Consistency Amid Uncertainty: Why Consumers Have Relied on Subscription Ecommerce During the Pandemic
Unprecedented. Uncertain. Unpredictable. These are just a few of our suggestions for Merriam-Webster’s 2020 Word of the Year.
But despite shipping delays, inventory issues, and supply chain complications, one ecommerce business model has managed to keep their customer experiences fairly consistent: subscription ecommerce.
More than ever, customer loyalty in the form of recurring payments is paying off. And subscription ecommerce businesses are taking notice.
According to Luke Retterath, VP of Marketing at subscription payments platform ReCharge, “Our customers, in virtually every vertical, experience[d] incredible growth in sales [since the pandemic began].”
In a survey of over 950 respondents, consumers reported what brands they’ve been subscribing to since the pandemic began and what they’re looking to give as gifts this year.
Find out why consumers are relying on subscriptions in uncertain times and how brands that employ a subscription business model are adapting.
New subscribers to new essentials
In April, 23 percent of consumers in a survey said they recently signed up for a subscription box or program with nine percent reporting they had been waitlisted due to issues with demand. Over the last six months, more than half of survey respondents have purchased or received some type of subscription box.
Similarly, Luke noted that “what we’ve seen more than anything over the last six months has been an acceleration in growth across our merchants’ businesses.”
While survey respondents were asked specifically about curated subscriptions, Luke told us that subscriptions encompass much more than monthly boxes.
“We’ve seen growth in curated subscription experiences, including boxes, but we’re seeing even faster growth in replenishment subscriptions such as razors and home goods including laundry detergent, etc,” said Luke.
This doesn’t come as a shock when consumers who subscribe to brands that sell essentials like the ones Luke mentions are also more likely to lock down products that might typically be hard to come by in times of crisis.
“I think we got more subscribers immediately because they thought that there was a better chance that if they subscribed, that they would actually get the product,” said Branch Basics CEO Tim Murphy in a recent Modern Retail article. The cleaning product brand went from graining 900 new subscribers a week to 1,400 in March and April.
Additionally, when Who Gives a Crap sold out of toilet paper at the start of quarantine, they made sure to reserve stock for recurring subscribers, so that customers would still be able to get their deliveries at a time when finding a roll of toilet paper was equivalent to striking gold.
But essential businesses aren’t the only ones benefiting from their subscription offerings—some new essential brands are seeing growth as well.
For example, immersive game brand Hunt A Killer saw their sales grow 36 percent from last year after the onset of the coronavirus. Their sales this March, April, and May were nearly equivalent to a typical holiday season.
Luke noted that apparel brands, specifically, are seeing success with their subscription sales during this time, as well.
“There’s an emerging interest in businesses that are built around access-oriented subscriptions. We’re seeing fashion retailers use memberships to drive repeat purchases through store credit, new releases, and other benefits. In general, we’ve continued to see growing consumer adoption of subscriptions and expect that trend to continue,” he said.
To this point, subscription clothing and accessories brand Framed! by Sarah doubled its sales in April and saw its first six-figure month in the business’s history, even beating November and December 2019 sales.
Framed! by Sarah releases new products in every box, many of which are seasonal or customized. Before introducing a subscription option, the brand had done the majority of its business out of the brick-and-mortar store in Texas.
“For people to spend money with me during this time, it’s made me really recognize how much people need something for themselves—they need something to gift to themselves and something to feel good about themselves. They want something to come in the mail to them, so I just kept giving them more of that,” said Framed! By Sarah’s founder, Sarah Williams.
How food subscription brands are faring
If you haven’t repressed the memory yet, think back to earlier in the year when coronavirus cases first began to spike.
During this time, consumers were flocking to grocery stores to stock up on food—oftentimes, only to find that most items were sold out.
Luke notes that once the pandemic started, Recharge saw large charge processing increases in the Food and Beverage category, assumably as consumers were looking for a consistent way to obtain these essentials.
“Consumers were stocking pantries and buying larger quantities of water, meal kits, snack foods, and meal replacement shakes. On average, brands in these verticals saw notable spikes in their active customer count, average order value (AOV), and monthly recurring revenue (MRR),” he noted.
Looking at survey responses on this topic, 36 percent of respondents that subscribed to a subscription box after the pandemic began subscribed to a food subscription box.
For Family Dinner, a farmer’s market subscription service, their team went from packing 250 shares a week to 630 shares within three weeks after the impact of the coronavirus reached the Boston area, where they offer their food delivery service.
Similar to some of the brands mentioned previously, Family Dinner had to prioritize getting food to current customers, which meant waitlisting new subscribers.
“For a while, we had to put new customers on a waitlist, which from a business perspective, we didn’t want to do because it’s leaving money on the table. But at one point there were 900 people on the waitlist. That’s a lot of vegetables,” said Family Dinner founder Erin Baumgartner.
Still, while an equal number of consumers (19 percent) signed up for food subscription boxes for convenience or out of concern for being able to grocery shop during the pandemic, many bought it for non-essential purposes—to fulfill their boredom.
