Subscription-Based Business Models and the Importance of Packaging by Jordana Revella (As Published in RCI's Kettle Talk)

by Megan Arnold February 24, 2021

As the Direct-to-Consumer business model becomes more and more popular, we wanted to throwback to an article from Retail Confectioners International's (RCI) magazine Kettle Talk. Written by our own Vice President Jordana Revella, this article gives you an overview of the subscription-based model and what you can do to help make your own Direct-to-Consumer product or service a success.

To check out more from RCI or to become a member, visit their website at www.retailconfectioners.org.

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The Covid reality has created a surge in online shopping. According to a study conducted in April of 2020, 24% of consumers have started grocery shopping online, compared to just 6% in 2019. Gen Z makes up 32% of those buying groceries online. Millennials and Gen X each make up 25%, and Baby Boomers make up the remaining 21%.[1] As online buying increases, new preferences are rapidly creating a post-pandemic new norm; therefore, the question brands need to ask is “how must we adapt to remain part of our target market’s monthly budget?”

While there are many different strategies that address this question, let’s focus on one: direct to consumer, subscription-based products.

Subscription-based products are all the rage. Gartner, the Global Research and Advisory Company, found that by 2023, 75% of all companies selling to consumers will have some type of subscription-based service.[2] And that was all before a global pandemic. No doubt current events have created a fast-tracked adaptation of this unique, convenience-based selling model.

But what exactly is a Subscription-based product?

Subscription boxes or “subcom” for short are recurring deliveries of niche products aimed to introduce buyers to goods they may never have found otherwise.

infographic depicting the process of a subscription box

Arguably, the first notable subscription box was BirchBox, which provides customers with samples of personal care products in order to upsell them into buying the standard sizes. BirchBox has reached nearly 400,000 monthly subscribers, according to Wikipedia, and has inspired many other companies to start utilizing subscription boxes. With the total market value of subscription services up over $15 billion, subscription boxes are an attractive, profitable and some may say booming opportunity.

According to McKinsey & Company, online subscriptions fall into three categories.

  • One: Replenishment – think Dollar Shave Club or Amazon Subscribe and Save. The goal is to create an easy, automated way for consumers to continually receive commodity type items.
  • Two: Curation – with the most successful example being Stitch Fix, Blue Apron and BirchBox. 55% of all subscriptions are thought to fall into this category. The goal is to surprise and delight the subscriber in a highly personalized way.
  • Three: Access – examples include Grove Collaboration, NatureBox, and Thrive Market. Here, subscribers pay a fee to access membership perks, and a unique collection of products.

As a confectionery business, your subscriptions would most likely fall into the curated category, offering customers a way to experience a variety of sweet treats in a personalized, set-it-and-forget-it type manner.

But wait, if you’re wondering if the recent economic stall out has affected chocolate sales, you’re in luck. For now, it seems – in these uncertain times – consumers are looking for “stress relief” and enjoyment from the comfort and safety of their homes – which has resulted in an up-tick in chocolate sales. A Nielson Corporation report states: “Consumers spent $3.7 billion on chocolate, up 6.3% from that time period last year. Milk chocolate was the favorite choice, with Americans spending over $2.9 billion on single serve and multi-serve versions of the snack. Dark chocolate sales were up 13.6% while mixed and white chocolate sales slid, according to Nielsen data. Scientific studies show that dark chocolate and other cocoa products can be a stress reliever.”[3]

Now that the case has been made for why creating a subscription-based offering is a relevant way to stay connected to your customers’ bank account, let’s look at a few examples.

Bar and Cocoa chocolate subscription serviceBar & Cocoa

Bar & Cocoa invites customers to discover the best chocolate bars from all over the world. Subscribers receive a curation of four bean-to-bar craft chocolate bars from around the globe every month. The company is committed to showcasing makers who practice ethical and direct trade, and support eco-conservation and sustainable farming. Subscribers may select a three, six or 12 month subscription for $129, $249 or $479, respectively. Subscriptions renew automatically. Not uncommon for these types of curated subscription products, this business model offers a mix of excitement, diversity and well-meaning messaging. Eat real chocolate because it's better for you, the environment, and the people that make chocolate possible.

