The addictive beauty behind subscription boxes

*Gasha*, *Gasha*, my heart palpitates to the clicking sound of the nostalgic toy dispensers that borders the streets of Japan. While the concept of Gachapon in this case isn’t new, it has rolled its way into other platforms. Notoriously so in games, particularly in PC and mobile. Where players ‘pull’ or ‘roll’ on gacha prizes in hopes of getting random new characters, or items. Closer to home however, the concept has similarities to subscriptions based services. In this article, let’s delve into the concept of subscription boxes. 

Seen from our previous article, the exponential rise in consumers shopping online has already resulted in a boom for the subscription economy. As consumers became more comfortable online, the subscription box offering has also evolved. Not only are they offering just clothes or razors, the direct to consumer model now features an expanding range of products from pet food to toys and even plants. 

Content

But what exactly is this appeal that subscription boxes seemingly have?

The convenience in simplification.

Consumers are constantly battling with the sheer number of choices they can pick. With a subscription box, it immediately tackles and narrows down on a consumer’s indecisiveness. Tossing away the regret in not choosing any other products. At the same time, giving them control with personalisation with a curated mix of items that thus encourages loyalty to the brand.

Personalisation

Subscription boxes often offer curated hand picked products from a wide range to solve an issue. In other words, simplifying and speeding up the decision making process. Replenishment meal kits for example can cater to specific dietary requirements. All without consumers spending an outrageous amount of time flipping through pages. Personalised solutions in this sense are what consumers want from subscriptions. Being able to choose from a specially curated list of options suited to their individual personas.

Value

Since subscription boxes comes in a curated selection of products at various price points. They are effectively chipping away at the consumers discount mentality. A product’s value cost is likely a consumer’s top priority. When faced with a subscription box, consumers face a greater value for money products thanks to the price bundling tactic.

Furthermore, the motivation and mindset behind a purchase is much like that of gamers ‘pulling’ on gacha. The thrill and rush of dopamine in anticipation for an seemingly unknown item can set up a new thrill seeking behaviour in consumers. As predictable as subscription boxes can be, they function in a similar manner. Personalised offerings thus ups the mystery factor, leaving consumers to second guess on their contents. Resulting in a similar euphoric state as one enjoys the ‘surprise gift’ of convenience.

Types of subscription boxes

Arguably unlike gaming, subscription boxes aren’t always enjoyable to the extent of getting a rare item. Which is why they can be classified into 3 broad types, namely access/membership, replenishment or curated. 

The most basic of the three, access subscriptions give access to particular products. These can be anything from magazines, books to even videos. Replenishment subscriptions on the other hand, leverages on necessities that need replenishment at a regular interval. Pet food, groceries and even cosmetics are in this tier. Consumers at this tier favour the convenience of having supplies arrive at their doorstep. Last but not least, curated boxes contain a selection of products that has varying levels of personalisation in it. This category of boxes will be most appealing to consumers that seek the thrill factor. Because the items are curated by the provider, consumer’s wouldn’t know what’s in it. Creating a highly addictive adrenaline rush while consumers wait for its arrival. Only to climax during the unboxing experience before the cycle repeats itself.

Demographics

Are men or women more likely to have an active subscription? The answer may surprise you.

Lo and behold, the answer is women at 60% according to a mckinsey report. However, those with active subscriptions, men and women alike are younger with reasonable spending power. They are likely between the ages of 25 to 44 with incomes ranging from $50,000 to $100,000. Interestingly, men are 42% more likely to have three or more active subscriptions, compared to women at 28%. Possible reasons are that men favour the convenience and the opportunity cost of a shopping trip. This can be further reinforced by the category of subscriptions men are more likely to subscribe to. Personal grooming, gaming and meal kits compared to beauty and apparel, lingerie and shoes for women. 

