As The Dandy Warhols sang in the late 1990s, “Heroin is so passé”. Surely the same could be said of getting a parcel in the post? Yet in the digital-drenched 21st century, consumers are signing up to endless snack clubs and perk clubs, electing to receive everything from coffee to cosmetics by mail. Gareth May unboxes the subscription economy, and the enduring appeal of the club.
In the 1950s and ’60s, in the grand old days of rockabilly and Elvis, record clubs were all the rage. EMI, Columbia House, Capitol Records. They were all at it. Musos couldn’t wait to get their mitts on a monthly vinyl via mail order. Today the same is true, with the likes of Flying Vinyl (with the brilliantly provocative tagline, ‘The Revolution will not be digital’) and Stylus (sending out 45s with a bottle of vino) just two examples of a thriving cottage industry ordering Spotify to step aside.
And it’s not only vinyl. In the wake of subscription-based media like Amazon Prime Video, ClassPass, Hulu and others, there’s now a tidal wave of tangible subscription start-ups flying through the letterbox. From Hello Fresh to Ipsy to My Freda, the subscription economy is back with an almighty bang – shipping snacks, meal kits, beauty products, period care, clothes, video games, and even razors to any corner of the world.
As the high street dies, subscriptions are thriving. It’s a trend, fuelled by a healthy consumer appetite and willing investors, with an astronomical rise. A survey by McKinsey reveals that 15% of online shoppers have signed up to receive products on a monthly or more basis and analysis by consumer insights company Hitwise show the subscription box industry to be one of fastest growing ‘retail verticals’ in recent years, with visits to subscription websites growing by an incredible 800% between 2014 and 2017. Move over Sgt. Pepper’s, there’s a new club in town.
Connection is made
Georg Richter, founder of OceanX, an online engine for subscription e-commerce, says that in a world where consumers are overwhelmed with the sheer number of products online and in store, “subscriptions provide an aspect of ‘expert advice’, guidance and inspiration, and also include the simple aspect of replenishment” that a millennial consumer typically values (Hitwise’s report backs up this demographic driver with 18-24-year-olds being the primary visitors to sub box sites).
And, Richter adds, it’s the most sophisticated subscription systems – set up to let brands ‘listen’ to customers and increasingly customize their offerings as their interests morph and mature – that leads to consumers “feeling that the company really knows them,” that they’re really part of a club.
The idea of inviting a consumer to join a select group is nothing new, says Leslie Hallam, psychology of advertising course director at the University of Lancaster. It’s just that “before the internet it was quite a tough procedure, so making the transaction frictionless is a huge element” of the rise of subscription services today. But frictionless only explains how it’s risen so fast, not why.
“Many brand values surround the notion that you’re doing something better and more effectively than other people, and that peer affiliation and approval results in an exclusive in-group ethos.”
— Leslie Hallam, psychology of advertising, University of Lancaster
Brands, Hallam says, are very good at creating in and out groups. The idea being that by joining the in-group, there’s a sense that you know better than the out-group. Simply put: that you’re in the know. “Many brand values surround the notion that you’re doing something better and more effectively than other people, that you’re steeling a march by avoiding paying the premium associated with a highly branded item, for example, and that peer affiliation and approval results in an exclusive in-group ethos.”
Subscription brands play off this sense of being in the in-crowd. Beauty brand Birchbox originally operated with an invite-only waitlist and we only have to consider the phenomenon of micro-influencers excitedly unboxing a package on YouTube as further proof of the in-group trend. Like waving a pair of tickets you’ve landed for the latest retirement Rolling Stones tour in the face of your mates, an unboxing is showing others that you’re a member of a select elite, with the content of the box playing second fiddle to the excitement of the opening; the declaration that you’ve got something others want.
In the UK, Hitwise regard fashion and beauty and food and alcohol categories as particularly responsible for a subscription surge that saw 3.1 million people visit a ‘sub box website’ in the Q4 last year. This remarkable growth has attracted established brand owners and retailers to enter the thriving space, whether that’s Sephora Play! or Walmart’s Beauty Box. But it was Unilever’s $1 billion acquisition of razor subscription service Dollar Shave Club back in 2016 that really put subscription services on the map.
