The Rise of Subscription Services

The audience Q&A after the Fashtech panel highlighted some of the most pressing issues and trends for fashion and technology in 2012. But what really sparked discussion was a question around the rise of subscription-based services. We’ve been thinking about subscription services too, and although they are a time-tested model – think old school Columbia House CDs to Netflix – there are some limitations to what we’re seeing in today’s fashion and style marketplace.

Rise of Subscription Services

Over the last few years, subscription-based services have become a bit of the rage, especially for fashion and beauty products (e.g., ShoeDazzle, Beachmint, and Birchbox). And for 2012 there’s no end in sight, from media to investor types, subscription services are hot.

But even with all the attraction, when asked about the future of subscription services, our panelists didn’t toe the line. I’m paraphrasing here, but here a few responses:

Jess Lee, Co-Founder of Polyvore, questioned the model’s limitation in addressing the large and diverse selection of apparel available to women. She went on to note that the subscription model does not help her shop since she prefers to shop at her favorite boutique. But, she added that if the model is done well and addresses how women shop, the model can be successful in niche areas.

Vineet Buch, Group Product Manager of Google Shopping, brought up the success of ShoeDazzle and how it seems best for the items it produces. At the $39.99 price point, the shoe is considered a one-off purchase, where you won’t necessarily keep the shoe for long-term, as a $40 pair of shoes is not intended to last long. But he wasn’t too supportive of the model for men.

Colin Stuart, CTO of Betabrand, was the most pointed: subscription-based models weren’t Betabrand’s target consumer and although there was some success out there, he did not see much of a market given how men shop. Yes, men shop.

For those wondering, Trunk Club was the example raised for men, but surprisingly (or not surprisingly, depending on where you fall in the argument), neither of the men on the panel thought it truly addressed the way the majority of men want to shop.

What are the Benefits?

There are four benefits to subscription-based services – acquisition, timeliness, personalization, and surprise. Lets talk about each one in turn.

Acquisition. The strength of subscription-based services is the convenience they offer consumers. But it is also the nature and scale of the business model. The model addresses two main concerns of most businesses: constant revenue stream and low customer acquisition costs. Once you got ‘em, you’ll likely have them…for a while.

Timeliness. Some services are focused on a replenishment model (e.g., Manpacks and Hoseanna) where you select products such as undergarments and socks to be shipped on a recurring basis. This saves you a trip to the store.

Semi-Personalized. Most subscription services make you fill out a style and preference questionnaire and then provide recommendations from personal shoppers or algorithms based on the information collected. You purchase what you like and can skip what you don’t. This attempt at personalization offers stickiness that makes you want to come back for more.

Surprise! Who doesn’t love to receive a package in the mail without knowing what it’s inside? Most services offer a selection to help you discover new products and brands that you may have not found otherwise. Some services (e.g., Stitchfix) even offer selections outside of your style comfort zone.

With All This Goodness, What Are the Limitations?

What you don’t often hear about are the limitations to this service. For fashion and style businesses, we think the panelists are on to something, specifically in the areas of selection limitation and gender bias.

Selection limitation. How does one service address the many different styles and looks that may constitute one consumer’s preferences? Women’s style preferences are crossing boundaries across multiple style personas, but most services only offer recommendations based on one profile segment. At minimum, this means it will be very difficult for subscription services to grow beyond niche markets. At the other end of the spectrum, it means the subscription services are more vulnerable to rapid shifts in market trends.

It’s (not) perfect for men. Word on the street is that subscription service is good for men’s apparel and that more dollars will funnel in to address this market. But we don’t think this is necessarily a good idea. Why? Subscription services do not address how men shop. When talking about developing a women’s line, Colin Stuart of Betabrand basically said the same thing: men and women need experiences designed around their mentality and approach. So even though subscription services are proving “sticky” for women, unless the items are lifestyle products (e.g., Stunners of the Month), fashion-based subscription service targeting men is not necessarily the panacea for men’s apparel.

Closing Remarks

We believe in subscription services, but we recognize limitations in catering to all fashion and style segments. Do we think these are insurmountable challenges to the continued growth of subscription services? No, not at all. After all, the most successful companies are sticking to specific product categories. And, subscription services are growing in other consumer verticals such as food, drinks, and general lifestyle products and services (e.g., Quarterly.co and member.ly). But one thing to think about for fashion and style is the rise of curated shopping experiences and how this can compete with subscription services. This issue is only going to grow as companies offer customers increased personalization through robust recommendation systems that incorporate more than a uni-dimensional profile questionnaire (a la Hunch). Soon, you won’t commit to a monthly membership based on current tastes but to a predictive service that offers products based on your schedule, location, and other factors that evolve over time.

Shortlist of Fashion and Beauty-based Subscription Services

Alwayshave – Men’s essentials (price and subscription period varies)

BeachMint – Jewelrymint (Women’s jewelry, $29.99/month), Stylemint (Women’s t-shirts, $29.99/month), Beautymint (Women’s beauty care, varies monthly), Shoemint (Women’s shoes, $79.98/pair/month)

Beautyfix – Women’s beauty care ($49.99/season)

Birchbox – Women’s beauty care samples ($10/month)

Blackbox – Men’s beauty care ($12/month)

Justfab – Women’s shoes and handbags ($39.99 each/month)

Hoseanna – Women’s essential items incl. legwear, femcare, and intimates (autoships every 2 or 3 months)

Manpacks – Men’s undergarments and socks (per season and price based on products purchased)

Panty by Post – Women’s undergarments (monthly fee varies)

Send the Trend – Women’s accessories ($29.99/month)

ShoeDazzle – Women’s shoes ($39.99/month)

Stitchfix – Women’s styling service for apparel and accessories (price based on products purchased)

Stunner of the Month – Unisex sunglasses ($9/month)

Swag-of-the-Month – Men’s t-shirts ($9/month)