The subscription box – it’s eCommerce, but not as we know it. And over the years it’s a concept that’s grown in popularity. But because it’s so different to other forms of retail, it can also have some specific and sometimes tricky requirements for the supply chain to meet, which can lead some subscription-based companies to fail in the long term.
Read on as we explore the challenges of subscription box services and how to overcome them.
What are subscription boxes?
From razors and cosmetics, to sports supplies and pet accessories, there’s a subscription box for all kinds of essential and frivolous items. Subscribers pay a monthly fee to receive a package of related items. For some models, subscribers have no input on what the box contains and the contents are based on individual preferences, they receive the same standard set of products as every other subscriber. Other providers allow customers to preview the box before shipping so they can make any changes before they receive it.
However, for other models, subscribers input a number of preferences and receive products based on them. For instance, a cosmetics subscription box could ask subscribers about their skin tone, hair type and favourite cosmetic products – blusher, mascara or lipstick, for instance. This gives them a good idea of what products their subscribers prefer to try out and what suits them best.
Hailed as the ‘online personal stylist’, Enclothed allows users to create a profile, complete a questionnaire and a team of stylists will then handpick a new wardrobe of clothes. The items are then delivered free of charge, with customers only paying for what they keep. Information is then kept on the clothes that each customer keeps, and what they return, in order to create a highly bespoke box the next time they order, and, of course, to decrease returned/unwanted items.
Rising in popularity
Subscription boxes have come a long way since The Sampler, which began selling a range of arts and crafts products in 2004. They’ve entered various industries, with some of the most well-known being Birchbox for beauty and cosmetics, Graze box for snacking and even Socks in a Box for customers who want – you guessed it – new socks delivered every month.
And those who choose to get involved are benefitting from more and more interest. Online visits for subscription box sites rose to an impressive 76.7 million in the UK last year – up 30% from 2016. Whilst visits to subscription sites only account for 0.2% of all retail traffic, it is one of the most dynamic sectors and. as a result, we’re seeing relatively new brands, like Harry’s shaving products, thriving.
Further research by Hitwise has shown that the main audience for this service is female, of a younger age with a spread of personal incomes. Whilst this is not exactly surprising, they have also found that the largest growth over the past year was seen among male and older audiences, which could be a result of the widened offering.
The impact of subscription boxes
But, of course, this new form of eCommerce leads to complications throughout the supply chain.
The last mile for deliveries can be the most expensive part of the supply chain journey. While most well-known services offer free delivery, some elite subscription boxes aim to deliver their boxes to subscribers on the same day – creating an exciting ‘product-release’ feeling. This is not a new challenge for retailers, but it is for subscription services. With every eCommerce retailer aiming to be the next Amazon, it is the delivery proposition that sets service apart. The infrastructure of their business model also means shipping thousands of packages in a tight time period, rather than steady dispatches throughout the month. With prices for individual packaging to keep items fresh and undamaged, margins can be severely eroded.
Most crucially, there’s the issue of sourcing. Compiling subscription boxes full of different products is no easy feat. That’s made more difficult when each subscriber is sent different products based on their preferences, and becomes even harder when the box contains fresh food. When this type of product is sold on its freshness and availability, it is imperative to not only procure enough product for each customer, but working with the right suppliers to create a more collaborative process who understand the importance of delivering the right number product, every time
Roger Hassan of Hello Fresh states:
“We’re working more on a partnership basis, rather than a transactional one. That allows us to work in a much more collaborative way – and it’s the only way we can stay flexible and meet the demands of our consumers.”
Subscription box warehousing
That brings us to the next issue – warehousing. With an ever-changing range of products, warehouses need to register and process a vast number of SKUs every month. Picking and packing for a high volume of orders then needs to be completed in a short window to get orders ready to ship on time – at the same time.
With many subscription box companies being start-ups, they lack supply chain experience and the complex infrastructure we have come to recognise from eCommerce retailers. Much of the activity in subscription box sites is still manual, with the repetitive placing of items into a box, and the focus being on exciting packaging. But with the growth of these services, many are struggling to deal with growing demand and order volume. The result? Too many businesses opting for third-party logistics companies to manage the solution, which can often cost more, and may not deliver the precision or flair required.
An inevitable outcome?
Unfortunately, when growing subscription-based companies can’t find the supply chain resources they need, problems are inevitable. Many, like meal-delivery start-up Sprig, see no alternative but to stop operating. While others, such as Blue Apron, compromise on worker conditions to meet fast-changing demand.
There is clear potential for success in the subscription box sector – just look at Glossybox, BarkBox, Prospurly and countless others. What’s essential to this success, however, is having a plan in place to deal with sourcing, warehousing and shipping when demand grows, falls and peaks over time. With growing competition, and high customer churn, it is important to increase innovation, and create an exciting product every month
Use less, deliver more
As leading Supply Chain consultants, Bis Henderson Consulting can help businesses deliver more using less. Equipped with years of operational experience combined with the very best technology, our team can bring fresh ideas, innovation, collaboration and best practice to every project.
Whether it’s establishing those flexible relationships with new suppliers, setting up an efficient logistics network or creating a more sustainable supply chain strategy – our expert supply chain and logistics consultants are here to help your business succeed in subscription commerce and beyond.
Call or email our team to talk more about your business.
Want to receive the latest news, insights and research papers from Bis Henderson Group?