The McKinsey report says that 55% of all subscriptions are curation-heavy, reflecting online customers’ demand for personalization—and the male grooming mail kit fulfils this need aplenty with monthly models ranging from £20 down to £1 (with £2 for postage) and a guarantee to cancel at any time. Yet convenience and curation are only two of the factors for subscription boxes’ success in the beauty sector. The club ethos is king once again.
For Dollar Shave Club, it’s not about buying the best possible razors, it’s about discovering a new way of buying them, says Hallam. “Gillette jumped the shark with its advertising in the ’90s with ‘The Best a Man Can Get’ campaign, because a lot of younger shavers really ripped the piss out of that. At the end of the day, it’s a razor. It gets rid of your beard. That’s all it does. So that over branding has played into the less commoditized aspect of these subscription services.”
“Customers might not buy each and every month, but if they can decide on the cadence of the program and feel that they get great guidance and value, why would they ever leave or buy from someone else?”
— Georg Richter, OceanX
In other words, consumers aren’t just getting the razors, they’re getting authenticity and understanding, and something different from “the massaged messaging” of mainstream marketing. Yet Dollar Shave Club is a unique example, Hallam says. There’s a deeper psychology, “a kind of generational succession at play” here too.
“Every generation wants to do something different from the previous one, and with shaving there’s a good deal of Oedipus psychology around that,” she continues. “When you come of age you want to do better than your father did. For the current generation of millennials, they see their fathers being wooed by the likes of Gillette and Wilkinson’s Sword and want to do it differently.” These consumers want to be their own man and Dollar Shave Club gives them the tools to do just that.
Churn baby churn
The club ethos is, of course, in part, an illusion; it’s certainly not a one-way transaction. Brands are equally getting something out of the club arrangement. In this newer marketing model, a relationship is formed where the brand gets to keep tabs on consumers, gets them to give up their likes and dislikes without farming data (via curation questionnaires), and essentially hand over the key to unlock their consumer needs. Not only does this lead to significant recurring revenue, Richter says, this is really what the subscription model is about: “brands owning the customer relationship.”
But as fruitful as this ‘forever’ relationship, as Richter calls it, is, it’s not without its challenges. Switching to a subscription model with the lack of a deep understanding of the P&L (for someone who is used to traditional P&Ls) and accepting that the subscription channel is less profitable in the beginning (with trial offers) and much more profitable in the long run (with recurring revenue without advertising spend) is the key to success. “Customers might not buy each and every month, but if they can decide on the cadence of the program and feel that they get great guidance and value, why would they ever leave or buy from someone else?” he concludes.
“We handpick six beers each month that we believe are real gems, meaning subscribers never get a dud and will likely discover new beers. Our subscribers are becoming more clued-in.”
— Stephen Grant, DiscoverBrew.com
The problem, however, is churn – when customers abruptly end a relationship with a company. It’s a common pitfall of newer subscription services. Consumers churn for many reasons, but the most common is a perceived lack of value. Founder of DiscoverBrew.com, Stephen Grant, says churn is something they overcome by offering expert insight, something that works particularly well in the food and alcohol sector. “We handpick six beers each month that we believe are real gems, meaning subscribers never get a dud and will likely discover new beers they’ll love,” he says, adding that the service guides subscribers through oceans of choice with bespoke videos for each selected beer, covering tasting notes, brewing methods, pairing suggestions and more in an open and friendly way. And what does the consumer get from this? “It means our subscribers become more clued-in,” Grant says. That in-group, once again.
And it’s evolving rapidly. “We’re at the beginning of a mega trend. Subscriptions are everywhere, from car wash to gyms,” says Richter. “And there’s also the Netflix of Aviation, California based Surf Air, that gives members limitless access to flights for a monthly fee.” When it comes to subscription services, the sky really is the limit.Share this article