Everyone loves a surprise in the mailbox. The boom in e-commerce has made online subscription services sprout all over Asia to offer customers almost everything under the sun. Muneerah Bee unpacks the mystery and appeal behind subscription boxes.
Subscription services present customers the thrill of discovering something new and it also helps that they are delivered in appealing packages to give customers the experience of literally unboxing a monthly surprise.
In Singapore today, you can subscribe to get various products delivered right to your door step on a scheduled routine — ranging from beauty products, sake, craft beer, pet supplies, coffee, tea, whisky, wine, nutritional meals, organic food, healthy snacks, ice-cream, Japanese snacks and other endless products.
A report by Cresight Research titled Subscription Commerce: A Box for Everything and Everyone reveals that subscription box services are usually broken into two categories: exploratory and replenishment.
The exploratory type of subscription service allows shoppers to try new products by selecting items on their behalf and some subscription box services also curate a variety of products across different product categories into a package.
On the other hand, the replenishment service offers refill boxes for regularly-used products, such as men’s shaving items, and many subscriptions are specifically tailored to the personal tastes of subscribers. Some subscription bundle services are even endorsed by celebrities and magazines.
The report notes that one of the key drivers for the growth in subscription commerce is that these boxes curate and cater products to customers’ personal preferences and often provide personalisation and customisation options. Additionally, online subscription start-ups usually offer a point of product differentiation from mass-market rivals and serve particular customer needs, such as vegan or handmade cosmetics.
These services save consumers time because they do not need to browse and try the products at bricks-and-mortar stores — providing discovery in a time-efficient and convenient way. The automating recurring shipments for frequent purchases also offer shoppers the convenience of not having to visit stores for ordinary repeat purchase items.
Subscription boxes also prove to be popular gift ideas, especially around the holiday season, Coresight Research says, and they can easily gain a customer following through the use of social
Besides e-commerce subscription service start-ups, some retailers are also offering subscription services as one of the channels to support the business and give them a new avenue for growth. For example, Books Actually — an independent bookstore located in Singapore — offers a monthly book subscription package where customers receive a book every month along with other special handpicked items.
Present today, gone tomorrow?
One key trigger for consumers to sign up with a subscription service is a recommendation, whether it is in the form of word of mouth or positive online reviews, according to a survey by management consulting firm McKinsey & Company. However, will consumers adopt a subscription lifestyle and is subscription commerce a sustainable business model in the long run?
Fiona Ho, co-founder of MāoBox, notes that e-commerce subscription is a growing trend even though Asia may be slower to adapt to trends. She opined that customers enjoy subscription-based shopping because there is a novelty factor and surprise element, along with the added convenience of receiving the product subscriptions.
Every two months, MāoBox delivers a box of selected samples, treats, food or toys for cats to its subscribers. Customers can choose a Standard Box for S$29 (US$22) or an upsized Pawty Box for S$39. Customers have the flexibility to get a box for a special occasion or sign up for a subscription to receive a box on a regular basis and 10% of proceeds benefit a local cat shelter for sick or injured community cats.
Ho says the company decided to offer a subscription-based service as the online pet store business is rather competitive in Singapore. “Secondly, we noticed that there were quite a few sub
boxes in the market for dogs, but none for cats. With the growing community of cat owners, it made sense to fill in the gap,” she explains.
As cat owners, the people behind MāoBox are aware that every cat and cat owner has different requirements and preferences. The company’s mission has always been to introduce as many
varieties as possible of different brands of treats, toys, food and products to its customers. “We invest lots of effort in curating our items, sometimes way in advance — up to six months — from reputable brands and distributors,” she shares.
Ho is confident subscription commerce will continue to grow in Asia as the region is still growing and yet to fully embrace the e-commerce subscription idea. Her advice for retailers who want to launch a subscription service is to always explore new options to keep the novelty alive. “The e-commerce landscape is constantly changing and what we should do is to embrace change and do what makes sense for the business,” she comments.
The report by Coresight Research highlights that online subscription service start-ups come with its share of challenges due to the proliferation of numerous subscription services in many
product categories, and considering the costs of acquiring new customers, it could be very difficult to run a profitable subscription business model.
Many customers are attracted to the buzz of such boxes but they may cancel the services within a few months after the novelty has worn off, if they are dissatisfied with the service or feel like they are not getting their money’s worth. Companies that construct subscription boxes based on customer purchase histories and mine customer data are more likely to send the most fitting value-add products, according to the report.
Trying a new route
Two companies Retail Asia spoke to initially offered subscription services but eventually decided to transition away from that business model.
Roslyn Teng and Robin Lim, cofounders of Made Real, share: “We founded Made Real, a customised subscription healthy snack brand, in 2015. We customised our snack boxes depending on our customers health goals, diet restrictions and so on, and we offered a wide range of granolas, nut mixes and dried fruits.
