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The Rise of Subscription Boxes

 


The Evolution of Subscriptions 

Subscriptions have been around since the 17th Century, first introduced by newspaper and magazine publishers. Now businesses from Netflix to Hello Fresh use the model, providing services and products on an ongoing basis, to build brand loyalty and focus on customer retention.

The subscription box model made an appearance around a decade ago with the launch of Birchbox, a beauty box, leading the trend and inspiring hundreds to start a subscription box service. Today you can subscribe to almost anything and have your subscription box/parcel delivered conveniently, to an address of your choice.

Physical subscriptions set to surpass digital.PNG

Today, as consumers we can subscribe to a wide variety of services and products. The subscription box model is here to stay, with the convenience to order everyday items and the opportunity to even surprise and delight recipients.

With advancements in technology, specialised subscription fulfilment services, improved audience reach with social media, and, in more recent years, the pandemic and subsequent lockdowns fuelled growth, resulting in a surge of boxes landing on our doorsteps.  

Reasons for growth have been sighted as:

  • Convenience
  • Regularity
  • Potential savings
  • Personalisation 

 

The subscription market was valued at £395m in 2021 versus £332m in 2020, a 18.9% year-on-year increase and set to be worth £1.8b by 2025.

Whistl has examined the current research into subscription services in the UK, providing key insights to support businesses already operating in the subscription services market, or those who are looking to do so in the future.

Contents Overview:

Subscription Model Statistics  Subscription Model Strategy   Subscription Boxes by Sector Think Outside (& Inside) the Subscription Box  Whistl’s Tailored Subscription Services

Download our Research Fact Sheet or One-Page Infographic 

Subscription Box Full Research Fact Sheet  Subscription Box Infographic


Subscription Model Statistics

With 81% of households signed up to subscriptions in 2021 subscription boxes are here to stay.  They are no longer a short-term treat, research found that shoppers stay signed up to a subscription for an average duration of 9 months.

Subscription Model Statistics.PNG

Research conducted on behalf of Barclay Payments found that consumers are signing up to boxes to save time, benefit from value for money, and convenience.

Subscriptions - reasons to sign up.PNG

Consumers are increasingly familiar with the subscription model. Subscribing to more boxes, and staying subscribed for longer.


Subscriptions Model Strategy

Companies across all industries are making subscriptions a key part of their business strategy, with 67% of UK retailers planning to launch a new subscription and 36% of UK retailers who had not previously provided any subscription services had planned to launch a range of subscription services, in time for Christmas in 2021.

Subscriptions - UK retailer statistics.PNG

Control and Flexibility is key for customers

Self-management

Consumers want the freedom to make changes to their subscriptions, to choose how they buy when they buy, pause and re-join at their own will. 

The Subscribed Institute’s Subscription Economy Benchmark Report analysed 90 million subscriptions and found that companies that allow customers to make more changes to subscriptions, grow faster.

The report found that companies that averaged one change per subscription had almost three times the growth rate of companies that don’t, and see a reduced rate of customer churn.

Subscription growth rates.PNG

Usage-based pricing

Successful businesses such as Oddbox, Splosh, and The Cheeky Panda all offer usage-based pricing, by charging per delivery instead of a fixed recurring fee.

A range of payment methods

Payments are a key aspect for businesses, especially for subscriptions due to the recurring nature of payments. Failure to cater to customer payment preferences can result in losing customers. The majority of subscription businesses charge monthly or annually, but what are the most popular methods of payment?

Statista conducted a survey in 2021 which revealed that debit cards (67%), direct debits (58%), and credit cards (45%) were amongst the most popular payment methods. Online payments (66%), which are featured in the top three, are options to pay without a card such as PayPal, Apple Pay, and Visa Checkout.

Subscription Online payment services.PNG

Offering customers a quality product is not enough. Retailers must offer an array of payment options and allow customers to make changes so they are in control. 


Subscription boxes by sector

Subscription boxes have developed significantly in the last decade, with popularity being boosted in 2020 by the lockdown, and the demand shows no sign of slowing down. Boxes range from the same products that are needed on a regular basis or surprise products that offer the customer something new.

Most popular subscription sectors

Food (31%), Shaving products (24%), Clothing (22%), Perfume and cosmetics (18%), Pets (14%) Source: Statista 2021.

Most popular subscription sectors.PNG

Food and Drink

Food is currently the most popular subscription box category in the UK and habits formed in lockdown are here to stay. 

