The Candid Voice in Retail Technology: Objective Insights, Pragmatic Advice

Subscription Boxes Go Mainstream?

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I like subscription boxes. In the interests of full disclosure, I subscribe to Lootcrate and to Stitch Fix. I was an original subscriber to Goodies, a food-based subscription started and subsequently shut down by Walmart. I’ve contemplated Birchbox, and also finding another food box to replace Goodies, but haven’t had enough time to put into research to decide if Birchbox will really send me things I’d use. And the food box scene is so complicated now, I just haven’t overcome my inertia to jump in.

Inertia. I think that’s an important part of subscription boxes’ success. Once they get your credit card, as long as they keep sending you cool stuff, you basically set it and forget it.

There are a ton of startups in the subscription box space. You can get dog toys or kid toys delivered monthly. You can get meals for two or four delivered weekly. Cosmetics, clothing, gluten-free, vegan — if there is atribe of some kind out there (Lootcrate serves the geek tribe), then there is probably a subscription box for it.

However, last week Sephora changed the game. By my count, they’re the first major retailer to get in on the subscription box service, with their brand on the box (Walmart did it first, but you had to dig around to figure out that they were the company backing it).

Sephora’s entrée into the space signifies either that subscription boxes are here to stay, or that they have jumped the shark.

I’m not convinced that subscription boxes have peaked yet. Sephora is well-positioned to succeed in the cosmetics category of subscription boxes: they already do a brisk business sending shoppers samples, they know a lot about their shoppers and about products they might like, and they have a large existing customer base to market to.

Fad or not, I do know that subscription boxes have to manage things very carefully if they want to avoid becoming a footnote in the future of retail. Specifically they need to:

Find A Tribe

Subscription boxes do best when they focus on curation and personalized selection. A box that is too broad in scope will have a much harder time staying relevant across a large enough audience, and a box that is too narrow in scope will not find enough subscribers to support its model. Many of the food boxes do it well — chocolates, or vegan, or healthy eating. Even Goodies, may it rest in peace, did a reasonably good job in providing snacks that both appealed to a large audience, but also had the feel of something relatively curated.

A tribe is also important for reaching suppliers. An ideal situation is to find a tribe that has both a strong set of potential subscribers, and a large enough set of suppliers who are very interested in reaching that group. If you can combine a set of suppliers who are willing to negotiate, either by providing exclusives or subsidizing samples or product costs in order to promote trial, and a set of passionate customers who are willing to pay something to get a curated box of samples or products, you’ve got the makings of a decent business model. It’s possible to do it without getting suppliers to subsidize, but that side of the equation certainly helps.

Stay Relevant

Lootcrate box openings in my household resemble a wolf pack circling dinner. My children have even learned that you can check online to see when the next box is coming without having to be on the email list. And check it they do. On the day that the black box arrives, they scramble over each other to be the first to get to it. Should this event occur when one of us is not home (most often, me), woe to you — you get the comic book. Everyone else makes off with the good stuff. However, while there have been many occasions where the contents of the box have felt like excellent value for the money, there have been a few times when the box was a miss — either we apparently aren’t that much of a set of geeks to know the science fiction property that was celebrated by the box, or the collection of magnets, blow-up crowns, and stickers just didn’t feel like it was worth the price of admission. It’s okay to miss every once in awhile, but too many of those, and there will be subscriber churn — definitely a bad thing for boxes.

Be Supply Chain Savvy

This is probably the biggest deal for boxes. Subscription companies know how many boxes they need to send out in any given month, but they must secure the products to fill those boxes in enough time to order the right quantity, receive it, and pack it into boxes. The supply chain operations of subscription companies look more like handling a December 23rd rush every month than a traditional direct commerce retail operation.

I suspect — but don’t know anything special — that this was the demise of Goodies. Every once in awhile we would receive something odd — like a straight-up coupon to redeem in store — because the company wanted to send out a product that wasn’t easily shippable (for example, because it required refrigeration), but couldn’t. The coupon was challenging because most of the products Goodies sent out were not yet available in my local stores. Sometimes the Goodies item preceded store distribution by months. So a coupon just became a slip of paper that was easy to lose.

And then the boxes started coming more irregularly. And then the company missed a month. And then the fateful email came — the company was shutting down.

Solicit — And Use — Customer Feedback

One interesting element of Goodies’ business model was that they asked for a lot of feedback. Customers collected points for taking quizzes about the products. They asked questions across a standard set of categories — packaging, flavor, perceived healthiness, etc. And then they also solicited ratings and reviews. Theoretically, this information was used to provide a more relevant set of product samples to subscribers, but it was also possible to provide direct market research back to the supplier of the product — another potential way to monetize the subscription audience.

Stitch Fix, for which I receive a box every quarter, also asks for feedback. They’re trying to refine fit and also provide input to help stylists make choices that minimize returns (a complication most subscription boxes don’t have to deal with). Subscribers get bonus points for sharing their Pinterest account with the company (if you follow me on Pinterest, that is why my activity level on the site has spiked — people have been warning me for years that it’s a time-suck of epic proportions, which I have resisted until Stitch Fix tipped the scales). I am sharing a lot of information about myself — sizes, body measurements, access to my social media — all in the interest of helping Stitch Fix pick things I will like.

But I have to say, it’s sort of like throwing slips of paper into a well. I have no idea what happens to my feedback after I give it. I don’t get any feedback or communication from my stylist. I don’t even know if I have the same one quarter to quarter, or if that’s all a front to make me feel better about sharing that information. Which is why the use part of customer feedback is so important. If customers share information, they want to know that it’s being used — and used to their personal advantage, not just for the company’s. It’s not enough to say “Thanks for the feedback “. Subscription services need to provide at least some transparency about how that feedback has changed things.

The Box Addiction

I like to discover new things. I like to be surprised, and I like to try. Subscription boxes, like flash sales in many ways, check off a lot of those boxes. But like flash sales, I don’t know that subscription boxes will take over the world. However, it seems there are enough people like me out there to definitively add subscription boxes as a permanent part of the retail landscape — and one that in the future won’t be limited to just startups.

Newsletter Articles August 18, 2015
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