Our thoughts on the future of business
Retail and the Rise of the Subscription Economy
Jonathan | April 3, 2020
From clothing to beauty to we have already seen an increase in subscription-based models applied to retail. Certainly the current , with the insecurities it creates will hasten that shift. All retailers will have to think through models and how they apply to their business.
Retailers will need to think about how might depending on the of the . In general there are 3 primary consumer models for :
- : Companies like Stitch allowing consumers to receive a variety of clothing products in a basis or Sephora which has a program that allows customers to test beauty products they might not otherwise know about.
- Convenience: Meal service companies like Blue Apron provide some but are really on saving consumers time by a complex product and providing it on an ongoing basis.
- : In a model, the same product is delivered on a recurring basis where that product that is used consistently. Chewy, with its and Dollar Shave are current examples of basis .
require some unique which varies somewhat across the models and how they are implemented.
- Pricing for models is quite different than shelf or pricing. Strategic pricing decisions are critical as trade-offs between customer churn and margin become critical. Losing a customer is suddenly a much bigger issue when that customer has a than if they are making a single purchase. Pricing must to incorporate these multiple factors that get tied into the and must be to rapidly changing conditions.
- Promotions are closely related to pricing and also in the . Will there be an initial promotion offered? A free trial? What kind of churn is expected at the end of the promotion? Can the be used as a vehicle to get consumers to buy or sample other products? This also requires and decisioning that is different than a typical retail promotion though some of the same principles apply such as potential for coops etc.
- Management Tools are required actually execute on the . Some of it is such as , , change/cancel, etc. But there are other of a that can add significant value that are less readily available. For a or convenience product how are you about your customer’s preferences and them in to future offerings? What is your loop? A that does not learn a specific customer’s preferences quickly will be cancelled. For , how is the model? Can customers adjust? There have been discussions about organizations moving to what they call a ‘ ‘ model where the term of the flexes to meet a customer’s usage , even potentially changing seasonally.
The holds great promise for retailers that implement it successfully but can create significant churn and hurt if it is poorly thought out. Retailer will need to decide the model they want to pursue and ensure they have the right , expertise and technology to bring it to life.