SnapFulfil, SUBTA Survey Reveals Strategies, Challenges Within Young Subscription Commerce Sector
Subscription commerce offerings are rapidly increasing, and while two-thirds of providers still have fewer than 1,000 subscribers, a new study suggests hope for revenue growth. According to the 2018 SnapFulfil and Subscription Trade Association (SUBTA) State of Subscription Commerce survey, 47 percent of today's subcom offerings launched in the last 12 months, and nearly one-third of all offerings believe their business will double in 2018.
The market outlook is bright for both growth and retention: by 2023, 65 percent of today's subcom offerings believe they'll see revenue growth of at least 100 percent, while 36 percent believe they'll see revenue growth of at least 501 percent. Currently, 30 percent of offerings experience 10 percent or less monthly member churn, while only 12 percent experience more than 25 percent churn.
For some subcom companies, however, growth and retention is a double-edged sword. Forty-eight percent of active subcom providers see demand forecasting as a significant fulfillment challenge, and because 74 percent of subcom providers still rely on paper- or spreadsheet-based warehouse management processes, their concerns may soon manifest as roadblocks. Among subcom providers' other greatest fulfillment challenges:
- 25 percent – Inventory Accuracy
- 21 percent – On-Time Shipping
- 16 percent – Returns Handling/Management
- 15 percent – Shipping Accuracy
To alleviate challenges around growth, 25 percent of subcom providers outsource their fulfillment operations to a third-party logistics (3PL) provider. Subcom offerings that choose to outsource tend to be more established: 50 percent of those that work with a 3PL have maintained the relationship for 2-5 years, while another 20 percent have worked with a 3PL for more than five years.
Of the subcom providers that contract a 3PL, 75 percent cite better efficiency as their primary reason for the relationship; 60 percent cite lower cost, while 40 percent cite better performance.
"We're thrilled to see a new form of retail emerging. But as subcom grows in popularity, it's crucial for warehouses to plan for growth," said Kirk Anderson, Executive Vice President at SnapFulfil North America. "Although many of these nascent offerings currently have small subscriber bases, it's not uncommon for a subscription to gain tremendous popularity overnight. Once these providers have greater visibility into their inventory and process data, they'll have the information they need for more accurate demand planning – and, in turn, they'll be ready to scale quickly."
Among the study's other findings:
- Sixty-five percent of offerings fall under the curation model, where the provider selects items for customers based on knowledge of their tastes, while 14 percent follow the continuity model, where customers receive needed items – i.e. pet food or razors – on a defined schedule.
- The contents of a subcom box might be a surprise, but the arrival date often isn't. Fifty-seven percent of providers ship all subscriptions at the same time each month, while 19 percent stagger shipments.
- Sixty-five percent of subcom providers will consider box returns depending on the circumstances. The caveat: providers often require the entire box to be returned. Eighty-four percent of subscription offerings will not consider partial refunds for individual box elements.
"For subcom offerings, the sky's the limit – demand will continue to grow as more shoppers discover the range of options available via subscription," said SUBTA co-founder Paul Chambers. "As demonstrated by the number of offerings launched in the last year alone, retailers are ready to try their hand at a new form of e-commerce. SUBTA continues to provide support for these entrepreneurs both as they lay the groundwork for a subscription and as they look to scale."
For more information on the survey, visit https://info.snapfulfil.com/snapfulfil-resources-state-of-subscription-commerce-report.