The State of eCommerce Subscriptions in 2021

eCommerce subscriptions were all the rage two years ago. Now, they seem more important than ever during a global pandemic.

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Updated March 16, 2022

It has been over a year since we first analyzed the rise of eCommerce subscriptions, and a lot has changed. Subscription services exploded, eCommerce adoption increased. Then a global pandemic upended retail and brought the world to a standstill. Even as consumers are eager to return to life as they knew it, uncertainty still remains.

This article explores the current state of the eCommerce subscriptions, the impact of COVID-19 and the opportunities still available to DTC brands.

The Market Has Grown Substantially Since Our Last Analysis

Research released in 2021 by the Subscription Trade Association (SUBTA) found that about 20% of U.S. consumers subscribed to a box during the pandemic. Between Q2 and Q4 of 2021, pet and animal subscriptions increased by 147%, beauty boxes subscriptions increased by 120% and food subscriptions increased by 100%.

Consumers find subscription services appealing for several reasons, says Christopher George, Co-Founder of SUBTA. “Most importantly they allow the consumer to engage in a relationship with the brands,” he says. “In many cases, they also save the consumer money; subscriptions can bring value and a lower cost monthly versus a one-time larger payment.”

Encouraged by the success of startups like Blue Apron, a slew of established brands have gotten in on the action. Companies like Nike, Urban Outfitter and Banana Republic have all started subscription services over the past few years, while Amazon expanded its subscription offerings in apparel. McKinsey’s Ken Fenyo and Adam Mitchell say they expect the actions of these established players to increase sales and raise consumer awareness of the model.

The U.S. leads the way when it comes to subscription service adoption, with the average American consumer spending $273 per month in eCommerce subscriptions. It is far from an American phenomenon, however. The number of Canadians who have at least three or more subscriptions grew by 58% during the pandemic. As of 2021, Sweden, Norway and the United Kingdom also topped the list of countries with the highest level of subscription services.

eCommerce subscriptions

The Pandemic Has Proven Positive For Most Subscription Brands

The vast majority of subscription-based businesses have fared well during the coronavirus pandemic, writes Tien Tzuo, founder and CEO of subscription management platform Zuora. More than one-half (53.3%) of subscription-based businesses report that subscriber acquisition rates have been unaffected. Four out of five subscription companies are still growing during the pandemic, and 18% of subscription companies have seen accelerated growth.

Subscription facilitator Ordergroove reported a 41% increase in subscriptions across all verticals since the pandemic began.

Ordergroove CEO Greg Alvo attributes the rise in subscribers to the relationships these brands build with consumers. “During these uncertain times, relationship commerce offers consumers an easy and predictable way to shop,” he says.

IMARC Group predicts that the subscription box market size will reach $18.8 billion by 2026. The market research group notes that Amazon Subscribe & Save, BarkBox, Birchbox and Blue Apron are fueling much of the growth, along with other key players like FabFitFun and Dollar Shave Club.

Should Your Brand Start a Subscription Service?

For Richard Kestenbaum, co-founder and Partner at Triangle Capital, it is not a case of if, but how. He says that with lockdown accelerating adoption rates, brands must assess which parts of their business can be sold by subscription. Currently, the bulk of eCommerce subscriptions are sold by subscription-only brands, but nothing is stopping larger retailers from adopting subscription models. If Nordstrom can do it, what is stopping your brand?

Digitally native brands are great candidates for eCommerce subscriptions, writes Patrick Campbell, CEO at subscription software provider ProfitWell. Customers are often more engaged with eCommerce brands and are more willing to commit to regular spending in the form of subscriptions as a result. They also stand to reap several benefits, including higher lifetime values and more consistent revenue.

There are three main models to sell subscriptions, explains journalist and digital consultant John Boitnott. You can curate existing products in a monthly box, replenish consumable products at regular intervals. Or, you can offer consumers exclusive access to products and experience.

“For consumable or refillable products, subscriptions are just common sense,” writes the team at Churn Buster. Consumers know they will always have your product on hand. Plus, they will have the anticipation of receiving it every month. In return, brands get reliable monthly recurring revenue that makes inventory and financial forecasting much easier. They can also save the money that would otherwise need to be spent on attracting new consumers.

You will need to consider whether subscription boxes make sense for your customers and whether they can afford them at this time, though, says Erica Carranza, Ph.D., VP of Consumer Psychology at market research firm Chadwick Martin Bailey. “The question now is: Is that too expensive, especially if people are concerned about being laid off, or worried about the economy? In the current climate, does it appear too frivolous?”

eCommerce subscriptions

Focus on Customer Experience to Improve Your Odds

Adopting eCommerce subscriptions just so your brand can cash in during the coronavirus will not work. You need a long-term, customer-centric view to be successful in this market.

Venture capitalist Kirsten Green says that eCommerce subscriptions must enhance the customer experience of the product. “If it doesn’t, then it is ultimately just a gimmick.” You need to go beyond repackaging your product in a box and delivering it monthly to consumers.

Success comes from understanding consumer needs and motivation, writes First Insight’s Greg Petro. Do your customers appreciate the ease of the service? Do they enjoy being surprised or are they overwhelmed by the number of options? Conduct consumer research, get feedback and tailor your subscription offering appropriately.

Visiture CMO and CoFounder Ron Dod recommends brands straight up ask consumers what they want. This is what Bark has been doing since it started selling its BarkBox subscription service in 2012, says Dod. This feedback spurred the company to design its own toys instead of buying them. It also helped them to understand that consumers want to purchase products separately from the subscription box.

In many verticals, consumers prefer choice when it comes to delivery frequency, too. ReCharge’s 2021 State of Physical Subscription Commerce report found that 99% of the top-tier subscription merchants offer skips, while 98% offer swaps. Likewise, other popular subscription services offer one-time purchases or pre-order subscription models.

Partner With a Third-Party to Reduce Risk

Establishing a new revenue channel like eCommerce subscriptions is fraught with risk at the best of times. Brands that partner with a third-party ease the transition and reduce risk.

Nicole Lee, Director of Fulfillment at Saddle Creek Logistics Services, says that flexibility is key. Working with a third-party for warehousing and logistics will make it easier to scale operations quickly, without significant investment.

Brands can also lean on third-party partners to run the consumer-facing aspect of subscription selling. Puori, a subscription-based supplements brand, relies on Scalefast to handle customer eCommerce subscriptions and loyalty programs. As a result, their in-house team can focus on the most important aspect of subscriptions: the customer experience.

Wondering if adding a subscription service is right for your brand? Schedule a call with one of our eCommerce experts and explore the possibilities.

Images by: Vasin Leenanuruksa/©, Morning Brew, Brooke Cagle

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