Quarterly Learnings Report: Customer stories and lessons learned, delivered quarterly
How more DTC brands could leverage subscriptions (but aren't!)
Any DTC merchant can tell you that in 2020, driving repeat purchases is harder than ever. With endless options for consumers and ever-growing competition within the marketplace, customer loyalty just isn't what it used to be.So what are eCommerce retailers to do? Subscription-based offerings might just be the answer. From the long-term relationships they orchestrate with customers to the convenience factor they bring to the re-ordering process, subscriptions are one product offering every DTC brand should seriously consider.
Why don’t more DTC brands offer subscriptions?
Right now, there’s still quite a bit of whitespace when it comes to subscription offerings in the DTC space.The reason: Most eCommerce companies don’t really think about subscriptions unless it’s an obvious fit, like a consumable or replenishable product.However, by not having a subscription offering, these retailers are missing out on a smart way to drive long-term customer relationships, monthly recurring revenue, and reduced churn.What’s more: As a growing number of DTC brands expand their product lines to further integrate themselves into customers’ lives, subscriptions would make for a natural part of that expansion plan.Think about mattress company Casper, for example. Now evolving into a brand they hope will eventually be the “Amazon of sleep”, introducing subscriptions would make sense. They could offer:
- An annual subscription for new sheets and pillows. Customers get fresh bedding each year without having to think about replacing them--who remembers to do that, anyway?
- Monthly refills on its CBD sleep gummies. If this product they experimented with earlier in 2019 becomes a permanent offering, it’s a natural fit for subscriptions as a consumable product.
- VIP membership access. By introducing a subscription positioned as a membership, they could tap into an engaged group of customers who get early/VIP access to test out new products and offer feedback. (Early adopters may jump at the chance to get first dibs on what’s new.)
This is just one example, but see the opportunity here?We’re going to break down some of the assumptions that subscriptions don’t work for DTC brands and look at some creative ways they could introduce subscription offerings, pulling from a recent episode of the PFK podcast.
Before we dive in, let’s get really clear about why subscription offerings are a good idea in the first place.Right now there are about 18.5 million subscription shoppers in the US, and that number continues to grow as shoppers realize the convenience and product discovery opportunities around subscription-based offerings.And subscriptions aren’t just for products that need replenishment. McKinsey data shows that most shoppers actually subscribe for curation, while another small portion also subscribe for access.
So why should DTC brands offer subscriptions?
For consumable or refillable products, subscriptions are just common sense: You want to make it easier for your customers to constantly have your product in stock (and to never run out.) Plus, there’s a novelty element: Customers like knowing they’ve got something coming their way every single month.But subscriptions are also great at adding a bit of predictability to an eCommerce operation. Subscription-based products offer up a sustainability component for brands via monthly recurring revenue, so that retailers can get off the (expensive) hamster wheel of constantly attracting new customers month after month.Reza Khadjavi of Shoelace says it well: "Retention has become a critical component of eCommerce success in 2020, and subscription offerings are a great way to incorporate retention into your business model because they add a recurring revenue stream that's predictable and simple to measure."Subscriptions help brands accomplish important tasks, such as:
- More realistic forecasting: With a subscription offering, brands can more accurately predict their revenue in the coming months. (Bonus: Less hustle to make recurring sales.)
- Simpler upselling/cross-selling: With subscriptions, promoting add-on items, upsells, or cross-sells is easier, as monthly orders are already being placed by the customer.
- Long-term loyalty: Subscriptions and customer loyalty go hand-in-hand. When customers are set up to buy from you month after month, loyalty becomes automated and friction-free.
For brands selling products that get used up and need to be refilled (like cosmetics, food/health items, etc.) this is a fairly cut and dry idea. But what about DTC brands selling items that don’t readily need to be repurchased? Is there still a subscription opportunity for them?Data indicates that there is. In fact, according to a report by the Subscription Trade Association (SUBTA), by 2023, 75% of DTC retailers will offer subscriptions, with global subscription commerce accounting for 18% of the market.Chase Alderton, Marketing Manager at ReCharge Payments, sees a real opportunity for DTC brands when it comes to subscriptions because many already have a loyal group of repeat customers.“DTC companies don't become successful overnight; they spend countless hours sculpting their brand, image, and values. Creating that network is what brings customers back for repeat purchases, and these brands were built for subscription commerce without even realizing it,” he said.“Subscriptions are sustainable long-term as an ecommerce strategy because of metrics like lifetime value, the single most important metric a subscription merchant should be tracking. In a subscription business, the total value of a customer over the lifetime of them being a subscriber is what allows for revenue forecasting with extreme accuracy. Instead of spending more money to acquire new customers, DTC brands that start to provide a customized experience will grow LTV with each retained subscriber.”Makes sense, right?Next, let’s look at some actual examples and creative ideas around how brands can (and should!) integrate subscriptions.
