The rise of direct-to-consumer subscription services has created new competition for traditional retailers. But retailers could benefit by incorporating some of these service offerings into their own strategies.
“Any company selling a product or service can be a subscription company,” said Tiffany Coletti Kaiser, EVP of marketing at ad solutions provider Digital Remedy. “If consumers are no longer strolling through the aisles at a department store yet actively participating in ‘fear of missing out’, subscription-based companies can leverage this new reality for their bottom lines.”
Subscriptions are popular across multiple sectors — in fact, research advisory company Gartner forecasts that 90% of technology solutions will be subscription-based by 2022. But consumer retail is a particularly rich market for subscription box services and routinely scheduled deliveries, due to shifting consumer habits. The emergence of a “social-driven economy” provides retailers with a platform to connect directly with consumers in an inexpensive and immediate way.
The approach capitalizes on consumers’ desires for on-demand products, while acknowledging the surplus of choice on the market. While subscriptions have proven popular for everyday items, such as toothpaste and razors, there is a growing market for apparel brands with a loyal customer base; Nike rolled out a kid’s subscription service this month.
The low overhead makes subscriptions an appealing model to add to a retailer’s business strategy. Shipping and logistics are made more efficient, due to the consistency of order fulfillment, and are generally cheaper for both the provider and customer. There is also a reliable amount of revenue — and data — generated from the routine orders, which can add value to the retailer’s larger business.
“[A subscription model gives] companies access to rich data on user behavior that isn’t scrubbed based on intricate or complex distribution models, like brick and mortar,” said Coletti Kaiser. “Data such as how frequently customers purchase and what they add on in subsequent purchases is key data to determine a subscription-based business’s validity.”
Digital Remedy believes that traditional retailers will be more likely to add subscription offerings in the coming months in a bid to stay competitive.
Still, retailers need to be providing true value and convenience in order to retain subscribers; the drop-off rate can be high. Personalizing the product offering for each consumer is also a strong way of fostering customer loyalty.
“Direct-to-consumer companies are likely to be less worried about their category’s traditional offering,” said Coletti Kaiser. “Instead, they are more invested in surprising and delighting their current customer base in an effort to expand it, naturally upsetting the traditional company [in the process].”
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