  • 26% of UK shoppers are signed up to food/meal and drink subscription boxes.
  • 28% of UK consumers said they have switched to buying food (excl. restaurant delivery) online more often.
  • Of those that use food subscription boxes, over a quarter (27%) rely on them for at least half of their meals.
The food market continues to grow:
  • Grocery retailers predict a further 35% increase in new sign-ups to subscriptions over the next 12 months.
  • 40% of current food subscribers plan to take out more subscription services because of the convenience they offer.

Male Grooming

Male grooming subscription boxes have seen massive growth, offering a convenient alternative to traditional purchasing of male grooming products, as products require regular replenishment.

  • Subscriptions saw a growth of 108% between 2017 and 2020 to reach a value of £42 million.
  • Male grooming is forecasted to rise to £86 million by 2022.

Toiletries and Cosmetics

Toiletries and cosmetics are another popular subscription service. As the awareness of product sustainability increases so do the number of eco-friendly options.

  • 16% of UK consumers said that when life completely returns to normal after COVID-19, they would continue to buy cosmetics online more regularly rather than switching back to physical stores.

Health and Beauty

Health and beauty products are seeing strong growth.

  • The sector has grown from £43 million in 2017 to £79 million in 2020.
  • The sector is forecasted to grow to £92 million by 2025.
  • 11% of UK shoppers are currently signed up for a health and beauty subscription box service.

Clothing Rental

The clothing rental looks set to see growth over the next decade. Growing sustainability concerns are a key factor for the growth of the clothing rental market. We look at two well known high street retailers who have recently launched clothing rental subscriptions:

  • LK Bennett, a leading fashion brand launched a new subscription service in July 2021. The service offers subscribers the opportunity to rent some of their most popular clothing items. Consumers are allowed to rent two products for £79 a month and can swap items up to eight times (LK Bennett 2021). The appeal of this service is to offer a more sustainable way of shopping and enable customers to rotate their wardrobe regularly.
  • M&S launched their first clothing rental service in November 2021 with the UK’s leading rental website, Hirestreet. It is made up of 40 womenswear pieces and customers can rent items for up to 4, 10, or 30 days (M&S 2021).
  • Other clothing brands that have launched clothing rental subscriptions include Jimmy Choo, Chanel, Gucci, and Ted Baker.

Household Products

This category will always be popular, especially the household staples. There is also now an increasing trend towards eco-friendly products. The green movement is growing rapidly in the UK as customer awareness and habits change.

A sector to keep an eye on due to changes in consumers’ shopping behaviours, and the convenience subscriptions provide, the trend of relying on subscription services to attain essential items will continue.


Think Outside (and Inside) the Subscription Box

With subscriptions set to become ever more competitive in the future, insight into this market is important. 

1. Optimise Customer Growth

The simple mathematical approach would be more customers = more revenue. The Subscription business growth is not always that simple! The focus should be on ease of sign-up and onboarding coupled with exceptional customer experience. This combination will ensure that customer growth is maintained, avoiding customer churn. 

2. Understand your Audience

Regularly analyse, research, and understand your customer base. New subscribers might change the dynamics of your original target base. Regular reviews of your subscription customer base will give insight into emerging personas and how to keep them engaged, their preferences, and even your pricing strategies. By increasing your customers' knowledge, you can start to build a stronger two-way relationship.

3. Continuous Customer Engagement

Customer loyalty requires continuous engagement, your subscription offering should have the consistency of service, quality of products, and unrivaled customer experience. Keeping things interesting could be as simple as the ability to provide reviews and direct feedback, personalisation options or to change selections regularly. If your customers lose interest in the service and products, they are more likely to cancel their subscription.

4. Test and Learn

Monitor the performance of all elements to your subscription model from your acquisition channels, products, packaging and pricing, and operational costs. Be prepared to make adaptions when required. Reviews and business monitoring will ensure growth happens, with a relevant structured test and learn the strategy

5. Be Responsive

The subscription model business is likely to continue to evolve at a rapid pace. For example:

  • New competitors may enter the market with a differentiated offering.
  • External factors could impact your product, operational costs, and even customer needs.

Your subscription model strategy must allow for growth in this dynamic environment.

Focusing on the customer experience and continually monitoring performance will result in a successful plan.


Download our Research Fact Sheet or One-Page Infographic

Subscription Box Full Research Fact Sheet  Subscription Box Infographic

Whistl is the UK's leading logistics specialist, uniquely placed to help subscription businesses effectively manage their e-commerce supply chain.

 

Whistl's Subscription Support Sevices:

Examples of Whistl's Subscription Service Case Studies: 

Subscription Services

Whistl offers specialist logistics services to help subscription businesses

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