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Sign Me Up:Sign Me Up:Sign Me Up:Why Subscription –Based Models Are on the Rise
by Rachel Starr Marketing Associate
New subscription-ecommerce services, from Stitch Fix to Hello Fresh,
have leapt into market spaces, disrupting billion-dollar industries that
have been around for years. While some companies have not taken
advantage of the subscription-services boom, many are jumping onto
the bandwagon, hoping to entice consumers with free trials, discounted
packages, and no-commitment time periods.
Most people are familiar with the subscription-commerce (subcom)
trend that’s underway, but what really accounts for its rise in popularity?
In an age where consumers want things NOW, why are many choosing
to opt for subscription packages, which may take a few days, sometimes
weeks, or even months for them to receive?
This paper discusses the ongoing subcom evolution, and examines
the consumers who are drawn to the appeal and the mentality behind
why. It also explores how industries moving toward data-driven mod-
els can learn from the growth of subcom.
THE METEORIC RISE OF SUBSCRIPTION BUSINESSES
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Subscription-type business models
were around for years before the
rise of subcom, in a form familiar to
many—magazines. Since 1663, the
year the first magazine was published,1
consumers have
been attracted to the
value proposition of
receiving consistent,
relevant content
weekly or monthly.
Almost 400 years later,
there are thousands
of magazine titles
available worldwide
for consumers to subscribe to, and
millions do. Magazine subscribers are
drawn to the titles that match their
lifestyle and personal preferences, and
they look forward to receiving content
regularly that they value, engage with,
and are inspired by. Many companies
have capitalized on the magazine
subscription service mentality; they’re
implementing their own forms of
subscription-based services, with
products, instead of content, delivered
in consistent intervals, otherwise
known as subcom.
Subscription commerce is separated
into two models: convenience
commerce and discovery commerce.2
Convenience commerce is for
consumers who enjoy a consistent
restock of favorite products that they
plan to continue using. Amazon offers
automatic delivery of thousands
of products, free shipping, and
free cancellation at any time for its
convenience subscription service,
called Subscribe and Save. The
products available through the
retail giant range from
household cleaning
supplies to personal
care products.
Discovery commerce,
on the other hand, is for
consumers who have
certain tastes in terms of
clothes, personal care
products, or food, and who want a
subscription service that will provide
samples, or curate unique packages
using advanced customer data, letting
them experiment with new items
they may not otherwise have found.
Loot Crate, for example, is a discovery
commerce service that sends out
monthly boxes filled with niche
merchandise that makes geeks and
gamers swoon with each new delivery.
Discovery commerce services have
to establish an attractive value
proposition for individuals to sign
up for their services. Their efforts
are paying off, as evident in the
most popular subcom companies’
successes—some are now worth
millions of dollars after only a few
years in existence.
subscription commerce
MAGAZINES: THE ORIGINAL SUBSCRIPTION-BASED MODELeven in the digital age, nothing beats the thrill of opening the mailbox
Convenience Commerce
Discovery Commerce
Many companies have capitalized on the magazine subscription service with products delivered in consistent intervals, otherwise known as subscription commerce, or subcom.
In April 2017, subscription company websites had 37 million visitors, an increase of 831% from 2014.Source: Hitwise.
Sign Me Up | MNI Targeted Media Inc. | 3
Two words: black socks. Many people wear them daily but
rarely do they stock up on them. Enter Blacksocks.
This convenience online commerce company offers monthly
subscription services for consumers looking to replenish
their personal black sock inventory. With this service,
consumers sign up to have three pairs of high-quality black
socks—from knee-highs to ankle socks—delivered to their
doorstep every month for a year.
And then there’s retail discovery commerce, for people
looking for an introduction to new products similar to their
tastes… like Jenny.
