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Report: Subscription Business Models Struggle to Find New Customers

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Subscription service companies took off in the mid 2000’s, with companies ranging from the affordable, like Trunk Club and Birch Box, the luxurious Net-a-Porter monthly shoe service giving customers footwear amounting to a $10,000 value.

The market for the new business model seemed like a shoe-in, but a report by Pymnts.com and Recurly, called the Subscription Commerce Conversion Index (SCCI) found that 84 percent of subscription service companies are struggling to find new customers.

The study scored 176 merchants on nine factors including the ease of using the site from browse to buy, the steps to cancel a subscription and the total number of payment types. Out of the 176 websites analyzed in SCCI, just 28 managed to score over 70 in Q1 2017. This means that 16 percent of subscription commerce services have an optimized model that enables them to quickly on-board new customers. Meanwhile, the remaining 84 percent still have more work to do.

The report found that the bottom 20 merchants suffered due to unclear pricing, plan change options, lack of a password for customer accounts and even product details.

Despite these hurdles, the study found that subscription service is booming. From 2013 to 2016, subscription box services grew 3,000 percent. Traffic grew from 772,000 visits to subscription box service sites in January 2013 to 21.4 million by January 2016.