What if you never needed to “shop” again? Over the past few years, there’s been a huge rise in subscription e-commerce companies that are aiming to redefine the traditional idea of shopping. Some claim to eliminate the need to shop for clothes, or allow you to never make another stop at the drug store.
So what are the types of emerging subscription e-commerce companies and how are they trying to position themselves in the market while competing against e-commerce behemoths such as Amazon? Here are three models we’ve seen gain major ground:
- Product Discovery
- Commodity Automation
- Try Before You Buy
Keeping up with the joneses: product discovery
The most popular model in the subscription e-commerce space seems to be that of ‘product discovery.’ For a monthly rate, you’ll receive a box of goodies from a variety of brands or different products from a single brand. The idea is that you’ll get exposure to a lot of things you might not ordinarily buy, and all at low-cost.
One of the most popular companies in this market today is Birchbox, which provides a monthly sample of women’s beauty products (now men’s health products too). They source samples from hundreds of vendors and assemble each month’s box where you then have the opportunity to re-purchase specific items. On the other side of product discovery are companies like NatureBox, which have white-labeled their own products but offer a similar monthly samplers’of natural snack foods.
So what will make these product discover companies stand out and win the hearts of consumers? We’ve found three competitive advantages:
- Huge Margins on Samples: Birchbox has enough clout and audience where beauty supply companies are willing to send sample-sized products *for free* to get in front of paying consumers. You can’t beat the margins on *free* when you’re sending a monthly subscription good! This allows Birchbox to keep the cost to consumers low so they’re happy to stay subscribed.
- White-Label Those Products: NatureBox keeps itself insulated from behemoths like Amazon because all of their products are white-labeled! They won’t lose in the ‘price war’ when they’re the only one on the market selling their products. The same goes for any co-branded ‘exclusives’ that pop up similar to some of the ‘themed’ boxes BirchBox has offered.
- Define Your Niche: Knowing your consumer and competitive landscape by defining a specific niche is key. This allows you deeper penetration into a market by tailoring marketing and operations specifically around audience wants.
Set it and forget it: commodity automation
A harder area to compete in but one that has no lack of participants is the ‘commodity automation’ space. Here you’re seeing people ‘reinvent’ the basics, such as shaving equipment and underwear. The sell for consumers is that you’re either getting a huge price advantage or simply a convenience advantage by never again needing to go to the corner store for toilet paper. One company that has made a splash in this space is Dollar Shave Club, whose viral YouTube video skyrocketed their product early on. Another company we’ve seen pop up is Manpacks, which promises men all of the basics each and every month.
So what will make these commodity automation companies stand out and keep their customers happy? We’ve found three competitive advantages:
- Make Me Laugh: Dollar Shave Club cracked some sort of code with their video marketing and turned it into thousands of paying customers. They focused on creating entertaining content paired with a quality product to engage customers who otherwise don’t think much of their shaving needs.
- Throw it All Together: Whether there’s a price advantage, convenience factor or simply something neat about getting everything you need for one area of your life, people like getting products ‘bundled’ together. There is something appealing to a guy in not having to think about your bathroom or kitchen as you know all those goodies will be coming from one place.
- Keep My Costs Low: No matter what, price will always be a major factor with commodity goods. No matter how funny your marketing, you have to have market-level or below pricing to keep people from making their weekly trip to Walmart.
Try before you buy: product demoing
The final emerging model in the subscription e-commerce space is a bit more hands-on. With ‘product demoing’ you actually take the traditional retail experience of trying on clothes or jewelry, directly to your home.
Here, a company sends a monthly box of goods to try, but instead of consuming them right there (as with food or beauty products), you get a ‘trial period’ to use them before you are charged. If you decide you don’t want to keep them, simply send them back. Two examples in this space are: Trunkclub, which provides men an assortment of fashion items tailored to their style, and RocksBox, which provides women a sampling of jewelry items to try.
So what will make these product demo companies make a mark on their customers? We’ve found three competitive advantages:
- Know Thy (Users) Self: The key to getting customers to buy products is to make sure the products fit their personal brand or style. For fashion companies, it’s essential to have a clear understanding of the type of ‘look’ your user is going after. This insight comes from extensive surveying and profiling to match mood, body type, personality quirks, etc.
- Ring for Help: Typically the monthly charge to receive a ‘demo box’ is fairly low, but the goods actually being shipped tend to be on the ‘premium’ side of pricing. With any premium-level product, people expect premium-level service. The best companies in this space are ones that shift their thinking from ‘customer support’ to ‘concierge-level service’ and proactively engage with their clientele.
- What Else Have You Got?: If you’re going to send a new array of products every month, you’ve got to make sure those products are fresh! Having a diverse inventory to consistently provide new options to your customers that meet their unique profile is key to successful purchase conversion.
As the subscription e-commerce space continues to evolve, we’ll see new business models emerge. Regardless, success will always stem from an obsession to differentiate yourself and create a personalized experience for your customers.