Jenny caught her mailman as he was leaving a package at
her apartment door. She ripped it open right on her doorstep,
her eyes lighting up at the colorful dress and accessories
combination—perfect for a Millennial like her—that sat
waiting in the package. She had just signed up for this
retail service, at the recommendation of a friend, and was
extremely pleased with what her online stylist had picked out
for her. At the bottom of the box was a reminder slip, telling
her that the discounted sign up was one-time only, and
she would be charged the full amount for her next delivery.
Jenny threw out the paper. She wasn’t going to cancel before
the next shipment, and would keep going with the service for
the foreseeable future.
Jenny’s subscription service is similar to well-known service
Stitch Fix, which was launched in 2011 with a $750,000
investment, and by 2016 it generated an impressive
$730 million in revenue.3 This leading subcom site eases
the clothes-shopping process by allowing consumers
to input their sizes, their clothing preferences, and their
budgets, and then shipping out stylist-picked outfits,
personalized for the individual. Stitch Fix is constantly
evolving, by leveraging artificial intelligence to analyze
purchasing behavior and learning what elements of styles
are popular.4 Stitch Fix’s stylists make sure each piece of
clothing matches the users’ styles and preferences, and
based on consumers’ individual data, outfits are curated
each week or month to make sure they match their ‘clothing
identities.’ The success of the Stitch Fix discovery model
continues—in 2017, 2,508,378 visitors came to its site, an 86%
increase from the year before.5
1. RETAIL
Stitch Fix was launched in 2011 with a $750,000 investment. In 2016 it brought in $730 million in revenue.
Source: LA Times
The biggest players in subcom align with the interests and
needs of their mostly-Millennial user base, playing off trends
in 1. Retail, 2. Beauty, and 3. Food.
Sign Me Up | MNI Targeted Media Inc. | 4
Personal care items such as haircare, soaps, lotions, and
razors, are also being shipped out regularly to consumers
interested in replenishing everyday items and/or
discovering new products for their daily hygiene routines.
Like retail subcom, the personal hygiene subscription
service category is increasing in popularity. One-in-ten
consumers, ages 18-34, purchase at least one personal
care item most often via subscription services.6
Dollar Shave Club, a monthly convenience commerce
company that delivers razors, shaving cream, wipes, and
more, began as a small start-up in 2011. It has since boomed
to controlling 27% of the razor market share.7 Well-known
shaving brand Gillette, with 70% market share ownership in
2010, reached a low of 54% market share in 2016,8 thanks
in part to Dollar Shave Club. What helps to explain Dollar
Shave Club’s popularity? There are a few reasons: its low-
cost commitment to consumers—starting at one dollar a
month—and its humorous social media advertising. Subcom
shoppers are drawn to Dollar Shave Club, and in April 2017
alone, it saw over three million unique site visitors.5
Birchbox is another well-known personal care subscription
service—a discovery commerce one—that has its value
proposition rooted in consumers’ desires to discover new
products. The always-changing personal care samples that
are sent out monthly have Birchbox subscribers waiting
by the mailbox, anxious to try new products that match
their skin tone, beauty preferences, and personal profiles.
Consumers begin by filling out a profile that dives into
their beauty preferences and the kinds of products they
use. Then, five sample products are sent out each month.
Consumers are encouraged to go on the site and review
the items received, so the next shipment is even more
personalized to their tastes. The cost starts at $10 a month,
and is zero-commitment—users can cancel at any time. Of
course, subscribers have the option of purchasing full-size
products as well; if someone receives a sample they want
to start using consistently, they can upgrade on the site
and receive loyalty points for every $10 spent,9 giving this
discovery platform a convenience appeal.
2. BEAUTY
One-in-ten consumers, ages 18-34, purchase at least one personal care item most often via subscription services.Source: Mintel
Sign Me Up | MNI Targeted Media Inc. | 5
Rounding out the top subscription-services categories is
food subcom. Subscription services tailored to the epicurious
made up approximately 33% of the subscription-service
site visits in 2017,5 with a combination of convenience and
discovery services offered. Amazon’s Subscribe and Save,
for example, is a service in which shoppers select items
that they want sent to them in consistent monthly intervals,
from spices and soups to cereals and granola bars. Amazon
markets this convenience service as an ideal way to save
up to 15% on products, with the opportunity to skip or cancel
with no penalties.
