Today, we are in the subscription box craze, with hundreds “of the month clubs” providing a supply of everything from beauty supplies to socks and coffee. I, myself, am in the subscription e-commerce business offering a monthly subscription service for cured, artisan meats. I’ve learned that, just like with any other industry, you have to watch trends in order to thrive.
Within the subscription box industry, there are three main market approaches: replenishment (e.g. Dollar Shave Club), sampling (e.g. Birchbox and Glossybox) and curation (Graze and my business, Carnivore Club, falls under this category). However, the industry has become so saturated that late entrants trying to find their place are starting monthly subscription boxes for more obscure categories like teddy bears and boxes specifically designed to gift your grandparents.
It’s reminiscent of the daily deal flash-sales craze popularized by Groupon in 2010 and emulated by countless entrepreneurs looking to jump on the bandwagon. By 2012, the bubble had burst and millions in investment had evaporated, as businesses realized that deep discounting was a quick way to lower the perceived value of their service and did nothing to attract long-term customers.
Despite the number of subscription box companies, we’re not in the midst of another e-commerce trend burst. Subscription businesses are built on sound business fundamentals, and the model has been used for decades by companies like Columbia House and the Wine of the Month Club, which was started in 1972.
Here are my top five predictions for the future of subscription e-commerce:
1. Micro-subscription box companies will proliferate.
White-label subscription e-commerce platforms like Cratejoy will enable thousands of entrepreneurs to start niche subscription box offerings. These startups will be characterized by niche offerings, filling their boxes with everything from adult diapers to hockey tape. They’ll likely be started by part-time entrepreneurs and rely on organic growth. Niche subscription services like Curator and Mule, which delivers seasonal men’s accessories and Mistobox, which curates hand-selected coffee cater to taste and convenience; personalization that continues to be in demand.
2. Professional services via subscription models will be disrupted.
Some of the oldest and most respected professions in the world have enjoyed the status quo when it comes to billing and charging hundreds of dollars per hour without any real accountability to productivity and cost. Their billing models are actually incentivized against productivity via the time for services model. One of the services we like is Toronto-based startup Scalability, a subscription company for back-office services. Watch out, lawyers and accountants: this could disrupt the way you charge.
3. The luxury lifestyle will be accessible to all.
The membership-subscription model allows businesses to increase the value for all. The higher margin and perceived value, the riper for disruption. Enterprising service-oriented entrepreneurs have started to offer luxury services en masse, whether it’s access to private clubs, salons, personal concierges, virtual assistants or vacation rentals. Businesses that stray from the dollar-per-hour or cost-per-night model to subscription models will enable more predictable revenue and offer luxury good and services to a larger demographic. One example of this type of business is JohnAllans, a premier men’s grooming club.
4. Consumer packaged goods (CPG) companies will offer subscriptions direct to consumers.
Many billion-dollar consumer products companies have direct access to millions of customers through email and social media, globally. However, they have yet to capitalize on monthly subscriptions to increase margins and expand their share of household, thereby owning the relationship with their customer directly. Walmart and Target have paved the way for these titans of commerce to dive in, so hopefully enterprising marketing executives will take the bait.
5. Consumers will experience subscription fatigue.
Like anything, we will eventually hit a wall where people will realize they have way too many subscription services and memberships as the model penetrates every facet of our lives. The gap in fees and usage of so many different services will drive breakage as people manage their personal finances. Once the novelty of the industry has subsided, I see the average consumer maintaining six to eight subscriptions covering various categories from music to beer.
This article has been edited and condensed.
Tim Ray is a serial entrepreneur focused in e-commerce and technology with a passion for creating cool brands and innovative business models. He is currently the Founder and CEO of Carnivore Club, the premium subscription service for foodies who love charcuterie; and Broquet.co, a site with awesome curated gift crates for men. His latest venture, 100Foodies, combines his new SaaS e-commerce platform with an aggregated marketplace and affiliate marketing revenue to create the first comprehensive e-commerce ecosystem. A version of this article originally appeared on PSFK.
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