Subscription ecommerce has exploded in the past decade, and many subscription retailers have seen a boost in sales in the past year with consumers sheltering at home. In this increasingly prevalent business model, subscribers pay a fee to receive a package of selected or surprise items on a regular basis. According to McKinsey, ecommerce subscriptions generally fall into one of three categories:
- Curation Subscriptions (55%) – The subscriber receives a curated selection of items, such as an assortment of apparel or beauty products. Customers typically don’t know exactly which products they will receive, so this type of subscription is popular for its element of surprise.
- Replenishment subscriptions (32%) – Regular, recurring deliveries of same or similar items, like razors or vitamins. This type of subscription makes it convenient for consumers to get their essentials.
- Access Subscriptions (13%) – Membership gives subscribers exclusive access and “VIP” perks. Primary categories are apparel and food.
The impact of COVID-19 on retail subscription
The coronavirus pandemic and consumer shift from in-store to online shopping have fueled the growth of subscription box services. For some companies, pivoting to this model has made it possible for them to stay in business after their previous business models were no longer viable (e.g., in-person or event-focused marketplaces). According to Forbes, many U.S. consumers leaned into subscription box services for the first time during the pandemic, and a survey of more than 1,000 shoppers showed that one in five had purchased a subscription box to have products on hand.
Even before the pandemic hit, subscription services had gained wide appeal. McKinsey research shows that in 2018, the subscription ecommerce market had grown by more than 100 percent per year over the previous five years, and fifteen percent of online shoppers had signed up to receive products on a recurring basis. In 2019, Multichannel Merchant data projected that by 2023, as many as 75 percent direct-to-consumer brands would have a subscription-based offering. Now, this percentage could be even higher. Whether it’s vitamin refills or a monthly box of dog chew toys, consumers have responded to the convenience of getting items they want and need without having to leave their homes.
How outsourcing fulfillment helps subscription retailers build customer loyalty and maximize savings
While conventional ecommerce involves shipping one-off orders of unique items, subscription box fulfillment often requires sending many of the same product in a tight timeframe. Many entrepreneurs who start their own subscription box businesses begin fulfilling orders themselves and then outsource to a 3PL when it becomes too costly and labor-intensive to perform these services in house.
Outsourcing fulfillment helps subscription box companies mitigate these challenges as well as one of the biggest that the industry faces: churn. Word of mouth is a key trigger for consumers to sign up with a subscription service, especially in the curation and access categories, but they are quick to cancel their service if expectations aren’t met. They are also less likely to recommend a brand after a bad delivery experience. So how can outsourcing your fulfillment help? We’re breaking down the top four ways that partnering with a 3PL helps subscription retailers minimize churn and increase savings.
1) 3PLs can help subscription businesses scale efficiently—without the major capital investment
For many subscription retailers, orders are processed in a peak period once a month, which creates significant fluctuations in volume. Having the flexibility and infrastructure to scale with demand is critical, but doing so efficiently requires resources like space, labor and systems that become expensive—quickly.
Retailers performing in-house kitting need space and labor, but often just for a few days to a week each month. For the rest of the month, that labor and space may not be needed. When you outsource to a 3PL with a shared-space fulfillment center, that labor can be redeployed to perform other warehousing activities. Plus, you don’t have the overhead investment of running your own facility or the burden of paying for space you don’t need. Partnering with a 3PL that can scale efficiently to accommodate volume fluctuations and all your company’s stages of growth will help you save money—and retain clients—in the long run.
2) Packaging done right improves your customer’s experience—and your bottom line
When it comes to returns in the subscription box business, a mistake may not just cost you one order—it could cost you a long-term subscription. Receiving an incorrect or damaged order leaves customers feeling frustrated while also affecting your bottom line in costly returns and replacements.
When you outsource to a fulfillment partner, you’re supported by a team dedicated to accurate picking and packing and trained on how to package orders properly to guarantee safe delivery. There is a detailed process in place strictly followed by employees to ensure an identical, accurate and safely delivered package to each customer.
While the right packaging is critical to prevent damage, it is also a reflection of the brand. Having a professional team that goes the extra mile to uphold a high standard of care when packing your orders can make a huge difference in the customer’s overall experience. A fulfillment partner can also add in marketing materials like inserts and other special packaging touches to help your brand stand out and create a memorable unboxing experience.
Check out our Packaging page to learn how Visible helps clients optimize their packaging, including size, materials and design.
3) Tech-enabled 3PLs deliver greater efficiency, visibility and profitability
One of the most crucial components of an optimized fulfillment operation is the technology driving it. However, purchasing a Warehouse Management System (WMS)—then learning and implementing it—is a significant investment of time and financial resources. Instead, subscription retailers have the option to partner with a professional who already has technology in place specifically designed to manage this type of business.
The platform used to manage your inventory and orders should have built-in automation and integration capabilities for accurate and efficient fulfillment. Systems with these capabilities not only help subscription retailers keep customers satisfied, but also eliminate waste throughout the supply chain and increase profitability. An efficient operation allows you to invest your time in impactful activities that grow your business rather than spend it on activities like manual data upkeep and spreadsheet manipulation. Additionally, the ideal system comes with an integrated web portal and robust reporting capabilities, so you have the transparency and control you need to manage your business and forecast properly.
It isn’t enough simply to have the technology, however. A fulfillment partner must have the technical knowledge and resources required to maximize the system’s capabilities and tailor them to meet your needs. Visible’s WMS delivers expert inventory and order management with the full transparency and reporting customers need to make intelligent business decisions. We are also integrated with more than 40 ecommerce software and shopping cart platforms to make the fulfillment process seamless.
4) Subscription retailers can leverage their partners’ buying power and facility locations for fast, affordable shipping options
Whether subscription retailers have a pre-established monthly delivery date, or customers are able to select their own, it is critical for the order to deliver when expected, especially if they are replenishing a daily necessity. A 3PL should have a strong network of carriers that provides not only high on-time performance but also a multitude of shipping options. Visible has partnerships with the nation’s top carriers, and we leverage our volumes to provide the most affordable pricing possible to clients for every shipping option.
If your customers are geographically diverse, it is recommended that you distribute your inventory across multiple, strategically fulfillment centers. Bringing your product closer to your customers reduces shipping fees and transit times and improves overall efficiency. Learn more about the benefits of having multiple fulfillment centers here.
Fulfillment is best left to the experts
Fulfillment, while necessary, isn’t typically where subscription retailers want to spend most of their focus—especially when there are companies that specialize in these services. Professional fulfillment providers like Visible have the staff, technology and resources in place to process orders as efficiently as possible, so customers can concentrate on growing their business with the peace of mind that the logistics are handled. A well-oiled fulfillment machine not only creates savings in the long run but also boosts customer loyalty by delivering accurate, properly packed and timely orders.
When the time comes to outsource, keep in mind that many 3PLs are optimized for just-in-time fulfillment rather than the subscription box model, so it’s important to choose a partner with expertise specifically in subscription fulfillment. Visible SCM delivers effective solutions to help subscription retailers meet customer expectations, scale efficiently and minimize churn. To speak with one of our experts, fill out our contact form or give us a call at 877.728.5328.