As convenience and personalization remain top of mind for many consumers, subscription boxes are poised to see significant growth over the next few years. According to recent estimates by Research and Markets, the global market worth of this industry is expected to hit nearly $37 billion by the end of 2024. This upward trajectory is primed to continue until at least 2028, with a compound annual growth rate of over 17%.
Naturally, this has seen the growth of physical product sales. This is why Darwin CX notes that most subscription box providers confidently aim for product margins of up to 50%. But just how exactly are subscription boxes doing this? Read on to find out.
Improves financial scalability
Being that they’re built off a recurring billing model, subscription boxes ensure some of the most stable cash flow. This is compared to other business models that have to wait for customers to make payments or repurchases, which can affect monthly revenue. That’s especially true since subscription box providers can make use of tech solutions that make it even easier to secure payments. SOFTRAX’s subscription billing software uses automation to meet every company phase and preference. This includes providing a highly customizable platform from which a subscription box business can control pricing tiers, billing frequencies, and unique add-ons or adjustments. As such, this allows businesses to scale up as needed, whether that’s to accommodate new packages or increased subscriber numbers. This efficiency and flexibility in terms of scaling up is why it’s also easier for subscription box businesses to secure physical sales while also growing their inventory. In the long run, this can result in tremendous financial growth. For instance, Ipsy’s beauty memberships have consistently been able to grow over the years as they expand their products. From a small start-up, it now caters to around 3.5 million subscribers and recently secured a $96 million investment.
Strengthens relevant branding
Branding is an extremely important factor that shapes whether or not a business and its products are deemed relevant. This is especially true among younger generations who seek to support products and services that resonate with their own values and beliefs. In line with this, packaging design specialists from Tridimage state that many brands are now pivoting their visuals in line with Gen-Z tastes. Specifically, design trends like neo-vintage and dopaminergic are meant to make a statement and spark joy, which the aforementioned demographic craves.
Among other business models, consistently exposing your target market to your branding can be hard as they have limited interactions with consumers. However, with a subscription box, customers are more exposed to a brand in a regular fashion. As such, it gives them more time to absorb and appreciate what a product is and what it stands for. This can then lead to boosts in sales from consumers who want to support what your branding represents. For example, the environmentally friendly boxes from Pollard, which were created for REN Clean Skincare’s subscription beauty boxes, include detailed information regarding how to repurpose the packaging. This is aligned with the brand’s green initiatives, which can be encouraging for sustainability-minded shoppers.
Enhances customer experience
Finally, because most physical products are rooted in personal care or passions, consumers’ transactions are influenced by their shopping experience. A Salesforce survey even found that up to 88% of consumers think the experience a company provides is as important as the actual goods it sells. With this in mind, subscription box models have the advantage of repetition. Since customers are more or less locked in for a predetermined period, providers have more chances to impress their market. At the same time, because subscription boxes typically offer curated packages, they’re less likely to cause any disappointments or impersonal feelings. Subscription boxes like Scentbird, which offers a selection of fragrances every month, even take this a step further by providing a personalization quiz. Using AI technology, this quiz then puts together a customer profile that will guide all future box inclusions. Previously, Scentbird’s customer-targeted AI tech was even used to create a genderless line of fragrances based on collected customer data. All of this allows for a better customer experience that improves satisfaction rates, thereby helping drive sales of more boxes and even toward full-size physical products.
