today to book a 30-minute consultation.