One billion dollars – the price paid by Unilever for online razor and men’s grooming company Dollar Shave Club this July – made news headlines, shining the spotlight on an industry that has become a growing phenomenon in the U.S. and beyond: subscription boxes.

Emerging as a trend in the U.S. around 2010 with Birchbox’ launch of a monthly $10 box of beauty samples, subscription box schemes grew fast, both in popularity and variety. While still a niche business, interest in boxes has skyrocketed – in the U.S. in particular. Hitwise, a division of e-commerce and consumer analytics company Connexity recorded some 24.1 million visits to a sample of key sites made in January 2016 alone, representing a 3,000 percent increase in just three years.


Subscription box schemes now come in all shapes and sizes. While some deliver convenience at a great price, such as the Dollar Shave Club, many cater to consumers’ love for surprises, and successfully so.  Site aggregator mysubscriptionaddiction.com lists no fewer than 900 schemes, and there is a box for all tastes and budgets – from sample boxes at less than $10 to the $25,000 a quarter Opulent jewellery box. Even man’s best friend is stylishly catered for by Barkbox, which delivers choice dog treats each month.

Wunderkind

Dollar Shave Club, the subscription wunderkind, is arguably the most profitable and the simplest of them all – a monthly subscription scheme of disposable razors plus optional men’s grooming products. Launched in 2011, it went viral with a witty online ad in 2012 and in 2016 was on course to generate revenue of some $240 million. The company excels at digital direct-to-consumer sales and marketing which made it so appealing for a big brand such as Unilever, whose core strength lies in traditional retailer relationships. 


Subscription boxes are a clear win for companies. Predictable demand and a controlled logistics flow, the ability, in most cases, to select the subscription contents, and opportunities to upsell to a loyal customer base – what’s not to like. No wonder, then, that the big brands now want to get in on the game.

John Fetto, Senior Analyst at Hitwise, comments:  “While the subscription shopping category is still a niche market, with total monthly visits just a third of one percent of what the top retailers receive, these sites appeal to a critically important segment of consumers who are entering the prime of their earning and spending years, which should sustain continued growth in the category.

“Traditional retailers should – and some already are – take note of the success that startups in this industry have enjoyed, and determine if a subscription model would be a smart extension to their existing product line-up.” — Michelle Bach

Published: November 2016

Images: PR, Fotolia, Thinkstock