Several years back, subscription-based business was the hot commodity on the market, such as Birchbox and Smashbox etc. In recent periods, this type of business model died down and the “surprise” factor wore off.
However, we saw another wave of rising subscription model in E Commerce – subscribing to a particular product and receive automatic replenishment. Amazon probably is the first major player adopting this model, and now we see other platforms such as Sephora and many DTC brands started the same offering. To provide incentives to consumers, the brand typically offers a discount if customers signing up for subscription. The value proposition is no longer the surprise factor, but the promotional discount and the convenience of not having to reorder the product. This model also increases customer loyalty and repeat purchase. As a result, customer life value increases and the payback period on marketing costs becomes longer. The ROI of marketing jumps and brands could potentially save more marketing costs.
The auto replenishment subscription model is still mainly used as a tool to retain customer when they are already on the webpage and making purchase decisions. We haven’t seen many brands using the discount as a main marketing point in terms of customer acquisition.
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