By Liz Cadman, Founder of My Subscription Addiction
From a quaint idea to a mainstream business model, the subscription box market is going big as players such as Adidas, Sephora, Macy’s and Disney enter the game.
Once just a startup concept, subscription boxes are going mainstream. Since the 2010 arrival of Birchbox — whose founders aimed to make beauty product shopping easier by offering samples of products in a box on a monthly basis — the trend has been growing steadily. In 2012, there were less than 200 subscription boxes on the market. Today, there are more than 2,000.
From 2011 to 2014, small companies trying to carve out their own niche dominated the subscription box market. Once a category was saturated, such as going from five beauty boxes to more than 50 in just a few years, a box would launch in a new category and other new subscription boxes would follow. From “time of the month” and “geek boxes” in 2014 to “home/design boxes” and “book boxes” in 2015, each category has expanded then stabilized as the next untapped category became hot.
But what was once a startup game is now shifting — big companies are entering the subscription box world and changing the revenue model, sourcing and customer expectations, too.
Getting in the Box Game
Walmart Beauty Box launched a quarterly subscription in late 2014. The company’s main competitive advantage: it has the lowest priced beauty subscription box at only $5 and there is no charge for shipping. The goal is to get customers sampling the beauty products Walmart carries and give customers coupons to buy the full-size versions in the store.
Disney launched two subscriptions in 2015: A Pin Pack subscription for $39.95 and a Tsum Tsum plush toy subscription for $24.95. Each subscription caters to a specific Disney collector demographic and includes exclusive items as a way to keep customers engaged and excited.
Play! by Sephora launched its beta version in late 2015 to huge demand. The beauty product company’s goal is to get subscribers into its stores. In addition to beauty samples, each box includes extras, such as a “Play Pass” that subscribers can bring to the store to get tutorials and tips on the makeup they received.
Avenue A by Adidas is a recently launched quarterly subscription ($150 a box) focused on women’s running. The company’s goal for the first year is not revenue focused. According to Chris Brewer, the Category Director of Running, Adidas aims to create a community forum and a communication platform with what should be its most dedicated customers. Avenue A will be providing convenience and hard-to-find items to subscribers, while getting feedback at a level that regular market research can’t provide.
Keeping Up with Demand
Unlike a startup subscription, big companies have a built-in customer base ready to subscribe. Alternatively, a newly branded subscription may need to be around for months or even years to earn brand loyalty and customer trust. In fact, sometimes these big companies can’t keep up with demand. Disney’s Pin Pack subscription is regularly sold out, telling potential customers to check back later.
Having more customers than boxes may sound like a good problem to have, but it can lead to customer frustration. Sephora, for example, has run the risk of alienating customers, including their VIBs (customers who spend $1,000 or more a year) by limiting access to Play! and not providing clear insight into how the company is selecting who gets off its
waitlist next. Yet, while the big companies carve out their space in this world, there is still plenty of room for small-scale subscriptions.
How smaller subscription box companies can compete:
Go for niche. Going up against Birchbox and Ipsy (and now Sephora and Macy’s) would be a losing battle in the general beauty box category. Instead, many smaller companies are defining their subscription box by how they are different. Petit Vour ($15 a month) is a beauty subscription box that only sends vegan items. Yuzen ($33 a quarter) delivers spa-inspired, natural and organic beauty products.
Play to your strengths. While bigger companies have the advantage in negotiating with brand partners for their boxes, small subscription boxes can be attractive to certain vendors because of their scale. For example, a small-batch, natural beauty brand may not be able to fulfill the quantities necessary for a box with hundreds of thousands of subscribers, but can deliver to a much smaller subscription base, which only sends out several hundred or thousand boxes a month.
Smaller companies can also have shorter lead times for curating the items in a box. If a subscription can work with inventory a company has on hand instead of needing production, the timeline for sourcing items for the box can be considerably cut.
Enjoy the big box bump. The subscription box industry is still relatively new. There are plenty of potential customers still unaware of this business model or unclear on how it works. With popular brands entering the market, the visibility of subscription boxes will increase and customers will become more familiar with the payment structure.
At My Subscription Addiction (www.mysubscriptionaddiction.com), readers can keep track of the boxes they subscribe to and the boxes on their wishlist. The average user subscribes to seven boxes and has 12 more on his or her wishlist, so there is room for everyone!