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Subscription Services Deliver on Personalization and Experiences

Ordering a curated assortment of apparel or beauty items online and having it delivered monthly or semi-monthly is no longer a new concept but it is often succeeding in areas in which traditional stores are failing, especially when it comes to retail’s latest obsession: personalization.

Fueled by the early success of Birchbox, which pioneered the space with its makeup sample business, the subscription box concept has spilled over into a wide variety of industries in the last seven years. These days, consumers can get everything from flowers and pet care items to snacks and socks delivered to their doors.

And there are more companies adopting this strategy every day, and consumers seem to be eager to give them a try. According to web insights firm Hitwise, traffic to subscription box sites grew 3,000 percent from 2013 to 2016. To service the new businesses, Amazon introduced the Subscribe with Amazon self-service subscription marketplace in April (not to mention Amazon Wardrobe, which allows Prime members to order boxes of clothes, though not on a subscription basis). The service allows sellers to manage payments on the frequency of their choice and get discovered via recommendations.

While a service like this can facilitate some logistics, success in this competitive channel goes beyond basic billing. It’s no longer enough for companies to simply package up shipments filled with cookie-cutter assortments. Today consumers expect selections that are curated to their tastes. These demands require a balance of fashion sense and computer science—a combo the apparel industry at large is eager to get right.

Even the frequency itself helps keep these retailers top of mind compared to stores or sites shoppers may not even think about between visits—which these days is too few and far between.

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“Receiving a physical product monthly is an opportunity to connect with that consumer further,” said Roberto Ramos, The Doneger Group senior vice president of global strategy and communications. And he added, there’s another bonus over traditional stores: a built-in revenue stream.

Getting personal

That revenue though is contingent on these companies knowing their customers and delivering products they’ll like. And that’s where the built in engagement of this model is an advantage. These days, most solicit a lot of detailed information about shoppers like their body shape, skin type, tastes, etc. at the outset to help them cater to their needs. Still others, keep the dialogue going by encouraging feedback to improve the service.

”What these subscription boxes are doing is basically trying to understand their consumer—asking them questions and really curating assortments that are hand-picked for that person at no risk and no liability,” said Morris Dabah, co-founder of Kidbox, a box that delivers children’s clothes, alleviating the hassle of taking the family to the mall. “The idea of personalization compares favorably to the shopping experience at brick-and-mortar.”

Not only are customers more likely to be excited by their purchases, the buying and product development roles for the companies in question are also easier than a typical store, which has much less consumer information to pull from when creating assortments.

With 1 million subscribers in six countries, Birchbox has a large sample size from which to make buying decisions. “We collect a lot of data about our customer as soon as she signs up,” said Eric Neher, vice president of merchandising at Birchbox, while speaking at the 2017 AAFA Executive Summit in March. “The box experience is tailored to our customers so it’s delightful and wonderful when the product is so right for you. The strong retention is very rooted in that.”

Neher explains that the fun of unboxing the latest goodies alone wouldn’t be enough to sustain the business. By really knowing it’s customers, Birchbox is able to fulfill needs like gel for curly hair or hyperpigmentation treatments for problem skin. “Ultimately what drives your success is our relevance. You don’t keep spending money on surprise or fun, you spend on utility,” he said.

Consumer connection

And part of the service for some people is it allows them to check one thing off their to-do lists.

“These curated, personally styled boxes are viable business models, because time is the ultimate luxury today and the idea of having someone select a box with a personal stylist touch for you really taps into that convenience and time-starved market,” Kidbox CEO Miki Berardelli said. “We are having a lot of fun tapping into the anticipation of the child waiting for the box, unpacking items and trying on new clothing.”

Amy Leonard, vice president of sourcing at Stitch Fix, echoes that sentiment, adding when it comes to apparel subscriptions, they can help consumers step outside the box, so to speak.

“They like the convenience of it coming to their home, and they are looking for something fun, something else maybe to surprise them and push them to the edge of something that they normally may not pick out for themselves,” Leonard said.

Stitch Fix shoppers work closely with their personal stylists, who, along with the company’s data-rich algorithms, select five items for her to try at home and keep or send back with feedback.

“The service has wholly expanded the way I look at clothes and fashion,” Stitch Fix customer Shelby Whitzel said. “This gives me the ability to get a customized wardrobe, better than anything I’d choose from a store, because I’ve been doing that for years and it’s never given me that confidence I feel in the items chosen for me.”

Morgan Hillman, also a Stitch Fix customer, says the services provides a sense of discovery without straying too far from her tastes.

“I like that it comes to your house and that they offer you brands that I haven’t heard of before, so the exposure to something new is great,” Hillman said. “They are very good about following your requests when you send a note in advance of a box, for example, I asked for outfits that could transition well from work/day to night/play and they really nailed it.”

Is a brick-and-mortar future likely?

With the success of their by-mail model, some subscription businesses have opened physical stores in the past few years. The decision to dabble in the brick-and-mortar space goes back to the mission of facilitating consumer engagement in the long run.

“We have what my CEO says is a laboratory to test anything we want there [in the Soho store]. Being able to interact with your customer in person is invaluable,” said Birchbox’s Neher. Because the value of its boxes is the way in which they fulfill needs, he said, ultimately the company decided to buck the beauty counter trend and organize merchandise by need rather than brand. “So for our customer, who’s not tuned into the beauty feed, she comes in to solve a problem and we’re merchandised to help solve the problem.”

The amped up engagement that a store brings is an important consideration for companies bridging channels.

“The need for brick-and-mortar that we are seeing is also the need for a branding presence, for connectivity,” Ramos said. “As we see consumers going back to a greater focus on experience, there is a desire to connect with experts and to be in spaces where you gather with people that have the same taste.”

On the other hand, he said, maintaining the personalization that endeared shoppers to the company in the first place could prove challenging in a store environment.

Reporting by Genevieve Scarano