Last editedFeb 20233 min read
There is something both comforting and exciting about receiving a regular shipment of something you love. It’s like giving yourself a birthday present every month. That’s why subscription boxes have proven such a popular concept.
A way to indulge in your favorite hobby and explore new products without breaking the bank, subscription boxes ask customers to sign up for a recurring shipment of goods and products, generally monthly. This could be anything from beauty products to beer. In fact, if you have a hobby, there’s a good chance there’s already a subscription box with your name on it.
Subscription boxes have been around for years now, with Birchbox, the company that popularized the concept, now almost 13 years old. They have enjoyed something of a second wind in recent years, thanks in no small part to the pandemic shutting retail stores and driving shoppers online.
Market size for subscription boxes
The subscription box market has been booming in the years following the pandemic, with the global market size valued at more than $23.18 billion in 2021. By 2027, meanwhile, the market value is set to be worth at least $62.89 billion.
While it would be easy to single out the pandemic as the primary contributing factor here, there are other reasons for this triumphant success. For one thing, dwindling economic and financial prospects have made the idea of the subscription box more appealing to many consumers, as it is perceived as offering strong value for money.
For entrepreneurs, the barrier to entry on an ecommerce subscription box model is also low as far as capital and resources are concerned, so there have been many more businesses entering the market in recent years, catering to some incredibly unique, niche interests.
It’s a market that’s always evolving and looks set to enjoy an incredibly profitable 2023, so if you are looking to start a subscription based business this year, read on.
Subscription box industry trends
With the pandemic now largely behind us, consumer habits have changed yet again, and we’re no longer at home all the time to collect our monthly boxes. This means the industry is expecting to experience significant churn in 2023 and an increase in customer acquisition costs. But brands can adapt comfortably if they consider the following five trends set to dominate the next 12 months.
Value is a key factor for most subscription box customers. The primary hook that draws in most new customers is the fact they’re often getting the items included at a significantly reduced rate, compared to what they would cost individually. The year 2023 will see businesses offering more to entice new customers and retain existing customers. This could be anything from including loyalty bonuses and discount cards to adding even more to each box.
There is nothing more off-putting to a subscription box customer than feeling as if they have been locked into a contract they can’t get out of. Make it as easy to cancel your subscription as it is to sign up and make your subscription packages as flexible as possible. This way, if a customer is having current financial difficulties, they can reduce the frequency of their subscription or perhaps skip a month.
Making your customers feel special is key to keeping them on board, and giving them a personal experience is a wonderful way to do this. Modern consumers have become accustomed to personalized experiences and have even grown to expect them. This can be done by asking questions during the onboarding process and personalizing your offerings for each customer, based on their answers. As their subscription continues, you’ll learn more about what they like and don’t like, and will be able to customize their experience even further in the future.
Concerns about sustainability have never been more relevant as customers are starting to prefer brands that can claim carbon neutrality. So, expect more subscription box businesses to be shouting from the rooftops (or at least from within their boxes) about their green credentials. Using sustainable packaging is another way to wear your green badge of pride in a natural way that doesn’t feel like greenwashing.
While meal boxes such as Gousto and Simply Cook are perhaps the most visible subscription boxes on the market, there are hundreds of more unique, niche sectors also being represented. Expect even more niche sectors to join the market in 2023. If you’re a business that has always considered yourself too niche for a subscription box, this could be the year you realize there’s no such thing as too niche.
What are the positives of the subscription box industry?
Provides predictable and forecastable revenue, allowing you to manage cash flow and scale up more effectively.
Start-up costs are low, allowing you to test a potentially niche idea or market with a small initial investment.
Forges strong customer relationships and more opportunities for upselling.
A subscribed customer is a potential lifetime customer.
Gives customers the chance to discover new products they might choose to come back for again and again.
What are the drawbacks of the subscription box industry?
The subscription box market is an exceptionally crowded place and is only going to get more crowded in the coming years.
You must strive to maintain value on a month-to-month basis, and this can prove intimidating.
Some customers might be afraid of contracts, though you can circumvent this fear by offering free trials that are easy to cancel.
How can GoCardless help?
Setting up monthly payments couldn’t be simpler with a subscription billing software solution such as GoCardless. Our system collects 97.3% of automated recurring payments on the first try and, as it’s built on direct bank payments, cuts out all unnecessary costs often related to credit card payments.
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out today how GoCardless can help you with one-off or recurring payments.