The subscription economy is booming as more of us sign up for pet food, razors, wine, vitamins and other everyday essentials delivered to our doorstep. Even before the pandemic imposed more consistency on our routines, the category was experiencing explosive growth. By one estimate, the subscription e-commerce market has grown by more than 100% over the past five years. In 2020 alone, subscription business sales were up by a 12% average.
From a customer perspective, subscriptions are convenient, taking away the hassle of reordering needed products in a timely fashion. In turn, this type of repeat business offers brands more stable, predictable revenue, and an avenue for learning more about their customers over time. When it works, both sides benefit from the relationship – but it doesn’t always succeed. Nearly 40% of e-commerce subscribers have canceled subscriptions, usually for one of two reasons: they don’t have the product when they need it, or they accumulate too much. So in a business built on direct relationships, online brands are getting more creative to win us back.
“[Merchants] used to be focused on one-time purchases: get the customers through the door, capture the payment, hope they come back. But with subscriptions, we have the relationship aspect where we’re seeing brands that want to make sure customers stay with them for the long haul,” says Margaux Novak, Senior Product Marketing Manager at ReCharge Payments, a payments platform for online brands.
In the past, after customers signed up, they had to log into the brand's online portal to make changes to their subscription, adding more work on their end. Now, brands can deliver that same feature via SMS message or email. What that means for the rest of us: The battle for our repeat business has moved to our inboxes.
According to ReCharge, text messages from brands see 13x more engagement from customers than emails do. While the opt-out rate for promotional (marketing) texts from brands is high at upwards of 60%, it’s just 2-6% for transactional messages (the ones asking us to reorder). With stats like that, Oatly, Hubble, and Olipop are just a few online brands that have signed on to stay in touch.
These texts can directly manage your subscription, helping you delay, swap, or skip shipments, (better outcomes than cancelation for brands, more flexibility for you). They also might run down your most frequent orders, or sweeten the deal with discounts, freebies, or other add-ons. Tampon brand LOLA, for example, gives customers the option to add another box of tampons to be donated as part of their subscription.
Perks and encouragement can help keep us committed. But we still might not get them when we’re really ready to buy. And if you have a lot of subscriptions, even these helpful nudges can feel like a nuisance. “Every text message should add value,” says Novak.
Working with brands including Huron and Hydrant, smart replenishment company Repeat takes a slightly different approach to the post-purchase experience. Repeat studies different products to determine when you might need to restock them, then sends you a text around that time (for example, skincare products might last longer than sparkling water). From there, it takes cues from when you snooze, click through or add more to your cart to learn your shopping behavior and ensure messages grow more personalized over time.
“One of the major issues with subscription is that it’s fixed and time-based, number one, which is not good for consumers,” says Kim Stiefel, Repeat’s cofounder and CEO. “Two, there’s really only a small number of behaviors that a consumer can take with regards to subscriptions: pause or churn.” This problem, she says, is why brands often don’t know when customers actually need what they’re offering. Put simply, customers’ relationships with subscription brands don’t necessarily fail because the brand isn’t communicating, but because it’s not listening.
“When we’re in shop mode, we’re on a journey, we’re looking for something new. When we’re in buy mode, we’re on a mission and the least amount of friction wins,” says Stiefel. Because brands have relied so heavily on subscription software, Stiefel argues, there hasn’t been much innovation in the all-important post-purchase experience.
Seattle-based coffee company Bottomless has taken their subscription service a step further. Launched in summer 2018, Bottomless built a WiFi-connected scale designed to measure how much coffee you have remaining and place orders only when you need them.
“If you create an experience that gives people no reason to cancel, and you provide what they need at the right time, they’ll be able to stick with you for a long time,” says Liana Herrera, cofounder of Bottomless.
Frustrated by being too busy to regularly purchase high-quality coffee at stores, cofounders Herrera and Michael Mayer saw an opportunity to create a method for reordering coffee based purely on consumption. Determining that the best way to measure when customers were ready for more product was by how much the remaining coffee weighed, they devised an easy-to-use scale to pair with their coffee subscription.
Bottomless found traction with friends and early users while the cofounders bootstrapped the business. The company later added more fuel with a pre-seed investment and participation in startup accelerator Y-Combinator in 2019. Last week, Bottomless announced $4.5 million in funding to power new technology development and add to its team.
“A lot of companies focus on pre-purchase to get you interested in the product and optimize to get you to put in your credit card information, but then after that they think the product itself will get you to come back,” says Herrera. Speaking from her past experience having too much or too little of her personal stock of Soylent, she adds: “The shipping problem was the reason to cancel, not the quality or the product itself.”
As the subscription economy grows, brands will have to continue getting smarter about when we need what we need. That could come through smart SMS or connected devices – or maybe something we haven’t even thought of yet.
Thingtesting is a database of internet-born brands. We’re building the un-sponsored corner of the internet where consumers can come together to talk honestly about new things. Read more about Thingtesting here.
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