“We were among the first to try a snack subscription model in Singapore. We believe it does not work.”
They go on to say that the company initially thought a subscription model was most relevant for health and nutrition products because eating healthy and living healthy is a drawnout process. “We wanted to provide our customers with sustained and long-term solutions instead of once-off purchases or gimmicks, ” they add.
Teng and Lim acknowledge that one of the challenges of a subscription business is the size of the Singapore market. When Made Real tried to scale across Asia, they found that all the cities are vastly different in terms of day-today operations, business culture and market readiness. “For example, in Indonesia, 95% of online purchases are still paid in cash on delivery instead of through credit cards. And this was a huge problem for us, having to tweak the business model so drastically for each city because we were a direct-to-consumer brand. A combination of the small market and the lack of scalability convinced us that this was not the business model for Asia, at least not for now and not for products like ours.”
As for its future plans, Made Real is currently working on streamlining its product offerings and focusing on mass-market retail and corporate sales. Teng and Lim believe that the success of subscription commerce depends on the product and the market. “However, from what we have observed, even for companies with business models that are largely based on subscriptions, there will always be a percentage of customers who are interested in buying the product without the subscription, so why turn away new channels of revenue?”
They advise businesses that are about to go the subscription route to always test with a minimal viable product. “Introducing a subscription in a regular retail consumer product company introduces a whole suite of challenges that were not present before,” they caution.
Responsible business decisions
Tereen Tan, director of BlackBox Singapore, shares similar sentiments in the sense that businesses must know their shoppers and their buying behaviour before embarking on such services.
BlackBox started off as a mass sampling platform in 2012, providing the mass consumers with an assortment of beauty samples. “We realised this has created a lot of wastage as consumers are throwing away samples/products that they are not interested in after receiving them,” Tan relates.
“In 2014, we shifted from mass sampling to responsible sampling, creating an e-commerce type of business model. Our product ranges from skincare, hair and body, personal care to pantry items, covering almost every area that caters to consumers’ lifestyle needs and wants. With this model, consumers can pick the type of samples they would like to try. This helps to quantify the data for every product sampled.”
Tan admits BlackBox might have “hopped on the bandwagon” as subscription beauty boxes were highly popular in the past. “But we soon realised this is not what consumers really want — pushing a set of products to them and expecting them to use it all.
“Subscription beauty boxes were gradually phased out about the same time we moved to a new platform. For us, our main objective was to focus on responsible sampling, for consumers as well as our clients,” she explains.
In her observation, subscription boxes do not really last long in the market. “Over the years, consumer behaviour has shifted, consumers have become more discerning when it comes to the type of products pushed to them. In my opinion, subscriptions should be one part of a business model, it should not dominate the entire model,” she declares.
Moving forward, the company wants to bring BlackBox to the forefront, whereby consumers not only come to them solely for shopping, but also for the information they need to help in their buying decision. Tan says: “In a way, we are moving towards a one-stop lifestyle hub for both consumers as well as our clients. They say knowledge is king, right?”
While subscription services are growing as consumers become more aware of the format and are increasingly appealing to millennials and urbanites, subscription-based retail often caters to a niche with product-specific services that represents a point of differentiation, as pointed out by Coresight Research.
As such, customers need to receive value every month with the subscription boxes and subscription service products need to be relevant to the customer. Otherwise, customer retention will be limited.
According to the Subscription Commerce: A Box for Everything and Everyone report, there is only room for a few subscription box services companies in each product category, as consumers cannot have an infinite number of subscriptions, and it would be more convenient to bundle several subscriptions into one.
The McKinsey survey conducted in the US also shows that to continue subscribing, consumers expect personalised subscriptions to become more tailored over time. Consumers also want a great end-to-end experience and are willing to subscribe only where automated purchasing gives them tangible benefits, such as lower costs or increased personalisation.
Subscription services for regular and frequently-used products are likely to show greater resilience than for curated services due to their regular usage nature, and brands have to be agile to keep up with the rapid pace of sending regular boxes and continuously offering value.
What can retailers do?
CORESIGHT RESEARCH’S SUBSCRIPTION COMMERCE: A Box for Everything and Everyone report shares the following industry ramifications as subscription box services generally bring an opportunity to smaller, unestablished merchants to promote their brands and services at lower costs:
- Subscription services can increase the market for certain product categories and increase customer bases by introducing people to new products that they would otherwise have to buy in larger quantities at more expensive prices, especially for cosmetics.
- Subscription boxes can be paired with temporary pop-up stores and social media influencers such as bloggers and vloggers to promote the services by leveraging their large follower bases on Instagram, Twitter or Facebook. As online subscription service start-ups take some of the share of the market, they are emerging as a possible risk for incumbents in almost very consumer product category and industry.
Hence, many threatened retailers and product manufacturers have responded by launching their own in-house subscription services or acquiring online subscription services start-ups.