Subscription Box Programs: What retailers can learn

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Subscription Box Programs: What retailers can learn

By Georg Richter - 03/01/2018
Many ingredients make a successful company, and a seamless and satisfying consumer experience is a vital one. However, for big-box retailers such as Walmart and Target, delivering such an experience is more challenging due to their wide scope of consumers. Recently, Target took a giant step in the right direction when it began offering pet toys and treats directly from the subscription retailer BarkBox. I believe many more successful retailers will eventually follow suit.

The key word, though, is eventually. With the exception Sephora’s Play! monthly beauty subscription box program, no other large retailers have effectively created a true omnichannel customer experience. Many are testing the power of combining brick-and-mortar, e-commerce, and subscriptions, but few have cracked the nut to date. Yet within a couple of years, virtually all retailers will have to offer some form of curated, direct-to-consumer subscriptions in order to remain competitive.

Evolution
It is now second nature for consumers to shop online for products that are delivered directly to their doors. In fact, eMarketer reports that in 2017, e-commerce sales across the globe rose to nearly $2.3 trillion. Consumers not only relish the direct-to-consumer experience, but they’ve also come to expect it from virtually every brand.

Among the factors driving the subscription box movement is paradox of choice, as Barry Schwartz explains in his book, “The Paradox of Choice: Why More Is Less.” The more choices consumers have, the harder it is for them to decide, and in turn, the less likely they are to buy. Moreover, consumers are more prone to feel buyer’s remorse after choosing among a plethora of options.

A subscription business can help solve indecisiveness and regret by curating products according to a customer’s personal preferences. This ultimately simplifies the shopping process. Through this approach, curation and personalization become the center of the retailer-customer relationship. It allows the retailer to become more involved in the direct-to-consumer relationship, which is the second factor driving the subscription retail trend.

Curating and customizing subscription boxes are among the more successful methods of doing this while maintaining and boosting customer loyalty.

Making a subscription box succeed
To create a positive customer experience, it is essential to give customers exactly what they want in variations that fit their tastes. Retailers can increase the stickiness of these subscriptions by providing store-issued credit cards and loyalty points programs across all channels. This is not a trivial technical issue but one that can really connect the dots for retailers’ consumers who don’t distinguish between sales channels.

Some retailers might even benefit from implementing in-store pickup, return, and exchange services. However, there are many hurdles to clear before this positively impacts the customer experience.

These hurdles are seen in the current total of successful subscription boxes in the market. Sephora looks to be the only company that has fully integrated the subscription box into retail experiences. Sephora’s success stems from its products and the customers who use them.

Cosmetics are one of the best categories for subscriptions because customers are highly engaged and want variety, inspiration, sampling, and customization. Nevertheless, the food, apparel, and pet industries will soon learn and experiment with subscriptions that are more than standalone businesses and can be a part of an overall omnichannel customer experience.

Simply creating boxes of products and charging customers monthly fees is far from a winning formula. Sending everyone the same products would be about as successful as selling only a handful of items in the store.

Instead, it’s important to view a subscription box as part of a seamless omnichannel strategy, which retailers can develop through these four steps:

1. Get started.
For retailers who are hesitant about starting a subscription program, the most important piece of advice is to stop waiting. Subscription boxes are proven to enhance retailers’ core business by generating more loyalty among current customers while attracting new customers. Advertising for the subscription aspect of the business will also add to the retailer’s existing advertising and potentially PR efforts, as they can now claim to be a part of the growing subscription economy.

2. Ensure continuity.
It is highly important to ensure that pricing on every channel is consistent with all other channels and that there is little to no conflict among them. Keep in mind that the e-commerce world thrives on transparency. If store discounts aren’t reflected in subscription channels, then a retailer risks adding a negative experience to the mix.

3. Connect all channels.
After creating a sizable customer base (10,000 or more), a retailer’s next step is to invest in connecting all the company’s channels. This might include in-store box pickups, product returns, and exchanges. All of this isn’t expected to happen overnight, so companies should tinker with these options until they have them down to avoid any missteps.

4. Integrate customer databases.
To take the customer experience to the next level, retailers must integrate their customer databases and move slowly toward incorporating store card and loyalty programs. This can be challenging due to changing tax implications, financial situations, and discount schemes. In this effort, it’s better to be slow and precise than fast and wrong.

In 2018 and beyond, the customer experience will dominate every company’s success. For retailers, this means increasing sales and profitability by promoting stronger customer loyalty. With a subscription box program and an omnichannel experience for customers, most retailers will eventually catch on, and by following the steps above, ultimately succeed.

Georg Richter is founder and CEO of OceanX, which is reinventing the membership economy by transforming customer-brand interactions and providing a powerful engine for subscriptions.