Creative ways DTC brands could introduce subscriptions
On the PFK podcast, we picked a few DTC brands who don’t currently have subscription offerings and discussed how they might introduce them.From an activewear brand like Outdoor Voices to an alcohol brand like Haus, here’s what we came up with when we put our heads together to think up creative ways a recurring revenue opportunity would make sense.
Outdoor Voices: Quarterly kits
For an activewear brand like Outdoor Voices that already has strong customer demand and a thriving, engaged community, subscription offerings would be a great way to reward VIP customers and loyal shoppers who are already making repeat purchases throughout the year.The question is: What kind of subscription would make sense for them?One idea is to introduce quarterly collections on a subscription basis that reflect the changing seasons. This would allow shoppers to add warmer/cooler pieces into their activewear mix as the temperature changes so they always have new, appropriate gear right when they need it.Other components to this quarterly subscriptions could be things like:
- Access to exclusive colorways or prints
- Early access to new product lines
- VIP access to special kits/product bundles
The other reason a subscription offering makes sense for an activewear brands like Outdoor Voices: These products often have a high frequency of use, which means they are washed often. The cycle is: Use, sweat, wash, repeat.While the quality of the brand’s products is solid, because they’re involved in high impact activities and may begin to wear out over time, it’s a good idea to leverage subscriptions so customers always have fresh, new gear to swap in when they’ve used items to death.
Haus: Recurring shipments
For an alcohol brand like Haus, subscriptions are a natural progression because, well, you drink it--and then you need more.
While the price of their bottled offerings are a bit higher than your run-of-the-mill option (Haus is $35 per bottle), they’ve got an advantage already on their side: Their customers are avid fans who don’t mind paying for quality.By offering a subscription of their individual products, their kits, or even a multiple-bottle shipment, they’d make it easier for their customers to automatically have Haus in stock at home without the hassle of having to go back and re-order each time they run out.As Haus still is primarily available through its website and not sold at the corner liquor store, this would also solve the supply issue for drinkers who go through product faster than expected and is a simple solution for shoppers who are gifting the product and/or bringing it along to holiday parties.Haus Co-founder Helena Price Hambrecht has hinted that a subscription-based offering is already in the works and will be rolling out soon. *suspense*
Stance: Accommodating customer realities
When it comes to socks, the truth is: Not only do they wear out over time, but sometimes those things get lost. It’s a fact of life: We lose one during the washing process, a dog eats one, we leave a pair in a hotel. People always need more socks.
That said, Stance is one DTC sock company that could use a subscription offering. Paired with a membership on top of the subscription, Stance could even offer exclusive prints or special drops for these VIP customers, making them feel extra special for coming on board and committing to a long-term investment with the brand.When you think about customer realities associated with the product offering, this is a true no-brainer. Subscribe for fresh socks and never go without a matching pair (or wear old pairs with holes) again. Boom.
Thinx: A natural fit for a recurring process
Thinx sells period underwear, which women have to deal with on a monthly basis. And while their products aren’t something you really need to buy over and over, there’s still an opportunity for subscriptions here.What is it?
A low-cost, curated collection of goodies that’ll help women get through this less-than-fun period (no pun intended) of the month.Whether it’s chocolates, self-care products, or other small goodies that help ease the pain of the worst week of the month, this could be a branded subscription offering that says, “Girl, we got you!” and would help the brand build a deeper community with customers and connect with them in a whole new way.
DTC brands: Get on board with subscriptions
You see it now, right? Subscriptions aren’t just for products that need restocked or refilled. They’re an opportunity to build deeper connections with customers, to build some sustainability into the business model, and an easy way to make avid vans feel like the VIPs they are.Want more content like this in the future so you can stay up-to-date on DTC tips and interesting insights? Subscribe to our newsletter to learn more about how you can address common pain points on a monthly basis.