UK businesses buy into growth opportunity of subscription boxes

UK businesses buy into growth opportunity of subscription boxes

Key points

  • Six in ten (59 per cent) subscription box* businesses intend to invest in new or existing subscription services in the next year.
  • Over half (52 per cent) of businesses agree that subscriptions are set to be a major focus of their company in the future.
  • Driving greater brand loyalty is a key motivation for launching a subscription service. Other important reasons include the desire for greater control and lower start-up costs.
  • Subscription box businesses see a return on investment relatively quickly, with 62 per cent achieving this within three months of a customer being signed up to a service.
  • Nine in ten (90 per cent) of these businesses make at least some of their subscription revenue from outside the UK and just under a quarter (24 per cent) make more than half of their sales from customers abroad.
  • Popular overseas markets include the Republic of Ireland, France, Germany and Spain.

Six in ten (59 per cent) subscription box* businesses intend to invest in new or existing subscription services in the next year, according to a report commissioned by Royal Mail. Over half (52 per cent) of the businesses surveyed also agreed that subscriptions are set to be a major focus for their company in the future.

Delivering brand loyalty

Driving greater brand loyalty is a key motivating factor behind the launch of many subscription schemes and is cited by almost half (45 per cent) of those operating such a service. In an increasingly competitive retail environment, subscription box services offer an enticing option to lock consumers in to regular purchasing. Other important reasons for starting a subscription box service include the desire for greater control, in particular control of distribution (35 per cent), control of marketing and promotion (24 per cent) and lower start-up costs (24 per cent).

Linked to the desire to drive greater loyalty, retaining customers is seen as one of the key challenges associated with operating a subscription box scheme (21 per cent). The average retention rate for almost six in ten (59 per cent) of the businesses surveyed is three months or less. On a positive note, subscription box businesses tend to see a return on investment relatively quickly, with 62 per cent achieving this within three months of a customer being signed up to a service.

International opportunities

Nine in ten (90 per cent) businesses surveyed make at least some of their subscription revenue from outside the UK and just under a quarter (24 per cent) make more than half of their sales from abroad. Low growth in UK retail sales and the growing attractiveness of UK prices is making international expansion opportunities increasingly appealing. With relatively low start-up costs, subscription boxes are an attractive option for businesses targeting overseas markets. Popular overseas markets include the Republic of Ireland and France - where 46 per cent of subscription businesses which export overseas make at least some of their sales – as well as Germany (39 per cent) and Spain (31 per cent).

A spokesperson from Royal Mail said “UK businesses are really buying into the growth opportunities that subscription services can deliver. Driving greater brand loyalty is a key motivation for launching subscription box services and we are also seeing lots of international opportunities for subscription businesses. We’re here to help these businesses along the way, wherever they are in the UK.

“With the UK’s biggest by far "Feet on the Street" network covering 90.000 postmen and women, Royal Mail is playing a key role in keeping carbon emissions low. The vast majority of subscription items are letterbox-able and so are ideally suited for on-foot delivery by Royal Mail and do not require a van delivery.”

This is the third instalment of Royal Mail’s subscription box series, with a full report set to launch later in the year.

 

- Ends -

Note to Editors

 

*A subscription box is a recurring, physical delivery of products packaged as an experience and designed to offer additional value on top of the actual retail products contained in the box, such as through surprise, a saving on what is on offer in the shops, or by giving the user a chance to experiment with a tailored selection of products.

 

The UK Subscription Box Boom Report, compiled by GlobalData.

The findings are drawn from a bespoke consumer survey of a nationally representative sample of 2,000 UK shoppers according to demographics and geography and a bespoke B2B survey of 53 directors and senior managers (including 32 from the retail/FMCG sector and 21 from the healthcare sector). In terms of the composition of the B2B survey, 23 were from micro companies (2-9 employees), 10 from small companies (10-49 employees), 8 from medium companies (50-249 employees) and 12 from large companies (250+ employees). 29 of the businesses surveyed operated a subscription box service.

The market was sized and forecasted using a combination of data from the above surveys, company financials, other secondary data (such as industry reports, macro-economic and population data) and GlobalData’s own proprietary database of consumer, market and retailer data.

 

About Royal Mail plc

Royal Mail plc is the parent company of Royal Mail Group Limited, the leading provider of postal and delivery services in the UK and the UK’s designated universal postal service provider. UK Parcels, International and Letters (“UKPIL”) comprises the company’s UK and international parcels and letters delivery businesses operating under the “Royal Mail” and “Parcelforce Worldwide” brands. Through the Royal Mail Core Network, the company delivers a one-price-goes-anywhere service on a range of parcels and letters products. Royal Mail has the capability to deliver to around 30 million addresses in the UK, six days a week (excluding UK public holidays). Parcelforce Worldwide operates a separate UK network which collects and delivers express parcels. Royal Mail also owns General Logistics Systems (GLS) which operates one of the largest ground-based, deferred parcel delivery networks in Europe.

Contact

 

Jasmin Prichard, Royal Mail press office
Email: jasmin.prichard@royalmail.com
Tel: 020 7449 8360
Press office: 020 7449 8246

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