Are subscriptions an untapped gifting opportunity for retailers?

Discussion
Photo: Stitch Fix
Dec 04, 2018
Tom Ryan

Nearly one-third of consumers have interest in receiving a subscription as a gift, while 44 percent are somewhat to very likely to give a subscription as gift, according to a study from Magid.

The most popular subscription received as a gift, according to the research, was kids/baby food, with 48 percent of those receiving a gift receiving one in this category; followed in the top-five by kids/baby non-food, 40 percent; clothing/fashion, 36 percent; health/nutrition, 35 percent; and home, 34 percent.

About 30 percent on average of respondents who received subscriptions as gifts got subscriptions for beverages, beauty/grooming, meal kits, food and pets. About 20 percent received subscription gifts, on average, for music, fitness, streaming content and warehouse clubs.

The survey excluded magazines to focus on contemporary forms.

 

Asked what type of subscriptions they were at least somewhat likely to gift, 28 percent cited music and streaming content. That was followed by beauty/grooming and warehouse clubs, both at 25 percent; and food, 24 percent. No category scored less than 18 percent as a potential gift idea.

Overall, the survey of 2,500 U.S. consumers found healthy attitudes toward subscriptions:

  • The average household has 3.7 subscriptions with the intent to renew at 85 percent;
  • The intent to enroll in a new subscription category was particularly high in food, beauty/grooming, pets, clothing/fashion, beverage, meal kits and home categories.

Target, Walmart, Sephora and Macy’s are among traditional retailers offering boxes, but a seemingly endless variety are available from standalone players led by Stitch Fix, Blue Apron, Birchbox and Dollar Shave Club. Many offered Black Friday deals. For gifting, theme boxes can to tailored to the interests of the recipient.

Amazon has created a subscription box section on its site that features boxes across four categories: Beauty & Lifestyle, Food & Drinks, Pets and Toys & Kids. Of the 31 boxes offered, the most popular based on reviews were STEM Club Toy, Funko Marvel Collector Corps and Allure Beauty.

Walgreens is testing 11 Birchbox in-store shops selling full-sized, premium beauty products, subscriptions to monthly samples and a personalized “Build Your Own Birchbox” offering.

DISCUSSION QUESTIONS: Do you see subscriptions growing in popularity as a holiday gift idea in the years ahead? Is the bigger opportunity for traditional retailers developing their own subscriptions or partnering with existing players around holiday-selling time?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"One place where I see an enormous amount of untapped opportunity is to tie subscriptions more strongly into the store. "
"Partnering with existing subscription services enables legacy retailers to rustle up interest from consumers they may not have otherwise been able to access."
"It’s the gift that keeps on giving. Subscription services are a hot trend and new companies are popping up every week and they are growing at a galactic pace."

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18 Comments on "Are subscriptions an untapped gifting opportunity for retailers?"


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Cathy Hotka
BrainTrust

There are so many possible scenarios for subscriptions — new athletic shoes every three months for running enthusiasts, Christmas decorations every November, and many more limited only by the imagination of the retailer. This is only the beginning.

Dave Bruno
BrainTrust

I definitely think subscription service offerings remains a relatively untapped market for most national retail chains, but before jumping in too aggressively, I would take a closer look at the size of the potential market. I suspect that affinity for subscriptions for food and streaming services like Netflix and Spotify skew the data to create a perception of a larger market than likely exists for apparel and hard lines.

Brandon Rael
BrainTrust

We have seen the rise of the shared economy with the emergence and dominance of Uber, Lyft, and WeWork and we should see a similar trend in the subscription space. The concept of ownership has evolved, as consumers have shown an increased preference to try, experiment, and experience new beauty products, food, and fashion, along with other categories, without actually having to own the items.

So without a doubt, the value of subscription services is increasing and brands should most certainly own this relationship. There was once a misnomer that e-commerce businesses could potentially cannibalize the retail brick-and-mortar business, however as we know that was a severe misconception. The same applies to subscription services. They serve as another potential channel for retailers and manufacturers to connect and offer new assortments with your existing and new customers.

