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The Rise of Subscription Ecommerce & What it Means for Retailers

Retail has seen an interesting new format crop up in the last five years that Amazon Prime, Birchbox, StitchFix and others have begun to perfect, but it’s a difficult business model to master. Using a carefully finessed recipe that couples automation and machine learning with human-driven curation techniques, subscription e-commerce companies are the poster children of the new generation of retail.

For those constantly on-the-move consumers (which is most people these days), systems like these are gifts from the retail gods. Working women with no time to head to the mall can receive new clothes every three weeks, and college students on a budget can still explore their beauty routines and build their brand loyalty with new sample products each month. Even perishable goods subscription services like Mantry and Plated are picking up speed with young professionals that are too busy to grocery shop but still prioritize healthy, artisanal eating.

Personalization remains a top retail buzzword, and it’s for good reason. Shoppers today want customized shopping experiences that fit their needs as well as their schedules. Subscription e-commerce models do just that: individually curated products shipped directly to your door. In order to make this a reality, companies moving into the subscription retail space had to find a way to learn about customer preferences and streamline the shopping journey. Otherwise known as: The Birchbox Effect.

Birchbox curates beauty boxes based on a shopper’s skin profile and beauty routine priorities. The company provides a solution to the problem so many of us have: “I want some really cool products that I can try before buying, but I don’t want to look too hard to find them.” When consumers subscribe, they input extensive information on their skin type, complexion, daily routines, and precedence for different facets of beauty products, and powerful automation builds a perfectly curated beauty box full of items relevant to their individual needs.

Similarly, StitchFix taps into human-driven personalized curation to build “style boxes” each month based on detailed profile information and specific commentary from shoppers directly to their stylists. After the stylists build the box with tailored items, streamlined technology and logistics takes it from there! It’s much easier said than done, but StitchFix has a system and it seems to be working well – they’re rumored to reach $200 million in revenue this year. When you think about Trunk Club’s acquisition by Nordstrom at $350 million, the stance on StitchFix’ profitable future looks more than just OK.

All of this comes down to one thing: customized convenience. It’s a strong position to hold in the retail market, and highlights an opportunity for standard retailers to connect with their shoppers in a new way. While subscription models are convenient, what they’re really doing is bringing the ultimate personalized experience to the shopper for specific retail niches. With the right strategies and technology in place, online and brick-and-mortar retailers can still bring that dynamism to the shopping experiences they offer. Ramping up a technique to listen to your consumers and answer with a real, relevant solution means customer satisfaction and brand loyalty.

At a recent SXSW Interactive panel session, the founders of two popular retail brands agreed that customized communication and engagement with customers is critical. Yael Aflalo, CEO and founder of Reformation Apparel said that a nice, honest communication and tone resonates with her customers, and that they use words that they would use with their girlfriends. Tina Craig, the CEO and founder of Snob Essentials, noted that the key to her company’s success is pivoting based on customer feedback.

So while you don’t need to implement a subscription model to see success, the personalization powering those business models and the intimate connections made with customers should be the real key takeaways for retailers.

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