Subscriptions aren't just for streaming platforms anymore. With customers purchasing a range of products and services at a regularly-scheduled basis, both start-ups and industry giants are taking part in the subscription-based economy.
On Monday, Nike announced that it would become the latest organization to offer its products through a monthly subscription. The Nike Adventure Club, aimed at children between 2 and 10, will alleviate the typical frustrations of both in-store and online shopping. Parents who subscribe won't need to make regular trips to the mall for shoes their child will quickly outgrow. They'll also avoid the "sizing issues and return hassles" that often come with eCommerce.
The State of the Subscription EconomyAre subscription-based services here to stay? Experts are divided on the subject. While last year saw traditional retailers like Target and J.Crew jump on the bandwagon, it also saw McKinsey publish a detailed overview of subscription eCommerce trends. Their findings will inspire as much trepidation as confidence.
Though the constant barrage of new services might suggest otherwise, the authors note that "Consumers do not have an inherent love of subscriptions." That's not to say the subscription-based economy isn't booming. With around 15% of online shoppers taking part, the subscription eCommerce world has grown by more than 100% throughout the last five years. Stickiness, however, remains a distinct challenge. More than a third of subscribers will cancel within three months, more than half will do so within a year.
McKinsey identifies three primary types of subscription-based service. Curation-based services (the most popular) provide subscribers with a surprise collection of items. This section of the market has attracted more skepticism than any other. Meal kit services like Blue Apron and Hello Fresh are practically household names, but both brands are hemorrhaging customers as the novelty wears off. Even with a 35% share of the meal kit market, Blue Apron has lost more than a quarter of subscribers. They expect more cancellations throughout the rest of 2019.
Subscribers to access-based services enjoy special prices and other perks. Accounting for just 13% of all subscriptions, these services are particularly popular in the apparel and food categories.
Replenishment-based services allow subscribers to automate purchases for core items like razors, diapers, and toothbrushes. These have generally been more effective in securing long-time consumers. McKinsey notes that 45% of subscribers to services like Amazon Subscribe & Save and Dollar Shave Club have leveraged them for at least a year.
Standing Out in a Crowded Field
Nike's Adventure Club will combine the convenience of a replenishment-based service with the more personal experience of a curation-based one. McKinsey cites "dissatisfaction with the assortment" as one of the primary reasons a subscriber might cancel. Customers have also expressed frustration at rigid order volumes. With three different models and more than a hundred varieties of sneaker to choose from, Nike is hoping to avoid both of these common pain points.
The Oregon-based company says it is explicitly targeting parents in suburban and rural areas. Subscription-based services have so far proven most popular among city dwellers, but Nike expects this relatively untapped community will help it gain a competitive advantage in the $69 billion children's clothing market.