Subscription Services Replacing Traditional Loyalty Programs? A Look at 4 Retail Subscription Services

blog-banner-delivery.pngNowadays it seems like everything is based on a month-to-month subscription. Just think of all the subscription services you’re paying for right now (at least four come to mind for me).

While the subscription-based model isn’t entirely new—originally pioneered by newspapers and magazines—it continues to grow in popularity. Some of the most recognized subscription services include media streaming companies like Netflix or Spotify, which you're probably using today (if not, I'd say it's safe to assume you're likely out of the loop on the daily water cooler talk). 

Regardless of whether you're up-to-date on the latest Netflix series or not, it seems like lately more and more retailers are getting in on the action with the subscription-based model, offering direct-to-consumer services on a frequent (typically monthly) basis. 

Some of the most disruptive companies of the year were developed around this model, like Stitch Fix—an online personal shopping service that delivers clothes right to your home each month. Apparel isn’t the only category offering these services either, as beauty box subscriptions like Ipsy and Birchbox also made quite a debut, particularly among younger generations who are 28% more likely to receive a beauty subscription box.

The entrance of this service into the retail space, particularly among “replenishment-friendly categories” has urged traditional retailers to start offering their very own subscription-based services (we’ll get into a few examples of these in a sec).

Aside from the obvious benefits of convenience, subscription services can offer another way for traditional retailers to foster loyalty among consumers, similar to what traditional retail loyalty or rewards programs aim to achieve. In fact, a consumer survey found that apparel loyalty programs ranked the lowest when it comes to consumer satisfaction—it only makes sense retailers would experiment with new ways to improve on this.

Not a bad idea, considering how ubiquitous traditional loyalty programs are. It’s hardly even a perk anymore and Nikki Baird, an analyst at RSR Research, agrees:

 “Promotions at a mass level have become so accepted that they’re almost demanded by consumers in order to shop in the first place.”

While I do believe some retailers have their loyalty programs figured out, these subscription services offer another way for businesses to provide value to customers in a more experiential and personalized manner.

Additionally, younger shoppers are much more inclined to subscribe:

“Indeed, millennials are more likely than any other generation to have a subscription service, according to a survey by marketing firm Fluent. […] More broadly, the concept of a personalized, unique shopping experience appeals most to the youngest generations — Gen Z and millennials — who should be on the mind of every retailer striving to stay relevant.” - Racked

Aha, it all comes back to the experience. Building long-term brand loyalty, while offering the unique experience the modern consumer desires, seems to be an area subscription services can tap into. So there’s definitely potential. Aside from the obvious, there is a psychology to what drives consumers to sign up for these types of services. 

Convenience? Obviously. Replenishment? Check. Value? For sure. 

But there’s more: 

  • Belonging and being known: Humans crave a sense of belonging. It’s in our nature and can be an essential component to driving subscribers if the subscription experience meets this desire.
  • The element of surprise: The anticipation behind subscription services always keeps us eager for the next delivery. Who doesn’t love getting a nice surprise package each month?
  • Curation, exclusivity, and discovery: Having too many choices can be paralyzing, and nowadays there's no shortage of options. Subscription services can alleviate this with curated products that offer exclusivity (which in turn foster loyalty) or the discovery of something entirely new.

All of these play into building a relationship with your customers over time—an essential goal for any retailer. Let’s take a look at some subscription services some major brand retailers offer that tap into a few these elements:

Adidas’ Avenue A

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Adidas offers a quarterly athletic, apparel subscription program for women, called Avenue A, for $150 every three months. This service incorporates the element of surprise, as each delivery comes with three to five products (footwear, apparel or accessories) selected by sports and fitness experts based on a personal style profile filled out prior to subscribing. Their service is down for the time being, and it looks like they’re still tweaking the personalization element, per their statement online.

UnderArmour’s ArmourBox 

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Another athletic apparel subscription service, ArmourBox, was also recently launched. For no initial fee, subscribers receive a personalized box of four to six handpicked UnderArmour gear tailored to your personal style every 30, 60 or 90 days. I love the fact this service has different delivery frequencies—for me, the frequency is deal-breaker, so having a few options is a nice addition. Once delivered, subscribers have one week to try on the gear and return what they don’t like. To add another level of personalization, each box is crafted by your very own ‘Official Outfitter,’ who subscribers can contact through their personal accounts anytime.

Sephora’s Play! Beauty Box 

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For $10 a month, Sephora’s Play! beauty subscription service provides subscribers with their very own beauty box filled with a curated selection of new and best-selling products (makeup, hair care, skincare, or fragrance) based on their personal preferences. In addition to an assortment of five product samples, Sephora uses this subscription service to drive subscribers in-store with extra bonus offers—such as a Play! Date—which is an exclusive subscriber-only invite to come in store with a friend to meet with a beauty expert and experiment with products. On top of this, they also provide subscribers with bonus points redeemable for in-store, full-size purchases. This is a great example of how retailers can incentivize subscribers to visit their brick-and-mortar stores, and ultimately help drive in-store sales.

Gap’s babyGap Outfit Box

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For $70, Gap sends subscribers a babyGap outfit box with six seasonally-relevant baby apparel items (valued at more than $100, which means outfits are discounted by 30%-35%) every three months. Subscribers have some level of control over personalization, specifically determining the size, gender and theme for each delivery. After subscribers receive their outfit box, they have 21 days to decide whether they’d like to keep the items or return them (shipping and returns are free!). What’s really unique about this service is that the babyGap box literally grows with your baby. Once you sign up, the service keeps track of your baby’s sizing and automatically updates this with each new delivery.

Subscription Services the Answer to Customer Loyalty?

As you can see, a number of retailers are providing their own spin on these subscription services. While there’s definitely an appeal from a retailer’s perspective to implement these types of services, considering it’s a great way to obtain consumer insights and acquire reoccurring revenue, retailers must be aware that it’s not an immediate gateway to customer loyalty:

“It’s a bit of a chicken and egg problem. A retailer wants to know more about its customers so they build a subscription model, but without knowing its customer, it's shooting in the dark for what the right offer might be.” – Digital Commerce 360

Understanding what the customer wants is of the utmost importance—always. If not, increasing churn rates and customer retention will be a problem: 

“Roughly 10% of consumers drop out of subscription e-commerce and box-of-the-month club plans. The lower the price point, the more the churn. […] In the world of subscription commerce, purchase conversions are critical, but to retain subscribers for a long enough period of time to ensure profitability, the brand promise MUST exceed the subscriber’s expectations over time.”– Digital Commerce 360

With a service so dependent on delivering the right assortment of products, it's paramount to understand customer choice. Brands can successfully exceed a subscriber's expectations over time only if they truly understand what the customer wants, or is likely to buy. If retailers are unable to do this, then why would any customer remain subscribed? By enrolling in this type of service, a customer is already placing a certain amount of trust in the retailer to deliver the right products to their doorstep. 

Isn't that the point? 

Plus, traditional retailers have tons of data on hand to do this. If retailers can leverage their data effectively, they can ultimately retain a subscriber's loyalty in the long run. Accurately identifying how a given subscriber would likely react to a given product selection is exactly what a successful subscription service is able to accomplish.

Otherwise, why subscribe at all?

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Topics: subscription boxes, ecommerce, consumer insights, consumer spending, direct-to-consumer, loyalty programs, customer choice

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