The challenge will be for retailers and manufacturers to keep the subscription offerings unique, personalized and spark enough interest that the customers will remain loyal, and perhaps they might even buy the actual products.

Bob Amster
BrainTrust

Subscriptions sure to grow and, as a gift, they are a nice idea. The issue with subscriptions as a gift is whether or not they have the stickiness to be renewed by the recipient after the initial subscription expires. If the product category lends itself to stickiness (consumables, health, personal care, etc.), the subscription as a gift has a better chance of being renewed.

Ralph Jacobson
BrainTrust

I think the opportunity for new categories of subscriptions is huge. And therefore, the opportunity for gifting these subscriptions is equally large. Securing branded partnerships is a great way to capture some initial revenue for the holiday season without having the need to develop your own — however, most likely this holiday season’s opportunity has passed.

Art Suriano
BrainTrust

I think we are heading into a period soon where many customers are going to frown on subscriptions because we already have too many and consumers are quickly learning that once the company gets their credit card info, they just keep getting billed. What happens with many subscriptions is in time the novelty wears off and then you’re no longer using the product or service as much or at all. Then you have to go through the hassle of canceling your subscription, and we all know with some companies that can be a real problem. So many consumers are becoming skeptical about adding subscriptions to the ones they had. When they receive them as gifts that’s okay, but the company may not obtain a loyal customer who once their gift subscription ends, renews it on their own. I think retailers and service companies need to think through their subscription programs and figure out better ways to keep customers interested in their product or service.

Georganne Bender
BrainTrust

Subscriptions are the new gift card. They’re easy to gift and do not require a lot of thought. The bonus is that whomever receives the subscription gets a gift each month, all year long, and the giver is perceived as extra thoughtful. It’s a win-win.

Richard J. George, Ph.D.
BrainTrust

I do see limited growth. Much depends on the type of subscription. Consumers still are seeking flexibility and convenience in such options. Consider the difficulties with Blue Apron, who has witnessed significant cancellations or people never going past the free trial, due to the feeling of being locked into the service.

I recommend retailers do what they do best – act as retailers and partner with existing players. This reduces the risk and capital necessary to go it alone. Find good subscription partners and go from there.

Nikki Baird
BrainTrust

I am an admitted subscription junkie, and one place where I see an enormous amount of untapped opportunity is to tie subscriptions more strongly into the store. One, sell subscriptions in the store (Macy’s, Target, you are guilty of not doing this). Two, feature full-size items in a display in the store for that month’s subscription, especially if you’re talking beauty items. While I think fatigue is a real thing, and every subscription box is a judgment call on whether the value is worth it to continue for another month, I don’t think subscriptions are tapped out yet – in part because the store is so under-utilized in driving the benefits of subscriptions.

Cynthia Holcomb
BrainTrust

The idea of subscriptions is great! Especially if one loves the product. The caveat is that after a few months the glow of excitement is replaced with a product(s) the customer does not like. Dealing with this entails figuring out what to do with the items one does not want, like or love. Regifting, stuffing in closets, etc. Not to be banal but, clearly, it takes a great understanding of one’s brand and one’s customer to knock it out of the park, month after month. I agree niche opportunities abound for subscriptions! Yet even “Fruit of the Month” is a bit overwhelming at some point.

Sid K. Hasan
Guest

I think this supports my opinion on the U.S. going back to the future. Think about this. Do you remember the Columbia House model (CD based subscriptions) and how wildly successful it was? Now remove their inability to innovate and keep up with Dr. Moore — the model was brilliant and WE all loved receiving a box in the mail to open.

Curation is key here. I am a 43-year-old ex-tech guy with a wife, five-year-old and golden doodle — Send me what I need, not what I want.

