From meal kits to makeup bags, there’s a subscription service available for just about anything you could want to buy. When category trailblazers like Birchbox and Blue Apron saw early success with subscription-based revenue models, competitors rushed in – likely faster than the market was ready for. Consumer adoption – and perhaps more importantly, consumer retention – remain relatively low. That said, longer-term shifts in the retail landscape, many of which were accelerated during the COVID-19 outbreak, indicate that subscription service usage will continue to increase as people pursue a convenient and cost-effective omnichannel shopping experience.
The number of different subscription products and services available is outpacing demand. Offerings are continuously evolving as new companies and product categories enter the market. However, consumer adoption remains relatively low; only 28% of U.S. adults that are familiar with any subscription services (excluding streaming services, retailer memberships, and facility memberships) are potential users.
While many early subscription services provided curated boxes on a preset schedule, consumers’ tastes have shifted. According to CivicScience data on subscription services, people who use or would consider using a subscription service are most interested in doing so because it’s cost-effective (21%) and convenient (15%), aligning with overall usage trends; subscribe-and-save programs are currently the most popular type of subscription.
Categories of Interest
Style boxes (e.g. Birchbox, StitchFix) are among some of the most well-known subscription services, but they’re not driving adoption. Interest in beauty and personal care and clothing subscriptions is low, limited by the gendered nature of the products as well as people’s retail FOMO; 39% of U.S. adults would prefer to shop for themselves on an as-needed basis instead of using an automated subscription service.
That said, the impact of the COVID-19 outbreak can’t be ignored. Style subscriptions have been rendered somewhat obsolete by pandemic safety precautions while other categories have gained traction. For example, CivicScience data on pet ownership shows that the number of cat and dog owners has increased from 63% to 69% since March 2020.
For better or worse, the pandemic has changed the way that people shop. While more traditional retail channels have struggled to overcome the operational challenges that emerged because of the COVID-19 outbreak, subscription services have been, in some ways, better positioned to succeed. Automated, contactless deliveries offer shoppers a level of safety and convenience that brick-and-mortar retailers can’t yet match. However, subscription service adoption over the past year has been mixed, highlighting the shift in Americans’ priorities. While 15% of U.S. adults have subscribed to at least one new service due to the pandemic, just as many have canceled or lapsed an existing subscription.
Among people that tried a new subscription service because of the pandemic, subscribe-and-save programs for must-have items have gained the most traction. While it’s likely that this success stems more from recent social distancing efforts than it does from a permanent shift in shopping behaviors, low defection rates indicate that there may be some stickiness after the pandemic resolves.
The future of the subscription service market is likely bright, but what happens next is still unclear. Adoption – and to an extent, interest – are still low. Pandemic-related buzz points to opportunity in essential (as opposed to discretionary) offerings, but category players will need to make serious efforts to overcome shoppers’ FOMO and prove their value.