In a 6-episode series, the Royal Mail Podcast focused on subscription box industry from multiple angles. In each episode, Royal Mail spoke with industry experts representing subscription box e-retailers and researchers.
Definition: a subscription box is a recurring, physical delivery of products packaged as an experience and designed to offer additional value on top of the actual retail products as the additional value may be through surprise, a saving on what is on offer in the shops, or by giving the user a chance to experiment with a tailored selection of products. Another advantage this is the added convenience, which is generally a strong factor with traditional e-commerce, and even more so with subscription boxes.
Numbers behind the whole thing
The UK subscription box market is forecast to grow by 72% by 2022, according to Royal Mail’s report on the UK Subscription Box Boom. The market is forecast to be valued at £1bn (€1.1bn) by 2022, compared to £583m (€648m) estimated spend in 2017.
Spurred on by the growth of mobile devices, subscription commerce has moved on from a previous focus on magazines and newspapers to now embracing everything from recipe food kits, to shaving gear and self-care. The UK subscription market is still in relative infancy compared to mature markets like the USA, but it is now in a phase of rapid growth. UK consumers are embracing subscription brands.
Over a quarter (27%) of UK consumers are currently signed up to a subscription box service, either for themselves or on behalf of somebody else. Over half of 25-34 year olds (52%) are signed up to at least one, compared to 12% of 55-64 year olds and 8% of those over 65 years old. There is also a slight male skew, with 31% of men signed up, compared to 24% of women. This reflects the strong traction that male-focused boxes have gained.
Male grooming and beauty subscription services offer the biggest growth opportunities in the market. Royal Mail’s report suggests that male grooming subscriptions could attract almost two million members by 2022, making them the fastest growing subscription category.
Beauty box services also cater to the replenishment needs of their subscribers, but additionally offer the excitement of getting to try out new products. Beauty subscription services are more established in the UK than their counterparts in male grooming. But, there remains significant growth potential, with health and beauty revenue forecast to grow by 230% between 2017 and 2022, according to the report.
‘Niche’ products also represent a strong growth opportunity, especially within the food and drink sector. There are plenty of opportunities to cater for specialised diets, such as veganism, with shoppers often appreciating a helping hand when it comes to deciding what to eat. More unusual products that are not easily available in shops also offer up an opportunity to service needs not currently being met by mainstream retailers. Many of these categories are particularly well suited to small companies, given that demand is unlikely to be sufficiently widespread to attract the attention of more established competitors.
The business perspective
Six in ten (59%) businesses intend to invest in new or existing subscription services in the next year. Almost three quarters (72%) intend to add new products to their service in the next twelve months. In terms of the likely longevity of this type of business model, over half (52%) of the businesses Royal Mail surveyed agree that subscriptions are set to be a major focus for their company in the future.
“Churn” – or the proportion of customers who decide to cancel – is one of the biggest challenges facing subscription box businesses. Keeping customers engaged is vital, and a number of subscription businesses have developed innovative ways to do so. This includes diversifying their business model to reduce their reliance on subscriptions, as well as launching new products and features. Retaining customers is very important for any subscription business. Even a small percentage of shoppers cancelling their subscription each month can have a big impact on the subscriber base.
Why it’s important for posts
The boom in subscription boxes will naturally result in an increase in the number of deliveries. The vast majority of subscription items are letterbox-able and so are ideally suited for foot delivery by the postal operator. Another advantage of posts for subscription boxes is the fact that postal operators often support the largest and most flexible delivery choice network: including postal offices, postal PUDO points, parcel lockers and others.
Driving greater brand loyalty is a key motivation for launching a subscription box service, cited by 45% of those surveyed and operating such a service. Other important reasons for starting a subscription box service include the desire for greater control, in particular control of distribution (35%), control of marketing and promotion (24%) and lower start-up costs (24%). Posts should recognise these motivations and establish a platform with rising and established businesses in the subscription industry as they hold potential for both more packages as well as mail advertising in the postal stream.
The six podcast episodes on the topic by Royal Mail are described below:
- Introduction and research summary
- London, Wales and the North East driving growth of the UK’s subscription box market
- Brand loyalty and international opportunities
- The changing nature of gifting and the rise of the self-gifter
- Food and drinks subscription boxes – what’s the motivation for subscription boxes? “The box fits in your letterbox and it fits into your fridge.”
- Key trends for success in the market – The subscription “sweet spot”