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Subscription box services dominated by mobile-savvy shoppers: report

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March 8, 2016

Sephora is one of several big retailers testing subscription boxes

Sephora is one of several big retailers testing subscription boxes

Subscription box services are now mobile-dominant, with 53 percent of traffic coming from smartphones and tablets, pointing to how merchants such as Sephora and Starbucks are appealing to tech-savvy shoppers, according to a new study from Hitwise.

The subscription box segment, while still small overall, is growing quickly as innovative startups such as Dollar Shave Club as well as bricks-and-mortar merchants look for ways to appeal to younger shoppers. The report, “Discovery, surprise, inspiration: The rise of subscription box shopping,” reveals that for the 12-week period ended Jan. 23, 2016, 53 percent of U.S. visits to subscription box services came from a mobile device.

“A majority of visits to subscription box sites come from mobile devices,” said John Fetto, senior analyst, research and marketing, at Hitwise, a division of Connexity.That’s considerably higher than the overall online average of 35 percent and even ahead of the shopping sector in general, which gets 43 percent of visits from mobile devices.

“The reason for mobile’s above average visit share can likely be attributed to two main factors,” he said. “[First] subscription box shoppers are more educated, wealthy and tech-savvy which means that they’re among those who turn first to their mobile device as opposed to a desktop.

“[Secondly] consumers of all stripes are increasingly accessing email from a mobile device and subscription box sites rely heavily on email to communicate with their customers whether that’s to provide shipping information and other transactional details or seeking feedback on the curated selections for the upcoming or previous deliveries.”

Algorithm-based discovery
Overall, consumers in the U.S., Britain and Australia put in more than 21.4 million visits to subscription box sites in January 2016, up from 722,000 in 2013, an increase of nearly 3,000 percent.

While the subscription box segment has been driven by startups such as Birchbox, Loot Crate, Graze and Dollar Shave Club, big retailers are increasingly taking notice and testing the waters, including Sephora, Starbucks and Walmart.

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The findings suggest that other traditional retailers should be giving the segment a closer look. Part of the appeal of this segment for big retailers is the interest in subscription services among younger consumers. However, as Hitwise’s research reveals, older millennials and Gen X are the primary groups interested in these services.

“The profile of the core subscription box shopper was probably the most surprising finding,” Mr. Fetto said. “We had gone in expecting to find them skewing much younger – like 18-24 younger – however we found them to be more heavily concentrated among older millennials and Generation X.

“These consumers have reached a stage in their lives where they’re more established, have more disposable income and are doing more, if not the majority, of their shopping online,” he said. “They want to stay ahead of the curve when it comes to trends and they trust – and expect – algorithms to help them discover new things.

“As such, subscription boxes, many employing a personalized and curated approach, deliver the promise to not only help their customers spend less time and energy shopping, but also help with discovery.”

Social media referrals
The study also found that social media is a strong driver of the subscription box category, with 13.5 percent of referred visits to these sites in the U.S. coming from social media in Dec. 2015. In comparison, the typical retail site received only 8.4 percent of traffic from social.

Dollar Beard Club saw 4.9 percent of visits come from YouTube when it launched last summer thanks to viral video.

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However, search engines are still the most common referral source for subscription box sites, although the role of search is less than for other retailers. In the U.S., 34 percent of referred traffic to these sites came from a search engine in Dec. 2015, compared with 40.7 percent for retail sites overall.

As consumers becomes more familiar with subscription sites, the role of search is growing, with the share of visits driven by search growing 20 percent in the last year.

“The subscription box category is still relatively small in comparison to the overall retail industry, but its rapid growth among key consumer segments has attracted the attention of traditional retailers,” Mr. Fetto said. “In fact, several companies, including Sephora, Starbucks and even Walmart are slowly testing the waters by adding subscription box options to their product lineups.

“One key advantage of subscription boxes is that it keeps customers engaged with the brand and often provides a more personalized and curated experience which has the potential to strengthen a customer’s brand loyalty, if it’s done right,” he said.

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