There is also a wide range of options for those looking to
cook new meals and discover new brands. Blue Apron and
HelloFresh, two competing
culinary-minded discovery
subcom services, are the
most popular of the delivery-
to-dinner services. Launched
in the U.S. in 201210, these
subcom services introduced
the idea of convenient,
ready-to-make meals for
the busy individual, couple,
or family, who doesn’t have
time to meal plan or shop, and who wants to make
few-to-no decisions when it comes to making dinner.
Amazon’s Subscribe and Save keeps a consumer’s pantry
well-stocked for cooking and snacking, while Blue Apron
and HelloFresh are discovery commerce services that add
convenience to everyday life. Five years later, with over
100 meal kit delivery services available, food subscription
services have blossomed into a full-on industry, and experts
predict that the industry will be a multi-billion dollar market
by 2022, with heavy appeal to time-pressed Millennials
and wealthier Americans.10
3. FOOD
Food subscription services have blossomed into a full-on industry, and experts predict that the industry will be a multi-billion dollar market by 2022.Source: Time magazine
Sign Me Up | MNI Targeted Media Inc. | 6
There are almost six million subscription-
service members in the U.S., and nearly all
are between the ages of 25 and 44.5 Overall,
subcom shoppers are 28% more likely to
buy online than in-store, because they know
how to conduct research and read reviews
online, and they value their time. Millennials,
in particular, are more likely than any other
generation to be subcom shoppers, because
they find shopping online and via mobile to
be easier, more convenient, more enjoyable,
and cost effective.11 Subcom services have
increased in popularity with Millennials,
with over 10% purchasing retail, beauty,
or food products through subscription
services in 2016.12 Females, especially, are
more likely to opt for subscription services
(61%), while males are less likely (39%).5
Today’s consumers are overwhelmed by
all of the decisions they have to make when
it comes to purchasing products, and many
are drawn to subscription services because
it takes the burdensome decision-making
process off their plates.
SUBSCRIPTION- COMMERCE statistics & demographics
HAVE COLLEGE DEGREES (index 128)
HAVE LIBERAL POLITICAL VIEWS (index 127)
ARE FEMALE (index 116)
HAVE A HOUSEHOLD INCOME EXCEEDING $100K (index 119)
HAVE CHILDREN AGES 3-15 IN THE HOUSEHOLD (index 109)
There are about 5.7 million subscription box shoppers in the U.S., almost all between ages 25 and 44.
Source: Hitwise.
Sign Me Up | MNI Targeted Media Inc. | 7
Subcom consumers understand that they need to share
personal information with companies in order to have a
custom experience that will enable them to get products or
services that satisfy their preferences and needs (index 120).5
Consumers want a company that knows them, one that
will use their personal information to elevate their current
lifestyles by recommending hip, trendy products for them
to use. From tracking how many times individuals purchase
products, to their names, emails, home and/or business
addresses, and preferences, subcom companies have more
than just opt-in data—they have tracked data as well.
With this mountain of personal data, subcom companies
are leading the industry overall on how to target, tailor, and
engender trust with their audiences. While an increasing
number of companies in other industries are using data to
capture and understand their target audiences, very few
have successfully captured information to create highly-
tailored experiences for their consumers to keep them
long-term like subcom models have.
COLLECTING DATA: understanding subscription-box industry statistics to capture long-term consumers
Consumers want a company that knows them, one that will use their information to elevate their current lifestyles.
Sign Me Up | MNI Targeted Media Inc. | 8
Spotify has invested heavily in
improving its use of personalization
and recommendation features for its
consumers. Like many companies,
the music platform captures data
in order to paint a clear picture of
consumers’ interests and habits,
but it doesn’t stop there. Spotify’s
focus is on constantly serving
personalized ads and offering
personalized experiences to keep
consumers past just the initial sign
up, offering services that lead to
long-term retention.
