The online subscription business has been growing exponentially. According to McKinsey, 15 percent of online shoppers in the US have signed up for one or more subscriptions service. In fact, subscription models are so popular, many are jumping on the bandwagon: from pure services without any physical exchange of goods like Spotify and Netflix; to fashion apparel, luxury goods, coffee capsules, wine, flowers and even… (wait for it) bacon.
Consumers love it as it provides a convenient, personalized, and often lower-cost way to buy what they want or need.
When successful, subscription models provide retailers with guaranteed revenue and valuable customer data. But the downside includes huge logistics and marketing costs, and high churn rates when customers’ needs are not met.
Below, we delve into three subscription services to learn from their experiences as well as find out how you can apply these best practices into your business.
Rent The Runway
Rent The Runway provides designer dress and accessory rentals on a monthly basis, allowing customers to rent outfits for special events without the hefty designer purchase price tag. The service allows customers a rotation of stylish clothes and freedom to experiment with riskier trend they might otherwise avoid.
Reviews – more important than we think
Buying clothes online can be tricky, and we’ve all encountered instances when you bought something you thought would be a great fit, but turned out to be a miss. Without the experience of physically trying on clothes, people rely on reviews posted by others for more information about the products they see online.
Knowing this, Rent the Runway app and website regularly prompt users to review what they borrowed. With a few taps, customers could let others know whether the item was true to size. CEO Jennifer Hyman revealed that over 50 percent of customers leave reviews and feedback, creating a trove of data which the company uses to improve on their services.
Be honest and transparent about mistakes
Of late, things have been a rough ride at the company. Due to a warehouse system update on September 13, the backend caused some orders to be delayed, reported Vox. As a result, hundreds of customers were left without their orders.
Fortunately, the Rent The Runway has taken steps to mitigate the damage. When complaints started increasing, its CEO personally responded to customers’ queries, assuring them that her team was doing their best to solve the issues.
We are so sorry for long response times today – our team is working around the clock to ensure we are giving every customer the best experience possible @rtrhelp
— Jennifer Hyman (@Jenn_RTR) September 20, 2019
On top of apologizing, the company set up a FAQ page to keep customers updated about how they are solving the issues during this period of shipment delays. Affected customers also received $200 compensation, as many of them had to make emergency arrangements due to their undelivered outfits. Rent The Runway has also stopped accepting new subscribers for the time being, until the technical issues have been resolved.
Dollar Shave Club
Perhaps best known for their viral marketing video back in 2012 (which has had more than 26 million views on YouTube), Dollar Shave Club certainly comes to one’s mind when discussing about subscription services. The company has grown from offering razors to a line of toiletries as well as lifestyle and wellness content for men.
Integrated supply chain
A huge factor in the success of Dollar Shave Club can be attributed to its integrated supply chain. The company sources its products from China and South Korea, and manages inventory from a single distribution center. This also leads to predictable demand forecast, as the only source of variability is the changing number of subscribers.
While logistics is vital for subscription boxes to work, costs can add up. Most retailers use multiple carriers, and quality management is something they have to grapple with. Parcel Perform provides one integrated platform to standardize realtime logistics data across all your orders and shipments – get in touch with us to find out about how we can help your business.
Use data to offer a personalized experience
Dollar Shave Club leverages on data such as customers’ age, ethnicity and location through their member profiles, and use these information to develop product recommendations. They also ask questions to find out concerns that customers have – for instance, thinning hair, or taming unruly hair – to plan for their product development pipeline.
CEO Michael Dubin revealed that based on the data they have about customers, Dollar Shave Club will likely move into skin care, dandruff shampoo and anti-aging products in the future.
Blue Apron is a weekly meal kit service which delivers customers the exact amount of ingredients needed and instructions to cook the meals needed for that week’s recipe. The company prides itself on offering responsibly-sourced, quality ingredients, as well as chef-designed gourmet meals where customers can cook from the comfort of their own homes.
Invest in an efficient supply chain
It’s no secret that supply chain management is complex, perhaps even more so in the food and beverage sector. Perishable items, product quality and safety all present challenges that go beyond standard parcel handling. Blue Apron ensured these demands were met by investing in advanced kitting automation to supplement its inventory management.
To ensure freshness, it built food-prep centers in a range of key locations. The meal kits were then sent to destinations in refrigerated trucks. Furthermore, ingredients can be managed and traced directly to their original source, guaranteeing optimal quality and food safety.
Focus on customer retention
While customers love meal kits for their convenience and choice, customer loyalty remains an issue. Due to competitive discounts offered across the industry, users often patronize the company offering more attractive discounts. Most either jump to another brand or go back to their old grocery habits.
Blue Apron has managed to come out on top in terms of retaining customers – a survey revealed that more customers subscribed to their meal kit service for at least 3 months, double the percentage of retained customers at other companies.
For any business, customer retention should be one of the key focus, as long-term relationships are needed to provide predictable revenue growth and deep insights into customer behavior. It is important to keep an eye on the churn rate and acquisition costs of customers in order for businesses to scale their revenues.
From the examples mentioned above, it’s clear that convenience is one of the main reasons consumers subscribe to a service. Similarly, they expect deliveries to be easy and seamless too. Businesses should look to offer parcel tracking solutions and alternate delivery pick-up points such as lockers and store pick-ups to add to customers’ convenience.
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