Subscription services have been making headway in the FMCG space of late, accounting for 20% of all e-commerce orders in that category. But how many online shoppers subscribe to broader e-commerce subscription services – and why? A McKinsey survey offers some insights.
Here are 5 key takeaways from the report.
1. 15% of Online Shoppers Have Subscribed to An E-Commerce Service in the Past Year
McKinsey’s survey demonstrates that 15% of online shoppers have subscribed to a subscription-box service in the past year. Most of those (11 of the 15%) also have subscribed to a media service such as Netflix or Spotify, which are more 3 times more popular (46% share of online shoppers having subscribed).
2. Subscribers Skew Towards Women, But Men Have More Services
The analysis indicates that subscription-box services have more appeal among women, who account for 60% of subscribers.
However, male subscribers are 50% more likely than their female counterparts to have 3 or more current subscriptions (42% and 28%, respectively).
In fact, fully 18% of male subscribers claim to be subscribed to at least 6 e-commerce services, compared to just 7% of female subscribers.
Overall, a strong majority (58%) of e-commerce service subscribers have multiple active subscriptions.
In other demographic data, McKinsey reveals that, compared to the US population at-large, e-commerce subscribers are more likely to be ages 25-44, have incomes from $50-100k, and live in urban environments in the Northeast.
3. Amazon Subscribe & Save Is the Most Popular Service
The report points out that men and women tend to subscribe to different services. However, the top-2 are consistent (albeit in different order) across both genders.
For women, Amazon Subscribe & Save is the most popular service, followed by Dollar Shave Club. Those are men’s top services also, although in reverse order.
Amazon Subscribe & Save comes out on top overall, followed by Dollar Shave Club, Ipsy (#3 for women, not in the top 10 for men), Blue Apron (#4 for men, # 7 for women) and Birchbox (#4 for women, #7 for men).
The leading service – Amazon Subscribe & Save – falls in the “replenishment” category, one of three general categories for these services. This category – in which the services replenish the same or similar commodity items – accounts for roughly one-third (32%) of e-commerce subscriptions.
The most popular category is the domain of curation. These services comprise 55% of respondents’ subscriptions – and include Birchbox, Blue Apron and Stitch Fix. The analysts note that the popularity of these services – in which subscribers receive a curated selection of items – “suggests a strong desire for personalized services.”
The last category – “subscribe for access” – is the least popular, comprising 13% of subscriptions. Its primary value is offering exclusive access to subscribers, and the leading service within the category is JustFab.
4. The Experience Counts. A Lot.
Subscribers offer different reasons for purchasing and cancelling subscriptions, depending on the type of service.
When asked the single most important trigger when initiating a subscription:
- Wanting to try something new (25%) was the top response for curation subscriptions;
- A financial incentive (24%) was cited most often for replenishment subscriptions; and
- A recommendation (24%) was the most-cited reason for access subscriptions.
As for the most important reason to continue a subscription:
- Personalized experience (28%) was easily the top vote-getter for curation and access subscriptions; while
- Convenience (24%) edged value for the money (23%) and a personalized experience (22%) for replenishment subscriptions.
Clearly a personalized experience counts. But so does a poor experience.
Asked the single most important driver of a subscription cancellation, respondents pointed to:
- Value for the money (29%) first for curation subscriptions, closely followed by dissatisfaction with the product and/or experience (27%);
- Dissatisfaction with the product/experience (24%) first for replenishment subscriptions; and
- Value for the money (29%) first for access subscriptions, with product/experience dissatisfaction and a preference to buy when in need as joint-second.
5. Churn Rate? Roughly 40%.
Possibly the most important metric for subscription service companies is their churn rate.
It’s true that acquisition is also a challenge: McKinsey’s survey found that just 53% of online shoppers even knew about one of the top services. Further, only 55% of those considering a service ultimately subscribed, making conversions a challenge. (Free trials could offer a helping hand, per Recurly research.)
Ultimately, though, these services have to retain their subscribers. And that’s proving a difficult proposition. Overall, 39% of respondents reported having churned from a subscription, ranging from a low of 30% for replenishment subscribers to a high of 46% for access subscribers.
The full report can be found here.
About the Data: The results are based on a survey of 5,093 consumers in the US, of whom 80% (4,053) qualified as online shoppers, having spent at least $25 online in the prior month.
Of those online shoppers, 607 (15%) had subscribed to at least one e-commerce service over the past 12 months.