E-commerce retailers, including subscription-based companies, are shifting to more of a membership model, highlighting access beyond just the one product, and hoping this boosts retention rates.
FabFitFun, which started out as a seasonal subscription box company, now has its own exclusive video channel for members, where they can get access to cooking and workout videos. Members also get access to exclusive discounts on products from some of FabFitFun’s brand partners. DTC aperitif brand Haus will launch a membership program this year, which will include access to discounted products, early access to new and seasonal releases, and events in select cities. FourSigmatic, which sells mushroom coffee and other health drinks, gives its subscribers early access to new products, as well as free drinks at its two tasting rooms in New York and Los Angeles.
The hope is that by giving subscribers access to more exclusive perks, they will stick with the service longer, and spend more money with the company. While many early adopters of subscription box companies excited by the ability to discover new products through monthly makeup or meal kits, they eventually lost interest in receiving that product every month. So, startups are finding they need to continuously find new ways to reduce customer churn in order to grow the business.
“To me, a subscription is something that you subscribe to and get this one thing,” said Danny Taing, founder of Japanese subscription snack company Bokksu. “Membership is different in the sense that you are now a member of this community, this program, that has a shared passion.”
Within the past several years, subscription startups like Birchbox, Ipsy and Blue Apron have reached valuations ranging from $500 million to $2 billion. Investors were encouraged by the belief that these businesses could grow more quickly because they had a recurring revenue stream. That prompted traditional retailers like Gap and JCPenney to experiment with their own subscription clothing services.
But they’ve also run into challenges, as they’ve struggled to both retain existing users, and sign up new users at a fast enough pace to replace the ones who have left. Blue Apron’s number of subscribers has been cut in almost half since it went public in 2017. Gap and JCPenney have both shuttered their respective subscription services for kids and men’s clothing.
According to an April 2018 survey from eMarketer, less than 10% of US internet users had received a subscription box in the past month.
“What retailers and brands want to do is make their customer relationships stickier,” said Lily Varon, digital business strategy analyst for Forrester Research. “Auto-replenishment was the initial stake in the ground — or a curated box — to build sticker relationships. And generally customers weren’t wildly interested in those things.”
As a result, subscription companies have found they’ve had to turn to other channels like physical retail — Birchbox for example has launched shop-in-shops with in retail stores — in order to rope in new customers, not all of whom sign up for the subscription service.
Varon said that the most popular categories for subscriptions remain pet care and personal care products like razors. They sign up for a subscription because they think it will be an easier or cheaper way to get product that they need to constantly replenish. But companies that are embracing a membership model are ones who believe that their customers are subscribing because they have a deeper affinity for that product.
“There’s two types of alcohol buyers,” Haus founder Helena Price Hambrecht recently said on the Modern Retail podcast. While impulse alcohol buyers are more likely to be swayed by packaging and price, she said subscription buyers are more likely to be swayed by “a deep affinity for the [alcohol] creators and have an affinity for them and their lifestyle,” the ability to connect with other wine or spirits enthusiasts, and access to events.
Likewise, Taing said when Bokksu surveys its more than 15,000 subscribers, one of the most oft-cited reasons customers give for subscribing is getting to learn more about Japanese culture. In addition to monthly snack boxes, Bokksu subscribers get access to a 20-page culture guide that includes interviews with snack makers, as well as a one-page lesson on Japanese language.
So this year, Taing said one of his goals for Bokksu is to turn the service into more of a membership. Later this month, Bokksu will add a members-only section to its online market, where subscribers can get access to exclusive snacks ala carte. Bokksu is also releasing a documentary later this month, featuring interviews with some of its snack makers — members will either get early access to the documentary, or a director’s cut. Additionally, Taing said that Bokksu is looking at launching Japanese language lessons for members later this year.
Taing said that Bokksu wouldn’t be raising the price of subscriptions in order to pay for these new perks — rather, it’s coming from the company’s marketing budget. “We are doing a lot of this for lower customer acquisition costs as well as higher retention,” Taing said. The average lifetime of a Bokksu subscriber is currently eight months.
The pivot to membership is still in the early stages, and doesn’t address some of the other fears consumers have about signing up for subscription services in the first place, namely that it will be too difficult for them to cancel. Varon said that for brands who want to get customers to buy from them more often, there’s other low-hanging fruit they can address first before adding a subscription or membership model — adding one-click reordering, for example.
“Most customers aren’t interested in making an upfront financial commitment to a retailer or brand — but that doesn’t mean they are not interested in re-ordering,” Varon said.