How subscriptions are breathing new life into retail
Retail was facing a reckoning – and then the pandemic struck. As businesses pivot their strategies to online business models, how are they making use of subscriptions to reinvigorate their offerings?
As traditional retail struggles in the face of online competition and a diminishing high street presence, in no small part due to the COVID pandemic, the industry has found a lifeline in subscriptions.
The return to physical retail will see many bricks-and-mortar stores needing to play catch-up with digital-native retailers, who saw their subscriptions boosted by 145% in the early months of the pandemic and resulting lockdowns.
Talk of the death of retail stores is premature, however, as although many businesses are shifting to online-only models, the trend is also happening in reverse; already this year, Amazon opened its first Fresh store in the UK, joining its budding global physical retail division.
As digital-first approaches blur the distinction between in-store and online retail, those providers that leverage the best of both worlds may find themselves at an advantage, provided they can best implement these parallel services and deliver a unique, seamless customer experience.
Here are just a few of the ways retailers are now employing subscriptions to innovate their offerings:
Subscriptions for physical goods
Whether it’s for replenishment or curation, the market for subscriptions to physical goods will quadruple by 2025 to more than $263 billion, overtaking digital subscriptions. Large corporations with ample digital retail divisions have taken note and are increasingly snapping up smaller subscription box providers (or one may think, competitors) to add to their already substantial retail offerings.
With food and drink based services making up 55% of new subscriptions in the last 12 months, Nestlé has gone on an acquiring spree, picking up meal kit box providers Mindful Chef, SimplyCook and Freshly. Meanwhile, pasta empire Barilla acquired the pasta subscription box provider Pasta Evangelists in the UK, and French retail conglomerate Carrefour has acquired Potager City, a distributor of fruit and veg subscription boxes.
Earlier this month, Signet Jewelers, the world’s largest jewellery retailer, acquired Rocksbox, a jewellery subscription provider, and The Hut Group acquired Dermstore, a provider of beauty boxes.
Further down the chain, companies such as Rent the Runway offer a rental subscription model for clothes; having opened a handful of retail stores, the company has opted not to reopen them after the pandemic, choosing to focus its efforts online while maintaining a network of drop box locations at partner sites.
Further blurring the lines between subscriptions and rentals are services such as Vivrelle, which allows users to rent out luxury fashion accessories for as long as they wish, before trading them in and receiving another once they’re done; the Snoo Smart Sleeper rental allows new parents to rent a specialised cot for newborns.
In fact, findings from Juniper Research’s report, “Subscription Economy: Industry Disruption, Value Chain Analysis & Market Size 2020-2025”, show there are very few types of physical goods not suited to subscriptions, as the logistics, supply chains and charging and billing software are now better tuned to delivering on customer expectations than ever.
The customer who came in from the cold
As premises tentatively begin their grand re-openings, a number of food and drink chains, forced to close for lockdown after lockdown, are hoping that coffee subscriptions will be what draws the crowds back in.
The collapse in foot traffic led Pret a Manger to cut 3,000 jobs and close 30 of its stores during the pandemic; now, they seek to recoup lost revenues with a subscription service, offering hot drinks for a monthly fee. Upon reopening, those remaining stores will see themselves double up as “click & collect” stations for digital customers. Similarly, the US-based fast casual chain Panera Bread already boasts over half a million customers for its $8.99-a-month unlimited in-store coffee subscription.
Those physical stores that have weathered long-term closures are looking to leverage the power of subscription schemes to entice customers back through their doors. This is not quite the desperate hare-brained scheme it may sound on the surface; despite the massive shift to online shopping, even before the pandemic, research shows that many customers on the whole still prefer buying in-person to online.
COVID-proofing your business
As we covered in our look at subscription trends for 2021, the industries most vulnerable to prolonged shutdowns, particularly hospitality and travel, are also seeking to adopt subscription models to shield themselves from further financial shocks.
As some speculate that one of the more unusual side-effects of the pandemic may be the demise of the buffet, restaurants are seeking out new schemes to separate the cost of food from the actual foodstuff – the answer may come in providing their own subscriptions and meal kits.
The US-based Goldbelly online food marketplace launched their first subscription service, the GiveBelly City Subscription Box, with profits going to frontline health workers. Goldbelly’s USP is its extraordinary capacity to ship orders across the US, meaning customers in California could enjoy an authentic New York deli sandwich or Key Lime pie.
Under normal circumstances, with the likes of Goldbelly taking a cut on each order, restaurants must decide whether being a part of such schemes is worth the cost. However, with many restaurants facing the existential threat of COVID-19, the option is becoming increasingly appealing to businesses looking for vital new revenue streams.
In the travel market, two businesses proving the viability of subscriptions are Netjets and SurfAir; for a fee, Netjets offers customers a set amount of flight time per month with the company’s private fleet, while SurfAir was the first ever subscription-based airline, offering customers unlimited flights on private jets for a monthly fee.
It seems for now though that such schemes are only workable for the most affluent of travellers – leaving a gap in the market for a mid-range travel provider to take advantage of.
Extending the value of media with subscriptions
As financial uncertainty continues to prevent many consumers from splurging on new tech, companies are looking to augment the value of their goods by recasting tech purchased on a one-off basis as a delivery platform for an expanded range of subscription services, at a time when sales of physical media have fallen off a cliff.
Last year, digital sales of video games began to outnumber physical sales, and the major video game console creators have launched subscription services in the last few years, such as PlayStation Now and Xbox Game Pass, allowing users to stream a select number of games for a monthly fee. Now, individual games are being restyled as continuously updated “live service” experiences, with customers being charged for ongoing access and bonuses – for example, games such as the typically free-to-play Fortnite, which has launched its Fortnite Crew subscription, offering subscribers premium extras and a monthly stipend of in-game currency.
On the streaming front, Disney will soon issue cinema releases simultaneously on Disney+ at a premium rental cost of $30 in the US, while Warner Bros. will simultaneously distribute new films on HBO Max, at no additional charge, given the continuing diminished returns from the box office. Considering the changing media consumption landscape, the pandemic may be a trigger for a permanent adjustment to this new way of viewing.
And now for something completely different: the micro niche
Settling on a micro niche is key to providing the personal touch that customers cannot find in larger suppliers. With the proliferation of services now on offer from both large and small providers, and access to customers with all manner of interests, there’s no limit to the creativity that subscription businesses can show.
These micro niches can even extend to unusual subscription bundles, such as that offered by Turntable Kitchen, which combines ingredients for a recipe along with a 7” vinyl paired with that month’s dish.
Meanwhile, for specialist collectors, the Bone Box from Skulls Unlimited offers a curated set of animal bone specimens every month, along with an info sheet containing facts about that month's featured animal; alternatively, history buffs of a less macabre bent may consider Arts in Letters, a service that will send facsimiles of real letters written by famous historical figures.
Going beyond simple collectibles, subscription services can offer entire experiences for those stuck inside; for armchair sleuths, the Hunt a Killer subscription box provides subscribers a series of episodic murder mysteries to dive into, with each month’s box containing new clues to a crime.
Finding the right audience for your products is crucial to the profitability of any business, but if you provide an experience that customers just cannot get anywhere else, then you set your business apart from other providers, and can make a big impact.
Deliver innovative retail subscription experiences with Cerillion Skyline’s charging and billing system – learn more, or ask for a demo today.