You've got mail: online subscriptions all the rage

06 Aug, 2012 01:21 PM
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Back in the day, the milkman used to deliver milk to your door every morning. Then, wine clubs began sending beautiful wines to their members each month and magazines would arrive in your postbox regularly. Now, creative start-ups are embracing subscription commerce and offering a diverse range of products to their customers, such as men’s jocks and socks, pet food, hosiery, nappies and cosmetics.

It’s a recent trend which has started to filter into the Australian market from the US, where Kim Kardashian co-founded Shoe Dazzle, which sends fashionable customers a different pair of shoes each month. Other successful US subscription commerce businesses include the Dollar Shave Club, Stylemint and H.Bloom. Even Amazon offers groceries on a subscription basis to customers.

According to retail expert Grant Arnott from Power Retail, subscription commerce can offer some great business benefits for entrepreneurs, such as a guaranteed cash flow.

“I think if you structure it right, it’s a great business model because it lets you build predictability into your sales forecasting and supply chain, so you can bank on what customers are going to receive each month,” he says.

Subscription commerce also gives entrepreneurs the opportunity to develop long-term relationships with their customers. It is for that reason that offering great customer service is imperative when offering subscription-based products, says Arnott. If you tap into that, you could potentially build a lifelong customer base.

Inspired by French lace lingerie, Natalie Grunberg launched Panty by Post as a subscription-based business four years ago. After all, beautiful underwear is not only a luxury, but also a necessity, she says.

The Canadian-based start-up has since expanded its offices to the UK, Russia and Australia and now sends approximately 1000 pairs of underwear around the world each month.

Customers can choose which style of panties they like and sign up for three, six or 12-month subscriptions, or just purchase a single pair of underwear. A range of men’s underwear is also available for the stylish gentleman.

“It’s kind of like going back in time. Normally when you get something in the mail now, you just get bills. But this is something fun that arrives in the mail each month,” says Grunberg.

“The panties come in a package with a handwritten note, so it’s a bit old-school, but it’s all done online. It’s like combining the best of the old with the new. You’ve got the convenience and accessibility factors, but it’s nostalgic too.”

There are two main subscription business models which start-ups have embraced, such as the replenishment model like Paws for Life, which sends customers bags of pet food each month.

Meanwhile, the ‘discovery’ model involves offering curated packages of surprise products for customers to trial. If customers enjoy what they have experienced, they can often purchase the full-sized product from the business’ website.

However, Arnott warns the challenge for business owners is maintaining the excitement of their product offerings for customers.

“The challenge for retailers is keeping the offering fresh and interesting enough to continue to entice new customers and inspire existing ones to renew. Every month, you’ve got a big commitment to impress your customers, and also if you are meeting a monthly deadline, you’ve got to make sure your suppliers are able to get you the products in time as well,” he says.”

“So in 12 months’ time, after an initial successful launch, if you haven’t continued to impress your customers, you could be looking down the barrel of a very difficult renewal phase.”

Australian business Lust Have It was founded by Nicci Herrera two years ago and offers customers a box of beauty samples each month.

As a former beauty therapist and industry sales representative, Herrera noticed a big gap between high-end professional products and the mainstream consumer. Inspired by US cosmetics subscription business Birchbox, she felt Lust Have It would be the perfect way to give Australian ladies the opportunity to trial new products.

“My goal is when each one of my members open their luxury packs, they have an emotional connection with the products. They may have a soak in the spa with that product and take out 15 minutes for themselves away from their daily routine,” explains Herrera. “It’s not just about the actual product, it’s the whole experience.”

When Herrera launched Lust Have It while on maternity leave, she aimed to attract 500 members to her new business. But after the first beauty pack was sent out, her membership doubled the next month and since last December, figures have increased by 1000 per cent, she claims.

According to Herrera, one of the biggest drivers of new members to Lust Have It is her Facebook fan page, which has more than 11,000 fans and is updated daily to encourage an active community.

“When I started Lust Have It, I was on Facebook daily. I just communicated with customers and offered good customer service by responding to their questions quickly,” says Herrera.

“Now we post our ‘hot pick’ beauty products, as well as make up tips, how-to articles and lovely pictures. We get a really great response. It’s been a great forum for people to talk about the products they receive in their packs.”

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