Jeff Miller
BrainTrust
Subscriptions of both digital and retail (boxes) will continue to grow. The main overlooked reason is that many of these subscription-focused retailers are now focusing marketing, technology and strategies towards gifting whereas before it was not seen as a growth area except for certain categories. Certain product categories and brands that people think of as subscription-only will certainly have their best holiday season to date. However, there is nuance in the process of gift giving of subscriptions especially around payment, length of subscription, and communications. The gift giver is usually not signing up for the gift to go on forever which is the subscription retailer’s main goal. The main challenge for the retailers offering them is, how do they convert a gift recipient to a paying customer? Because acquisition costs especially in the holiday season can be so high it may have a negative impact if say the gift is only for three months but the LTV that the business is based on needs four months to see profit. It will be the retailers who… Read more »
Anne Howe
BrainTrust

Retailers that have plenty of stores are behind the times in setting up subscription offerings. As I was thinking about Nikki Baird’s insightful comment, retailers like Talbots, Banana Republic, Lowe’s, Sephora, Ulta and Kohl’s come to mind, as it would be so easy for them to allow the gift recipient to visit a nearby store and trade out an in-box selection for something of equal value. Even better if the recipient could transfer value to a gift card and save for bigger purchases. There is no doubt the recipient would increase time at the store and make more purchases.

Jasmine Glasheen
Staff

Partnering with existing subscription services enables legacy retailers to rustle up interest from consumers they may not have otherwise been able to access. Plus, retailers can tap into the subscription services’ customer base through these partnerships and show next-gen customers that they’re hip to their buying patterns.

Shep Hyken
BrainTrust

The subscription model is booming. Any way that a retailer can create ongoing/recurring revenue is good for the business. An important part of that is renewals. Once a consumer gets used to getting (and enjoying) a monthly or weekly product, the goal is to get them to renew. A little harder when it’s a gift, but still the odds of a returning subscriber are still good.

As for partnering versus developing their own subscription model, retailers will have to make that choice. Getting a piece of every sale without having to deal with the back-end is appealing, but loss of the customer connection may be an issue for some retailers if the partnership is not properly put together.

Craig Sundstrom
Guest

For some businesses, perhaps (for a Mercedes dealership? Yeah, you wish!)

So how is it different than a “conventional” gift? For one, it’s open-ended (or at least it’s more than just a singular occurrence) so unlike that atrocious tie that can just get returned, a recipient could be saddled with months (years?) of something they don’t really like.

Alternately, if they do like it there’s a potentially awkward moment when they find a service they have become used to runs out. Ideally the timing would be such that the giver can just renew it (or the recipient could do it themselves), but I can see the transition as potentially being unsatisfying.

David Naumann
BrainTrust

It’s the gift that keeps on giving. Subscription services are a hot trend and new companies are popping up every week and they are growing at a galactic pace. Consumers like the surprise of getting something new every month and it is an awesome idea for gifts, as the recipient will remember the gift giver every month.

Traditional retailers will be developing their own subscription services and may outsource the “service” part of it to a third-party subscriptions service company. I see an opportunity for companies that develop efficient process for subscription services and offer it to many retailers.

Phil Rubin
BrainTrust
14 days 1 hour ago

Customers like giving and receiving subscriptions and retailers like the recurring revenue of fee-based models, so it seems like the perfect convergence. And it is, but like most other customer value propositions, relevance becomes a fundamental question.

As more retailers are pushing into fee-based models, there is already the beginning of a shakeout and it’s largely due to the subscription offering being too merchant-centric versus customer centric.

The most beneficial approach for the merchant is to develop its own offering versus promoting a third party, unless there is a strategic partnership underlying the offering. Like most things, we expect that this trend will ultimately be overdone.

wpDiscuz
Braintrust
"One place where I see an enormous amount of untapped opportunity is to tie subscriptions more strongly into the store. "
"Partnering with existing subscription services enables legacy retailers to rustle up interest from consumers they may not have otherwise been able to access."
"It’s the gift that keeps on giving. Subscription services are a hot trend and new companies are popping up every week and they are growing at a galactic pace."

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