The Subscription Economy: Key trends for success in the market

The Subscription Economy: Key trends for success in the market

Key points

Episode 6 Contributors

Bloom & Wild
www.bloomandwild.com

Lola's Cupcakes
www.lolascupcakes.co.uk

Garçon Wines
www.garconwines.com

 

Over the last few months, we have released snippets of findings from Royal Mail’s report on the UK Subscription Box Boom. Now, we are releasing the full report on the subscription box market*. Forecast to be valued at £1 billion by 2022, the report highlights key trends across the market, providing advice and insights for businesses already operating in the space or looking to do so in the near future.

The spectacular rise of subscription boxes has largely been driven by start-ups. The low barriers to entry in the subscription box market have meant that even with limited capital and resources, entrepreneurs can establish and build a successful business. This success is now sparking interest from bigger brands including Gillette and Sephora hoping to emulate the performance of subscription companies such as Dollar Shave Club and Birchbox.

Yet, subscription box companies have not always considered big retailers and brands to be their direct competition and have found ways to work in collaboration. Brands such as Graze are now stocking their products in conventional retail stores, while Unilever acquired Dollar Shave Club for $1 billion in 2016.

For this podcast, we spoke to a number of subscription box businesses including Aron Gelbard, co-founder and CEO of Bloom & Wild, who said: “Bloom & Wild planned to be both a subscription and a gifting company from the start. We thought there was an opportunity for a flower subscription. The letterbox delivery seemed to work for a self-purchase subscription because people don't need to be at home to receive the flowers. As we became a popular gift option, the idea of a gift subscription and not just gifting somebody one bunch of flowers but an ongoing flower experience also seemed to work really well. Subscriptions have been part of our DNA since the beginning.”

 


“Bloom & Wild planned to be both a subscription and a gifting company from the start. We thought there was an opportunity for a flower subscription. The letterbox delivery seemed to work for a self-purchase subscription because people don't need to be at home to receive the flowers. As we became a popular gift option, the idea of a gift subscription and not just gifting somebody one bunch of flowers but an ongoing flower experience also seemed to work really well. Subscriptions have been part of our DNA since the beginning.”

Aron Gelbard, co-founder and CEO of Bloom & Wild


 

The overseas opportunity

The subscription box business model presents significant opportunities for international expansion, with our report revealing that nearly 90 per cent of subscription businesses make at least some of their sales overseas.

Moves by overseas brands, including Birchbox, Harry’s and Dollar Shave Club to enter the UK market have been mirrored by the efforts of UK brands to conquer territories abroad. Graze garnered over 150,000 US subscribers within just three months of its launch in the USA in 2014 and now enjoys a major presence on the US snacking scene.

Popular markets for international sales among businesses include Ireland and France, where 46 per cent of subscription businesses have an overseas presence. Germany (39 per cent) and Spain (31 per cent) are also common destinations for international entrants.

 

The subscription sweet spot

“Churn” – or the proportion of customers who decide to cancel – is one of the biggest challenges facing subscription box businesses. Keeping customers engaged is vital, and a number of subscription businesses have developed innovative ways to do so. This includes diversifying their business model to reduce their reliance on subscriptions, as well as launching new products and features. Retaining customers is very important for any subscription business. Even a small percentage of shoppers cancelling their subscription each month can have a big impact on the subscriber base.

Asher Budwig, Managing Director of Lola’s Cupcakes, discusses the company’s latest venture: “Lola's has been baking cupcakes for over 10 years. We'd been selling brownies into some of our stores but been restricted in how far we could reach our customers. Cupcakes are fragile and don't travel well at all. We were looking to expand our reach and we stumbled upon brownies that travel much better than cupcakes. So that's how we stumbled upon the subscription box model and the idea of shipping brownies by post to the whole of the UK.”

 


“Lola's has been baking cupcakes for over 10 years. We'd been selling brownies into some of our stores but been restricted in how far we could reach our customers. Cupcakes are fragile and don't travel well at all. We were looking to expand our reach and we stumbled upon brownies that travel much better than cupcakes. So that's how we stumbled upon the subscription box model and the idea of shipping brownies by post to the whole of the UK.”

Asher Budwig, Managing Director of Lola’s Cupcakes


 

Innovation can sometimes be as simple as keeping customers engaged using a magazine. Shaving subscription business, Cornerstone, for example, credits the launch of its “15 minutes” male lifestyle magazine with a major reduction in its churn rate. The title now claims a readership of 130,000. Similarly, among beauty box retailers, there has been an increasing trend towards personalisation, with Birchbox trialling Birchbox Select, which enables customers to pick out specific items or tailor the box to their cosmetic requirements such as dry skin and coloured hair.

Overcoming the key barriers to the take-up of subscription services requires the delivery of a highly convenient and flexible service that is easy to cancel and offers something shoppers cannot easily get in conventional retailers. This might include unique products, a tailored, curated selection or just the element of surprise.

Delivering a convenient experience from start to finish is also very important. There is clear demand from busy shoppers to have items delivered hassle-free without them having to wait in at home. Letterbox delivery is highly sought after and brands, such as Garçon Wines, with its pioneering, flat wine bottle are seeking innovative ways to respond to this need.

Santiago Navarro, co-founder and CEO of Garçon Wines discusses letterbox delivery: “We're the inventors and granted IP holders of a flat wine bottle designed specifically for e-commerce and home delivery, ensuring the bottle can easily go through the supply chain between winery and dining table. The Royal Mail service and the good fortune that most homes have a letterbox in their front door ensures direct and safe access for the wine bottle into the house.”

 


“We're the inventors and granted IP holders of a flat wine bottle designed specifically for e-commerce and home delivery, ensuring the bottle can easily go through the supply chain between winery and dining table. The Royal Mail service and the good fortune that most homes have a letterbox in their front door ensures direct and safe access for the wine bottle into the house.”

Santiago Navarro, co-founder and CEO of Garçon Wines


 

The final piece of the jigsaw lies in delivering a unique selling point; something new, different or surprising, which helps the brand stand out from the crowd.

In the sixth and final episode of our Royal Mail Subscription Podcast series, we spoke to Aron Gelbard, co-founder and CEO of Bloom & Wild, Santiago Navarro, co-founder and CEO of Garçon Wines and Asher Budwig, Managing Director of Lola’s Cupcakes about the UK’s subscription box market. Take a listen to the final podcast in the series!

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