Residential mailbox. By Stilfehler, via Wikimedia Commons
The days of mail-order CDs are over, but in the last few years the subscription economy has seen a revival, thanks to companies like Loot Crate, Ipsy, and others. The idea is simple: customers sign up to receive a package in the mail every month. Often the contents are themed with the actual items a surprise for the recipient.
The demand for subscription boxes has increased dramatically. Loot Crate, which targets all things geeky, was ranked #1 on the Inc. 5000, a list by Inc. Magazine of the 5,000 fastest growing companies. Loot Crate boasts 650,000 monthly customers who receive boxes with assorted and exclusive items for The Walking Dead, Back to the Future, Doctor Who, and more.
Subscriptions boxes have seen a significant jump in online traffic, receiving 21 million visits per month. Three years earlier, subscription sites had just 722,000 visits a month. Although the business of subscription boxes is fairly new, subscriptions have been around since newspapers and magazines. For companies, the subscription model makes sense. Customers are paying monthly for services or products, setting up a nice revenue stream. Companies like Adobe Systems, creators of popular design programs that include Photoshop, now offer their software through cloud-based computing where users pay monthly to use the programs. The move to the cloud also allows Adobe to send updates quickly and efficiently to customers.
But while older companies are trying out subscription services, newer companies are pinning their success or failure on subscription boxes. Dollar Shave Club was billed as a way to get razors at a price far below store prices. Anyone who has had to buy razors on a regular basis knows that blades can get pricey. Dollar Shave Club instead sold blades for as little as $1 a month. Earlier this year, Unilever purchased Dollar Shave Club for a reported $1 billion, even though the direct-to-consumer company has yet to make a profit.
Economists see the subscription economy to continuing to grow. With more shopping done online, subscription boxes can offer the best of both worlds: younger shoppers ordering or signing up online, and businesses are able to reach customers directly with products, instead of hoping they pull them off the shelves. More typical brick-and-mortar stores are finding success too. Starbucks now mails beans, syrup, and other coffee-related items to homes. Target, already a big player with its retail stores, started a subscription box for beauty items.
There appears to be no slowing of the subscription economy. From Netflix and Hulu to Dollar Shave Club and Ipsy, there’s something for anyone who is willing to pay a monthly rate. The downside for subscription companies is building up a customer base can take time in an industry that sees a lot of turnover. However, according to a recent publication, 41% of retail revenue is from repeat buyers. Subscription companies that can sign up, and keep customers, can have a bright future.
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