For those survey respondents that purchased a food subscription box in the last six months, 24 percent purchased a subscription box in order to learn how to cook or to learn new recipes.
In fact, in a recent Live From Your Laptop episode, eat2explore, a family cooking kit that focuses on cultural education through cuisine, reported that their last month’s revenue was close to their entire 2019 revenue.
But what does the future for these food subscription businesses look like? Perhaps most famously, or infamously, among subscription food boxes is Blue Apron, which saw its first profitable quarter in March, at the onset of the coronavirus, since going public in 2017.
While Blue Apron and its competitors have historically had a significant churn problem (pre-coronavirus, only 28 percent of Blue Apron customers remain subscribed to the service six months after their first purchase, according to Second Measure) sales seem to be steadily surging—for now. But when most consumers are unsure of how long the pandemic will last before there’s a vaccine, or whether they’ll be a second wave, it’s possible that some might not be keeping their subscription indefinitely as much as they’re avoiding canceling just to be put on another waitlist if they need to sign up again.
But whether subscription businesses are seeing an influx in customers because of the rise in ecommerce sales or because customers are looking for consistency, the name of the game in the subscription economy is always retention and the brands who focus on putting their customers first are most likely to see success with their subscription services past the pandemic.
And for businesses like Family Dinner who are able to connect their subscription offering to their brand mission, the future is a lot more promising.
“The interesting thing with the coronavirus is that it didn’t change our mission at all. The scale exploded, but I think it’s interesting for us to see how people are starting to realize the flags that we’ve been waving all along,” said Erin.
“Local food really matters. Knowing where your food comes from is important. Having as few people in between the farm and your plate as possible is important and having a massive global food supply chain is dangerous. I think it’s nice that there’s been a big push to support local more broadly. And I think this push toward having to rely on local food suppliers has sharpened people’s understanding of why local food is an important issue.”
Are subscriptions the new gift card?
While gift cards have been the go-to option for procrastinators scrambling to get a last-minute present for the holidays, subscriptions may emerge this year as an alternative digital offering that still allows customers to avoid shipping problems.
Nearly half of all survey respondents are thinking about giving a subscription box as a holiday gift. And although only four percent of consumers are planning to gift subscriptions instead of gift cards, most are stating that they plan to gift subscriptions because they won’t have to worry about shipping.
This comes after a recent survey showed that nearly three-quarters of consumers have had a problem with the delivery of their online order. Not to mention, today, it takes twice as long to receive a package delivered as it did pre-COVID, according to shipping tracking platform Malomo. These problems are likely only to get worse around the holidays.
Luke noted that Recharge “expects that subscriptions will continue to be strong through the holiday season,” but for subscription purchases, “seasonality is not as significant a factor as it is for traditional, one-time purchases.”
This presents an opportunity to subscription brands to push those offerings to new customers and as gifts this holiday season.
For example, Vital Proteins mentioned in a recent Live From Your Laptop episode that they plan to focus on driving subscription discounts for new subscribers this holiday season rather than relying on steep discounts to win over customers around Black Friday Cyber Monday.
Vital Proteins’ Sr. Director of CRM and Lifecycle, Julia Linker, also mentioned that they plan to introduce gift subscriptions this year since gift-giving will likely be virtual rather than in-person.
Still, subscription boxes are not exempt from shipping delays. While a subscription itself is ideal for consumers because it can be purchased online and presented as a digital (but definite) “IOU,” there are no guarantees on the timeliness of boxes themselves.
The saving grace? Brands can sidestep the competition of peak holiday shipping times since customers that purchase subscriptions as gifts won’t be expecting items to come before major holidays.
Advice to brands and the future for subscription
Subscription items have gained popularity since the beginning of the pandemic, with food products, in particular, experiencing a spike.
Meanwhile, many brands that offer subscription or membership services have experienced significant sales increases since the onset of the coronavirus.
And with a number of consumers planning to purchase subscriptions as holiday gifts, this upward trend may continue through the holiday season.
For brands that either offer a subscription service or are thinking of offering one, consider providing different options to customers for how regularly they want to receive a box. Not only can this help alleviate some shipping and supply issues, but it can also improve the overall customer experience.
“We have the option of a one-month, a three-month, a six-month, an eight-month, and a 12-month wine subscription. You get to customize it,” said Dan Foster, president and managing partner at 7Cellars, a Colorado-based winery.
Dan also emphasized that you have to make it easy for customers to change their subscription or unsubscribe at any time.
“I think people really want to feel like they have control. I don’t want to buy something and have someone tell me that there’s a certain way it has to be or that I can’t cancel. You’re able to cancel [our subscription] at any time, but the opportunity is to have that ongoing business,” Dan said.
But while brands can use subscriptions to increase lifetime value (LTV), avoid seasonal surges, and create a more consistent customer experience, that doesn’t mean the business model is a fit for every brand.
Those who go into the subscription business without a solid plan of customer engagement and retention will see their subscribers jump ship once the pandemic eventually subsides and shopping behaviors return to something resembling the pre-pandemic “normal.”
Instead, brands in this space need to consider how they can encourage consumers to rely on subscriptions for good, rather than just for now.