Target is the latest retailer to jump into the subscription services channel, as the big-box retailer announced it would now begin sending out boxes from its popular children's line Cat & Jack. As one of the first megaretailers to jump into the channel, Target is setting the bar for others to follow suit.
Jim Fosina, founder and CEO of Fosina Marketing Group, said that now is the time as the millennial generation is the largest living generation and this consumer base is responsible for driving the more than 100% growth rate of subscription services in the past five years.
And a children's brand seemed a perfect start for Target, as many millennials are currently buying for babies and young kids.
"The children’s market is also an evergreen market with 4 million-plus babies born each year," Fosina added.
Fosina said that the channel is growing in both established subscription categories as well as the introduction of new products and services entering the replenishment purchase behavior.
"It is critically important that subscription box businesses focus on targeted acquisition of customers but more importantly, an engaged relationship that maintains retention and life time value," he said.
But is there such thing as too much growth? In other words, could the subscription service industry become over saturated?
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Fosina said that as long as the developer is an innovator and is creating a strong value proposition to the consumer, then saturation wouldn’t be anywhere in the near term. However, he said there is a possibility of consolidations "as similar types of value propositions team up to increase their footprint and expand their services for their subscribers."
The subscription service is part of a larger trend of increase among direct-to-consumer sales as shoppers look for purchasing options that are convenient and easy.
"Retailers are also realizing that much of what they sell are products that are replenished regularly and; therefore, if a consumer is going to buy online, the option to provide ongoing replenishment and product choice is a way of winning customer loyalty and life time value," Fosina said.
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Fosina added that other retailers should be attempting to follow suit as a megaretailer like Target sets a new bar. If they don’t, Target might inherit these customers.
"The future of subscription boxes will lie in the hands of the innovation having a true value proposition versus a fad, the product living up to the expectation of the consumer, the pricing having a cost value relationship that doesn’t exceed consumer tolerance and most importantly, the engaging of the consumer whereby the company is loyal to the customer rather than the company expecting the consumer to be loyal to the brand," Fosina said. "Without loyalty to your customers, retaining them for an ongoing subscription experience will be challenging."