The Rise (and Fall?) of Subscription-Based Services

 

We’ve discussed the importance of sampling and the amazing effect it can have on brand awareness and customer retention. In the past 5 or so years however, a new marketing strategy has emerged, wherein these samples are being regularly distributed directly to the consumer’s home for a monthly fee. Better known to consumers as subscription boxes, these services have mainly taken off in the beauty industry – but are they here to stay?

Birchbox, a pioneer in the beauty subscription box services, is reportedly scaling back on their plans to continue expanding their brick and mortar stores and has recently cut as many as 50 employees. This is due to their inability to secure additional funding as a result of the tightening venture capital market.

Forrester analyst, Sucharita Mulpuru, tells Bloomberg,“Subscriptions have a lot of issues. They’re not huge addressable markets; you’re constantly dealing with churn and you have to find new customers.”

However, despite the seemingly difficult market, Birchbox remains one of the most highly visited subscription-based services in the US. Meanwhile, competing subscription beauty boxes are booming.

In fact, Ipsy, co-founded in 2011 by popular Youtuber Michelle Phan, boasts 1.5 million subscribers and reportedly generated nearly $150 million in revenue last year. Beauty retailer, Sephora recently joined the beauty box race by appealing to consumers searching for more consistently high end, easily recognizable brands in their boxes.

The reality is, one need only to look to the countless unboxing videos and blogger reviews to realize that this market is most likely here to stay. In fact one such blogger, Liz Cadman of MySubscriptionAddiction estimates that the number of subscription-based services have increased tenfold, having counted about 200 beauty box companies back in 2012 to well over 2000 today.

So while there are certainly some growing pains involved, subscription-based services will only continue to grow. And with benefits to consumers such as affordable monthly prices that typically range between $10-$100, as well as personalized and varied contents spanning nearly every market you can imagine, it’s easy to see why.

Even some of our Hubba users are subscription-based services or at least offer them as an alternative to buying products one-by-one. Click below to connect with them!