The downside

The appeal and convenience of subscription boxes may have been quite attractive, but with every business model there is a downside.  Firstly, much like a double-edge sword, subscription boxes require subscriptions. The process of registering for anything is likely to diminish the demand held by consumers. Next, consumers are only in it for the tangible benefits. A great experience from the automated purchase, a need for the product as well as cost savings. Adding to this, the reassurance consumers get from positive reviews and from word of mouth cannot be downplayed. The third party credibility allows consumers to not only determine if the product is right for them. But also whether the business can be trusted. A crucial and essential step that first time purchasers will seek to evaluate.

Furthermore, subscription box services face an underlying retention issue. 28 percent of subscribers in general believe that personalised experience was the most important reason for continued subscription. Followed closely by convenience at 24 percent and value for money at 23 percent.

The Insight

Does going the extra mile for customers make the difference? As told by Managing Director of the subscription box service Lifebox, its success stems from making the difference. Lifebox was made to be a special moment for customers who take great joy in the self gifting experience. The firm paid great attention to detail on the unboxing experience. Starting from the external wrapping down to the placement of inner contents.

The experience however, doesn’t end here. Like most other e-commerce businesses, consumers are encouraged to provide feedback in the form of leaving reviews. This not only acknowledges the customer’s voice but provides invaluable feedback to resolve misunderstandings and problems. Moving forward, these feedback and reviews are crucial to a business growth. An analysis can uncover underlying trends or consumer behaviour to tap into.  

Insight into the UK Market

In 2018, the Royal Mail Group predicted the subscription box market would be worth $1 billion in 2022. A 72% increase compared to 2017. In 2021 however, the market is forecasted to hit $1.8 billion in 2025. Unlike the previous report, the steady ease in predicted growth largely represents the maturing of the subscription box market. Compared to 2018 where consumers raced to embrace a relatively new model in the market, the current lead has been secured by recipe boxes. Predictably, amidst restrictions on physical stores in the last year, the demand for ‘new’ food remains high.   

In 2020, an estimated £1,369 million was spent on subscription services, of which £1,098.2 million was spent on food & beverage recipe boxes, the largest spending category. Consumer sign ups have also increased to 29.6%, up by 2.2% from the previous report, reflecting a strong appeal to the market.   

Market Growth

The UK market’s changes has already been set in motion. Fueled by the pandemic’s lasting effect on the population’s lifestyle choices. The average salarymen are seeing recipe boxes as a breath of fresh air over common takeaways.
More so for those having work from home arrangements, and have the capacity to do so.

Additionally, the market is bolstered by a strong demand for replenishable health and beauty products. Of which, the demand for men’s grooming has seen a boom thanks to its direct to home convenience. 

What’s surprising is that consumers have started purchasing subscription boxes as gifts for others. Driven at a time where friends and family were apart, spending for this rose 121.2%. Common categories for gifting include entertainment & books, health & beauty as well as fashion and peripherals.

Sustainability

While the awareness of sustainability continues to rise, subscription boxes have also entered the fray in embracing the components of the environmental, social and governance (ESG) framework. Packaging made from recycled plastics, or the use of glass instead of plastic bottles are just the appetiser in the long list of initiatives brands have launched. Bloom & Wild for instance has a zero waste initiative, holding ‘eco sales’ for overstocked flowers at a reduced price. This not only improves their brand image but rewards consumer loyalty through sustainable education. 

Use of AI

To offer greater levels of customisation, businesses are moving towards using AI to gain a competitive edge.
Gathering feedback and reviews allows the AI to more accurately predict a suitable course of action on what’s likely to be in demand. Thereby, improving logistical efficiency and reducing the probability of cancellation. 

Conclusion

The subscription box market is still thriving from its younger audiences. However it needs to attract its older audiences with greater spending power to have a firmer growth in the industry. Since personalisation has become an increasingly popular and essential element in any subscription box service. More could be done in the last mile of delivery,for example adding more flexible time slots or having alternative pick up points from post offices. In lieu of an anticipated rise in cancellation due to the festive period, businesses could also offer more flexible arrangements.

Benefit Pte Ltd

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