The Subscription-Box Phenomenon and Subsequent Effects on Fulfillment
The evolution of ecommerce gave rise to a new trend in online retail: subscription boxes. Subscription-box services rely on recurring deliveries of niche products specifically curated for the customer’s preferences. These items are delivered to the customer’s door, usually monthly, in a creatively branded box with new discoveries inside each time.
The rise of subscription boxes started in 2010 with beauty company and current subscription-box leader Birchbox. Now, this micro-industry is one of the fastest-growing retail segments with more than 2,000 box sets on the market encompassing everything from dog toys to cleaning products to wine.
The popularity of these boxes doesn’t seem to be slowing down anytime soon. According to consumer behavior analytics firm Hitwise, subscription-box site visits grew 3,000 percent between 2013 and 2016. Many large retailers like Sephora, Walmart and Starbucks are currently trying to tap into the expected $40 billion dollar industry with launches of their own subscription boxes.
Popularity among consumers
What makes these boxes so popular among consumers? According to a study from social media analytics agency Crimson Hexagon, the main reason is the surprise and excitement that accompanies a delivery.
“Again and again, consumers posted on social media about how receiving a new box in the mail—regardless of product category—made them feel like it was Christmas morning,” Crimson Hexagon reported.
Aside from the excitement that surrounds a subscription-box delivery, the other top reasons consumers sign up for these services include:
Shopping in a physical store with hundreds of products to choose from can be overwhelming for unfamiliar customers. Subscription-box services lift this decision-making burden from the customer. Instead, the company uses their expertise to choose products best-fit for that customer giving them a personalized experience that they wouldn’t get in-store.
Having a box of custom products delivered to your doorstep saves time – time that would have been spent researching and reading reviews on new products and physically going out to purchase those products.
- Customer service
This reason may be surprising because the nature of subscription-box services minimizes the amount of interaction a company and customer have since they never have to step foot in a physical store. However, Crimson Hexagon discovered that a sizable amount of consumers cited positive customer service in their experience with these services.
How do subscription-box services affect fulfillment?
Not only do subscription boxes offer benefits for consumers, but also for fulfillment operations. Fulfillment operations are often crippled by demand volatility – something that subscription-box services can help to regulate. Let’s explore these advantages more:
- Predictable revenue
Once your customer is subscribing to a product you’re offering, so it’ll be recurring revenue. Once they sign up and pay, you’ll have built-in customer retention and will have a better estimate on monthly revenue.
- Manageable stock
Similar to predicting revenue, your inventory can become more predictable. The subscription model is set up to tell you what to stock and how much of it you need upfront. You can predict the volume based on the number of subscribers you have.
- Lower shipping costs
Because your shipments occur on a fixed schedule, orders can be prepared to ship in an adequate amount of time to avoid expedited shipping costs, saving you and your customer money.
Traditional order fulfillment vs subscription-box fulfillment
If you’re used to traditional online order fulfillment, you’ll need to consider some key differences between the two in order to make the process as efficient as possible.
In a traditional fulfillment center, there is typically a consistent stream of orders being shipped out daily. In contrast, subscription-box services tend to experience a high concentration of shipments at one time since most of the boxes are sent out during the same period each month. This peak shipment schedule requires a flexible workforce that can easily scale based on the order cycle.
Additionally, the quality of the shipment is critical because subscribers are looking for a well-packaged box to share online, so items need to be organized a certain way during the packing process for a perfect presentation. A damage-free box is critical to the customer’s perception of your company and whether or not they will continue their subscription.
The last key difference is that subscription boxes require constantly changing inventory. Subscribers are expecting to discover something new inside their box each month, so you must continually upgrade your product selection to stay on top of customer trends and expectations. As a result, you’ll need extra room in your fulfillment center to store this new product.
Are you ready to implement a subscription-box offering?
If you’re able to meet the challenges of subscription-box ecommerce and have the support to flex your staff based on peak shipment periods, then your operation might be suitable to fulfill subscription-box orders. Although there are operational differences, the popular subscription-box service provides predictable revenue and inventory making your stock more manageable. As your subscribers enjoy their monthly curated items, you’ll gain more loyal customers that can help advocate for and grow your business.