Although the first instances were earlier, subscription boxes began to take full flight in the past decade with the introduction of the beauty and grooming subscription services. This saw the launch of Birchbox in 2010, followed by Dollar Shave Club in 2011 – the latter being acquired by Unilever in 2016 for $1 billion.
Over the years, a growing number of businesses began seeing the profitable nature of venturing into the subscription box market, with a reported growth of 40% from over 2017 to 2018 bringing the number of subscription boxes on offer to 3,500 in 2018.
This increase also meant a greater range of products on offer. Once synonymous with ‘beauty’, subscription boxes are now available across many industries, with offerings now covering health & fitness, food & beverage, D.I.Y & craft, fashion, books, and more. Unlike many other consumer trends, subscription boxes appear to be more than just a passing one, and to such an extent that even large traditional retailers are entering the market.
Naturally, businesses looking to potentially launch their own subscription boxes are questioning how and why they have become so popular and where the industry is heading, as the growing market dictates that businesses must differentiate to remain competitive. With this in mind, we explore the psychology fuelling the subscription box craze and an industry trends outlook for 2020.
Why are subscription boxes so popular?
Since its dramatic rise to worldwide popularity over the last decade, the subscription box industry accounts for a large portion of the subscription e-commerce industry’s current worth of over $10 billion. Numerous studies surrounding this phenomenon aim to offer insight as to why consumers are so attracted to the service.
Whilst it is common knowledge that online shopping is steadily overtaking traditional retailers as the younger generations opt for digital experiences, this is only one of many attributable factors. Some other major contributing factors include:
The increasing popularity of online shopping goes hand in hand with the convenience of making purchases at the touch of the button and this is also the case for subscription boxes. Having products pre-chosen and replenished monthly adds another element of convenience which is attractive to consumers as the time-consuming browsing and selection process is eliminated.
Subscription boxes offer carefully chosen products from a wider range, often to complement a certain need. For example, a company offering meal kits could choose their boxes based on different dietary requirements (e.g. vegan, dairy-free, gluten-free). Consumers don’t need to spend excessive time browsing through pages of products to find a suitable selection, making purchasing decisions much easier.
Strategically and accurately defining ‘personas’ for each box has proven to be a successful strategy for many businesses as consumers are drawn to purchase something which feels tailor-made for them. By creating personalised experiences, consumers are also more inclined to make a larger purchase. For example. if a group of relevant products are offered in a bundle, they are more likely to take this option than if they were to find the products individually.
Businesses often attract customers through price bundling techniques, advertising their boxes as offering ‘$X’ in savings versus buying each product individually. This is a massive drawcard as consumers strongly consider discounts and value when making purchasing decisions.
With subscription boxes promising ongoing deals which are only available through this channel, consumers are also affected by ‘fear of missing out’ (FoMo), a psychological phenomenon which drives consumers to purchase primarily so as not to ‘miss out’ on an offer and, as such, are inclined to continue their subscriptions.
Although novelty was arguably a more defining factor during the advent of subscription boxes, the anticipation of receiving a package and the uncertainty of its contents continues to play a significant psychological role in their popularity.
The ‘gamble’ of whether the recipient will like or dislike the products is often defined by the positive experiences, meaning if customers are not happy with their most recent box, they will seek the satisfaction of receiving a ‘good’ box again with the next delivery. This is based upon a psychological theory known as ‘operant conditioning’.
Subscription box trends for 2020
The success of early players in the subscription box market has seen a variety of businesses penetrating the market. As the market continues to diversify, businesses are being forced to adapt to the latest trends which are not only driving tougher competition but also enabling greater success in an increasingly crowded market.
The past few years have seen many trends in this space gain traction, with the following expected to develop further in 2020.
1. Leveraging data
Businesses are realising the power of data in creating more personalised products. Using artificial intelligence (AI) to understand different touchpoints provides invaluable insights into consumer preferences which are used for creating boxes that sell. Businesses must implement serious strategies to harness data to optimise not only product offerings but also customer journeys or will fail to remain relevant in today’s market.
We expect to see ‘smarter’ AI capabilities which will extend personalisation across the whole customer experience. For example, chatbots programmed to ‘get to know’ customers when they arrive on a website to determine their likely purchases, using purchase history to create and market ideal products to returning customers, and addressing ‘pain points’ to optimise customer journey mapping and maximise sales.
2. Specialty markets
As we’re seeing typically niche markets become more mainstream (e.g. eco-friendly, health conscious, pet owners), it is a safe assumption that more businesses with offer boxes with these products over the next year, mirroring broader market trends. Substantial growth in the vegan market and health food industry will likely influence new subscription boxes in this space.
3. Traditional retailers
The widespread decline of in-store patronage means retailers must broaden their online presence and increase brand loyalty. With Target and Walmart already getting in on the action, we can expect many more traditional retailers to recognise the subscription box market as a viable revenue stream.
The psychological theory of ‘behavioural consistency’ suggests that subscription box consumers may be more likely to stick to one brand as past behaviours are the best indicator for future behaviour and ongoing subscriptions are a familiar and consistent action for the consumer.
4. Greater customisation
Millennials account for the majority of subscription service memberships and are characterised by their higher expectations of customer experience, meaning they expect greater choice and flexibility with their consumption habits.
In a bid to satisfy their highest spending demographic, more businesses will likely offer more range in terms of pricing (e.g. tiered subscription levels), content (e.g. ‘build-your-own box’), and commitment (e.g. ability to pause subscription).
Takeaways and tips for subscription box companies
Subscription boxes have proven to be a popular product among consumers which as highlighted by the growing number of businesses entering the industry successfully which has been met with steady demand. As consumers outgrow the novelty aspect of subscription boxes, their sights turn to the convenience, personalisation, and value that they offer.
Emerging industry players should acknowledge these elements as consumer expectations, not perks, when developing their boxes. To keep their products competitive, businesses should also:
1. Test subscription box pricing regularly.
Consumer preferences and acceptance change frequently and should be reflected through pricing, especially in an increasingly crowded market.
2. Test consumer preferences before changing features.
One small unwanted change is enough to turn customers away to a competitor.
3. Continuously observe for new industry trends.
With greater competition comes greater innovation and enhancement opportunities.
Learn more about 2020 trends
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