Analysis: The rise of subscription boxes

The subscription box market has boomed in the last couple of years, and in doing so created a viable corner of the market for a number of brands which have grown to become household names. These businesses combine convenience with great branding and products and include the likes of Birchbox, Glossybox, Graze, HelloFresh, Gousto, Pact Coffee and Cornerstone, to name a few. But equally, this new business model has given a platform for unique and interesting business ideas which have not fared so well – cheese toasties in the post, anyone?

Oliver Bridge, founder & CEO of Cornerstone, a razor blade subscription company, agrees. “There was a wave of hype and novelty and there were some crazy businesses sold on subscription – baby toys, LPs which also sent you a flavoured tea to drink while listening to the record. We did hit peak novelty subscription.

“But what has remained are businesses who provide a genuinely useful or cool experience for the customer,” said Bridge, who founded Cornerstone mid-2014 and has since amassed 170,000 UK customers.

According to a report from Royal Mail the value of the subscription box market is forecast to grow 72%, from £583 million in 2017 to £1 billion by 2022. Royal Mail says 27% of UK customers have already signed up to a subscription box service, with boxes being most popular with under 35s, while more than half of 25-35 year olds are signed up to at least one service. Meanwhile 40% of consumers said they will join more schemes in the future.

Stealing market share

There’s also good news for Cornerstone, Royal Mail sees male grooming and beauty subscriptions as the biggest growth area, with predictions of an additional two million members in this category by 2022.

And while this area of subscription is already getting a little crowded – Unilever’s Dollar Shave Club made its UK debut in early 2018 and there are a number of other brands edging in on the male grooming market – Bridge believes his competition is in fact retailers, and in particular Boots.

“We’re going head-to-head with Boots and stealing market share from them,” he says. “But in reality millions of people a year still go through its doors to buy toiletries.”

Bridge says the subscription market is providing consumers with more choice, while businesses can test the waters of their brand online and potentially even move into traditional retail – just look at Birchbox’s pop-up and Bloom & Wild’s move away from subscription into gifting. “It’s a great way to get awareness,” admits Bridge.

From subscription to on-demand

And while subscription is still the main focus for his business, Bridge and his team are working on some clever technology to provide on-demand fulfilment for Cornerstone customers, taking inspiration from Amazon’s Dash buttons.

“I have a range of products in my bathroom – say 15 products – but I don’t want 15 Dash Buttons in my bathroom. Add my wife into the mix and then we’ll have about 35 Dash Buttons.”

Bridge says Cornerstone is currently working on a product that has all the benefits of a Dash Button without the need for multiple buttons per product. When you consider Cornerstone sells razors, blades, shaving cream and associated toiletries, this mounts up to a number of different products a customer may need to replenish.

When the Cornerstone’s solution launches early next year, Bridge says the business will “move towards a hybrid of subscription and immediate on-demand” which will help it do battle with the likes of Amazon and Boots.

Fulfilment tipping point

According to Bridge, subscription companies could soon face a tipping point in the next couple of years when access to same-day courier services become commoditised thanks to the launch of off-the-shelf solutions. He believes it will only take Royal Mail, Uber, or even a new player to develop an on-demand service for retailers and brands to level the playing field. This will mean the subscription market will become less focused on a regular delivery of a product you are loyal to, and give consumers the option to buy products on-demand.

“There are half a million Uber drivers out there, and when you think about it, it’s not much more effort to have something else in the back of their boot which they can deliver on the way to their destination,” says Bridge.

Forrester analyst, Lily Varon warns that once the novelty of a subscription box wears off consumers like to be in control of their purchases and the frequency of deliveries. She also believes consumer demand for faster delivery times could work in favour of the subscription market if businesses identify the need.

“But I think same-day and next-day fulfilment is also a threat to subscription businesses hinging on auto-replenishment,” she tells Essential Retail. “Especially if your products are available from another retailer who can support same-day or next-day delivery while you can’t.”