Since 2015, the music streaming
service has been
capturing consumers’
listening and skipping
habits, to recommend
songs and playlists
that cater to each
individual. Discover
Weekly and Release Radar are two
of the playlists that subscribers can
listen to with content that changes
every week. Spotify uses technology
and algorithms that analyze both real-
time and historical data to understand
users’ contexts and behaviors,13 and
to generate these recommendations.
From what time a subscriber plays a
certain playlist to how many times that
same person plays a song, Spotify
captures it all. Any other company,
and consumers might be wary about
their data being used so blatantly,
but Spotify expertly provides a service
its subscribers love, so many willingly
allow it to track their habits. Collecting
data is the first step to capturing an
audience, and Spotify takes it one
step further by understanding its
audiences and their habits and using
collected data to provide a consistently
personalized experience.
Subscription shoppers are hooked
on subcom services, for the same
reasons many consumers subscribe
to magazines and Spotify: they look
forward to an experience that matches
their personal preferences and
lifestyles, they eagerly
anticipate engaging with
new content and services
that match their tastes,
and they look forward to
the surprises that await
them weekly or monthly
in their mailboxes. Marketers in other
industries need to focus on increasing
levels of personalization so consumers
feel as if brands are listening to their
needs and are worth their loyalty. After
all, 75% of consumers are more willing
to buy from companies that are able
to recognize them as individuals and
provide recommendations that meet
their particular needs.14
DATA COLLECTION IN ACTIONSpotify demonstrates the importance of capturing consumer data
Spotify so expertly provides a service its subscribers love, that many willingly allow it to track their habits.
CONSUMERAQUISITION COSTThe key to enhanced profitability
is selling products that are
appreciated by the subscriber
so much that they extend their
subscription beyond the trial.
Sign Me Up | MNI Targeted Media Inc. | 9
It’s time to take a page from the subscription-
services’ playbook and consider how to use data
to benefit consumers instead of focusing solely
on how to use data to benefit marketers and their
business objectives.15 Many companies can learn
from the success of the subcom boom, and
use data to create personalized experiences to
appeal to consumers.
Ready to sign up?
MNI Targeted Media Inc. can help. Personalizing
digital experiences is at the core of the subcom
experience and at the heart of what MNI Targeted
Media Inc. does best. Let’s discuss how we can
help you learn more about the mentality of subcom
consumers and how best to reach them and build
long-lasting relationships. Contact us at mni.com.
mni.com
1. Magazines.com. “The History of Magazines.”
2. Subbly. “What is Subscription Commerce? 7 Things You Need to Know.” June 2014.
3. LA Times. “How I Made It: Stitch Fix Founder Katrina Lake Built One of the Few Successful Ecommerce Subscription Services.” June 2017.
4. Wall Street Journal. “The Next Top Fashion Designer? A Computer.” March 2017.
5. Fetto, John. Hitwise. “The Rise of Subscription Boxes and the Consumers Behind Them.” May 2017.
6. Mintel. “There’s a Subscription Service for Everything.” August 2016.
7. LA Times. “Dollar Shave Club Succeeded with Razors, but the Rest of the Bathroom is a Challenge.” September 2017.
8. MarketWatch. “Procter and Gamble’s Gillette Razor Business Dinged by Online Shave Clubs.” April 2017.
9. BirchBox. (2017, November). Retrieved from http://www.birchbox.com.
10. Time. “This is the Best Meal-Kit Service on the Market Right Now.” July 2017.
11. Hitwise. “The Rise of Subscription Box Shopping: Consumer Insight Report.” March 2016.
12. Mintel. “Women’s Clothing-US.” July 2017.
13. Spotify. “Personalization at Spotify Using Cassandra.” June 2015.
14. Skyword. “What Spotify’s Data-Driven Marketing campaign Can Teach Us about Localization and Personalization.” April 2017.
15. Harvard Business Review. “Use Big Data to Create Value for Customers, Not Just Target Them.” August 2016.
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