Subscription services involve a customer paying a fixed amount of money that repeats at regular intervals—usually monthly—for a product or service. While the subscription model can also apply to Software as a Service (SaaS), streaming services and digital products (media), the focus in this article is specifically on physical products and their impact on retail.
Subscriptions of physical products typically come in two forms: curated boxes or repeat orders. Curated boxes are assortments of products that are different with each delivery and are either selected by the customer or combined in a mystery box.
While the concept of mystery boxes might sound risky, they’re exploding in popularity, thanks to the sheer diversity of brands that appeal to different hobbies and lifestyles. Brands that send a random assortment of products themed around everything from pop culture to animation, like LootCrate, are pioneers of the mystery-box subscription craze.
Repeat orders are more conventional, involving the same products being delivered over and over again on a schedule. This model applies well to things like household cleaning or grooming products. Dollar Shave Club, which practically wrote the book on recurring self-care subscriptions, is a perfect example.
When done right, the benefits of subscription services are profound. As long as businesses minimize churn, they’ll maintain a healthy and predictable revenue stream without constantly worrying about the cost of acquiring new customers.
According to Tien Tzuo, cofounder and CEO at Zuora, an enterprise software company that helps brands manage subscription services, “If the Subscription Economy is about anything, it’s about a fundamental return to customer relationships. It’s the agility of the subscription model that uniquely positions businesses to adapt quickly to customer needs and provides them with consistent, ongoing value—regardless of economic climate.”
Subscriptions are a great way to forge strong ongoing relationships with customers while presenting a unique chance at exposure for local vendors and up-and-coming brands, as many subscription boxes make it their mission to procure products from small businesses.