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How Larger Retailers Can Benefit From The Subscription Model

Until recently, the vast majority of subscription boxes came from subscription brands – that is, brands that exclusively sell curated boxes of themed merchandise. We’ve seen hugely successful subscription services like Stitch Fix, Birch Box, and Dollar Shave Club, to name a few.

But in the past year, many bigger brands decided to dip their toes into the subscription box business: Sephora released the monthly beauty products subscription “PLAY! by Sephora,” Starbucks introduced a coffee subscription called Reserve Roastery, Target has a themed subscription box with products for babies/new parents, and of course Amazon has a variety of subscription boxes you can buy based on your interests.

It’s no surprise that these big brands would want to take advantage of a booming industry. According to The Economist, 80% of companies report seeing a change in how their customers want to access and pay for products. Purely from a customer-centricity standpoint, retail subscriptions make sense as a way to provide shoppers with an avenue to explore a brand’s products.

Shoppers can decide which way best fits with their unique needs, price-requirements, and preferences; brands have another option by which to drive revenue.

But larger retailers have a huge opportunity with the subscription model that empowers marketers to create a more customer-centric subscription experience. Where subscription-only retailers need to work extra hard to learn as much as they can about new customers based on granular actions and browsing sessions, larger brands will likely see many of their subscription buyers coming through from existing customer base.

A Sephora customer is unlikely to hear about “Play! by Sephora” before they hear about Sephora, for example. It’s more likely they’ll consider the subscription box only after browsing the more traditional per-purchase route that the bigger brands are known for. And this means, among other things, that those customers will come in with an existing store of behavioral data that marketers can then mine to improve on the subscription shopping experience.

How can larger retailers benefit from the subscription model in ways that subscription-only retailers can’t?

Ability to recommend relevant subscriptions to current per-purchase customers

The fact that larger retailers have an existing audience that they can reach out to is one of their biggest advantages over subscription-only companies. By identifying what per-purchase shoppers’ browsing/purchasing preferences are, marketers can recommend an accompanying subscription that relates to those demonstrated needs. This gives customers another way to shop and could improve customer loyalty. But in this instance, like always, it’s absolutely critical to make sure that you’re not sending your customer an irrelevant recommendation. Walmart, for example, shouldn’t recommend their Beauty Box to existing customers without a demonstrated record that those customers habitually and regularly purchase cosmetics, because there’s no faster way to lose a current customer.

Increased opportunity to personalize the subscription shopping experience…

Similarly to recommending a subscription overall, when larger brands have insight into a customer’s historic per-purchase browsing behaviors, they can use what they know to further personalize the subscription experience itself – without having to resort to lengthy personalization surveys like subscription-only brands are sometimes forced to. The aforementioned Sephora box, “Play!,” leverages existing loyalty data to understand what kinds of products customers are looking at and marking in their Favorites – those items then get included in a hand-selected box.

…and vice-versa.

The flip-side also becomes possible when bigger brands know what boxes their per-purchase customers have subscribed to. Provided that marketers are gathering feedback on what their customers did and didn’t like within each box, they can then use that knowledge to make recommendations for what customers might want to purchase online or in a brick-and-mortar store. Some subscription-only retailers have begun to go this route, by offering customers the option to buy the full size version of a sample product they received in a box – Graze and Birchbox both now have online per-purchase stores that they’ll use to make additional product recommendations to their subscription customers.

Though a subscription customer is by no means a guaranteed stream of revenue, it’s another route by which larger retailers can reach out to customers with targeted content and provide multiple options for a customer to engage, browse, and (hopefully!) purchase. At the end of the day, it’s ultimately still about being as customer-centric as you can, by thinking about what your customers’ needs are in terms of what they want to buy and how they want to shop, and then doing what you can to see that those needs are met.

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