The concept of a monthly membership, once tied to items of necessity like utilities and household goods, has evolved to include entertainment, fashion and food. Companies like Stitch Fix for fashion, Birchbox for beauty and Harry’s for men’s grooming were early pioneers of a nouveau, subscription-based model featuring personalized products and services for its customers. The benefits of subscription-based services are two-fold: On the one hand, they allow for the personalized convenience of shopping direct to your door, while also providing the consumer an opportunity to tailor the experience.
Targeted to consumers with a discerning taste and limited means, the front runners to this new concept are financially savvy millennials. Yes, you read that right. Studies show that millennials are better at managing their money than older gen Xers or their parent baby boomers. With the highest recorded loan debt rates of any generation in history, millennials have had to develop a pragmatic approach to how they spend their money. Skeptical about their financial futures, they are well-known for valuing experiences over things. Plus, it helps that many may still be living at home with their parents.
Millennials are quick to adapt to innovative retail models that commoditize on convenience. According to a report conducted by OceanX, nearly 1 in 3 millennials shop via a subscription service and are the most channel-agnostic, seamlessly switching between shopping online (52%) and in stores (59%) on a weekly basis. Actively engaged in share-economy (e.g., Lyft, Uber) practices, there is an allure to the subscription economy that feeds millennials’ desire for accumulating a cache of experiences while satisfying their fear of missing out (FOMO).
The Subscription Economy
The growing subscription box market draws in approximately 5.7 million customers per year, according to a 2017 Hitwise report. Zuora, an enterprise technology company that sells subscription-management software, is hedging its bets on the recurring revenue model to reinvigorate the retail market. They estimate the subscription economy will represent close to $9.1 billion in revenue by 2022, and CEO Tien Tzuo predicts that the future of retail will rely heavily on paying for access. Customer retention will significantly depend on how quickly retailers can come up with dynamic subscription programs. Once retailers take a shine to this idea, Zuora’s enterprise software will enable a smooth transition to integrate the offering into their omnichannel portfolio.
Try Before You Buy: A Sampling of What’s Available
- Swiss watchmaker Eleven James appeals to millennials with a subscription model where members can borrow a luxury timepiece on a quarterly basis.
- Gwynnie Bee customers select (and swap items) from their online closet as often as they wish with subscription-based pricing determined by the number of items selected.
- Ipsy provides consumers with a monthly bag of cosmetic samples for $10. The products include skincare, perfumes, nail polish and makeup accessories.
- Menlo Club individually curates a package of up to three menswear items based on the subscriber’s style for $60 per month.
- ThriveMarket sources natural and organic food products offered at reduced costs through an e-commerce membership program.
I’d love to hear from you about your favorite subscription box service. Which one do you covet? How does it enrich your life? Tweet your comments to @AnjeeSolankiCRE.
Anjee continues to be an insatiable collector of all things retail. She’s a student of culture living next door to future shoppers, whose fleeting trends constantly change the retail landscape … driving retailers, landlords and developers crazy!