Subscription services come with challenges

Stitch Fix
Subscription boxes are rising in popularity, but do they pay off?

In the last five years, subscription boxes have grown in popularity. Some of the biggest brand names are getting into the business, covering areas of retail from meal kits and fashion to men’s shaving sets. 

According to a recent study from Fluent, a data driven marketing firm, millennials are embracing subscription services and will keep them from becoming just a passing fad. 

Nearly a quarter of millennials (24%) report having subscribed to a meal kit, compared to 14% of those 35 and older. Twenty-eight percent of millennial women say they receive a beauty subscription box. 

But with that said, not all areas of retail lend themselves as well to this program as others. For example, Blue Apron spends a large amount of money on marketing to get new subscribers, as 72% of customers leave the service within six months. Yet companies selling men’s razors, an ongoing replacement need, seem to have been retention rates. 

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Yet many grocery and food companies still believe that meal-kit subscription services will grow in popularity. At the moment, only about 16% of U.S. shoppers subscribe to a meal-kit delivery service, yet almost half of all women are aware they exist. So what’s holding them back from subscribing? The No. 1 reason given is that they are too expensive, 34%; the consumer doesn’t want a recurring subscription, 32%; it will not appeal to the entire family, 29%, etc. 

When it comes to the beauty category, U.S. consumers are torn. While about 60% of men are aware of subscription shaving clubs, only about 25% subscribe to one, a number that rises to 35% for millennials. Similarly, about half of all women in the U.S. know about beauty box options, and about a quarter also subscribe. 

The top five subscription services include BirchBox and the Walmart Beauty Box. For women not interested in subscriptions, they cite not wanting to sign up for a recurring payment or buying specific beauty products as reasons for not subscribing. 

"The subscription services that are doing well are those than managed to replace purchasing behavior that consumers would have engaged in anyway," Tanya Levina, research direct at Fluent told FierceRetail. "People who shave all the time or have pets need to purchase razors or pet food on a regular basis. A subscription in this case makes a lot of sense, since they are getting a similar product for cheaper delivered straight to their door. For meal kits specifically, the business model may need to be adjusted in order to attract a larger number of customers."

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Currently, the “Blue Apron” model appeals to a fairly small number of Americans, young working professionals, according to Levina. With meal-kit services, however, the service is too expensive to replace grocery shopping and cooking for an average family, yet requires too much work to replace takeout. 

Still, retailers will continue to look toward Amazon to see whether the giant marketplace will try a different model or will be able to offer much better pricing and flexibility to make the meal-kit service more attractive to an average U.S. household.