The subscription eCommerce market has grown by more than 100% a year over the past five years, with 4 in 5 people in the UK are currently using at least one subscription service and 3,500 subscription box services operating in the United States alone. And health and beauty is no exception, especially with the additional hygiene concerns sparked by COVID-19, which are fuelling the desire for alternatives to the beauty hall tester model.
Research has shown that the younger generations are more likely to prefer the subscription model, with more than a quarter of those aged 25 to 34 stating that they’re signed up to three or more subscription services, compared to just 10% of 55+ year-olds, demonstrating that purchasing habits are changing and brands need to be aware of this demographic shift to keep pace.
Moreover, the subscription model done well is extremely profitable, just look at Birch Box, Dollar Shave Club, The Nue. Co and the huge industry success story, Beauty Pie. Reaching this point does require a long-term relationship with consumers and often necessitates taking an initial hit, through offering a free trial, which 45% of people cite as their main reason for joining a subscription. Done correctly the future recurring revenue outweighs the short-term losses and the ongoing relationship with customers results in much more operational flexibility. According to the Subscribed Institute, subscription businesses who are agile enough to respond to changing customer needs grow at three times the rate of their peers. With a flexible platform, companies can offer customers more options and greater control over their subscriptions, which we see results in significant growth.
Beauty Pie has mastered this model with its offering of luxury products at drugstore prices. Since the start of Covid-19 in March, their subscribers have doubled (membership costs are tiered: subscribers can pay £5, £10 or £20 a month, or £99 a year) and the number of new members has increased on average by 300% each week! And they aren’t the only ones. Other subscription box companies have experienced a similar increase in demand, with sales at Ipsy, the beauty box founded by YouTube influencer Michelle Phan that costs around £12 a month, jumping 60% in both April and May from a month earlier.
Subscription models are also fantastic at harvesting rich consumer data, which allow brands to better understand consumer motivations and provide sensitive shopper solutions. An example of how this data-led approach can provide sensitive marketing solutions can be seen in our work for Nike, where we created the Snipes Sound Booth Challenge based on in-depth statistical and field research. This provided inner-city pop-up style sound booths for fledgling artists inside multiple urban shop locations, allowing shoppers to perform their beat in-store, share their sound and represent their community through social platforms.
Another win for the subscription model is the level of personalisation it can provide the consumer. As a vast 70% of consumers say they would pay more attention to personalised products, (particularly younger generations), it’s a key factor in catering to this shopper demographic. This can be achieved through data harvesting, product swap outs and VIP/member privileges which allow more choice for an additional fee. It all boils down to asking the right questions, listening to shoppers and continually evaluating how the experience can be made better, as there is no longer any room for complacency in today’s market.