Mystery ChocolateMystery chocolate subscription service

With every box delivered, Mystery Chocolate also donates two meals to charity – one to the United States and one globally. The three bars delivered each month are unnamed and it’s intended that the receiver of the chocolate invite others to taste test and guess the ingredients inside each bar before revealing the labels. This subscription service is also available for three, six or 12 months, at $56.95, $107.95 and $204.95, respectively. The website even promotes a “quarantine sale.”

Candy Club subscription serviceCandy Club

Candy Club is a super simple subscription for both gifting and personal enjoyment. The Gifting option is personalized for your choice of birthday, valentines, thank you, anniversary, congratulations or new baby. Both the gifting and getting option are available in two sizes, $29.99/month or $39.99/month, plus shipping. After subscribing, customers fill out a candy profile so that the box contents can be personalized based on preference.

Lake Champlain ChocolatesLake Champlain Chocolates chocolate of the month club

Members of the “Chocolate of the Month Club” can choose 3, 6, or nine month subscriptions, from $190 for 3 months up to $600 for nine months. The website claims “Give a Chocolate of the Month Club membership — an easy, delicious way to send Vermont’s best gourmet chocolates right to their door, month after month. Simply place one order, and we take care of the rest.” The shipment is presented in a premium way, advancing the perceived value of the subscription and ensuring members will want to remain part of this exclusive club.

There is a lot to consider when creating a subscription box. What does the competition look like? Who is my target market? How can I personalize options for optimum enjoyment? If you’re ready to take the next step, here are a few Keys to Success.

Keys to Success

  • Make it personal. Give members options or preferences when signing up. If the goal is to delight and surprise with new and exciting products, make sure it’s relevant and personal to the subscriber.
  • Do your generational research. Given that millennials are the number one generation signing up for SubComs – being 24% more likely to have a meal kit subscription than baby boomers, 35% more likely to have a shave club subscription and 28% more likely to receive a beauty subscription box[4], make your box appealing to the millennials by offering a personal product as well as supporting a humanitarian or environmental cause.
  • Don’t forget the Packaging. On a shelf in a retail environment, the First Moment of Truth is when the customer looks at your product in comparison to everything else. Does he pick it up? Does she read the packaging? Did he buy it? With a product that ships directly to the consumer, it’s feasible that the First Moment of Truth is the moment the buyer opens the box. Did it entice? Did it excite? Did it live up to their unreasonably high expectations? If not, your subscription may be getting an early cancellation notice. If so, your “set-it-and-forget-it” model may just win you hundreds if not thousands of dollars in new revenue. The unboxing moment is something that is often recorded and shared – even if not publicly on social media – often just personally to other friends and family. If the packaging leaves much to be desired, you’re missing the number one point in the SubCom venture – which is repeat buying, customer loyalty and brand advocates.
  • Use Social Media. Social media combined with an easy recurring payment option – like “PayPal or Amazon Pay or Apple Pay” - are two sure fire ways to get your new box noticed and paid for quickly. You’re looking to seize the opportunity. If the interest is there and the potential subscriber has clicked into your ad, the goal is to make it as easy and fun as possible to get them to sign up.

 

[1] FOOD Navigator-usa.com. Walmart leads in online grocery during coronavirus, but will it last post-pandemic? May 22, 2020. https://www.foodnavigator-usa.com/Article/2020/05/22/Walmart-leads-in-online-grocery-during-coronavirus-but-will-it-last-post-pandemic?utm_source=copyright&utm_medium=OnSite&utm_campaign=copyright

[2] Zuora.com. THE SUBSCRIPTION ECONOMY INDEX™. March 2019. http://info.zuora.com/rs/602-QGZ-447/images/subscription-economy-index-q4-2018.pdf

[3] USAtoday.com. Americans are buying more chocolate as the pandemic rages on. July 10, 2020. https://www.usatoday.com/story/money/2020/07/10/americans-buying-more-chocolate-during-pandemic/5412598002/

[4] RetailDive. Millennials more likely to have a subscription service. August 29, 2017. https://www.retaildive.com/news/millennials-more-likely-to-have-a-subscription-service/503809/#:~:text=Millennials%20are%20more%20interested%20in,by%20data%2Ddriven%20marketing%20firm



Megan Arnold
Megan Arnold

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