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Established brands eye subscription box market, claims Royal Mail

Established brands are waking up to the benefit of creating a subscription service, with companies including Gillette, Sephora and Estee Lauder launching reoccurring shipments of products.

According to a report from the Royal Mail, bigger brands are hoping to copy the success seen by start-ups such as Dollar Shave Club and Birchbox, which have benefitted from low barriers to entry. Indeed, Dollar Shave Club built itself up to become an international company which was acquired by Unilever in 2016 for $1 billion. And snacking subscription service Graze was also recently snapped up by the FMCG titan after expanding the business overseas and stocking its products in grocery stores. According to the Royal Mail 90% of subscription businesses generate revenue abroad.

The UK Subscription Box Boom Report from the Royal Mail forecasts the industry to be valued at £1 billion by 2022.

But retaining customers remains the biggest challenge facing subscription businesses and brands must keep consumers interested or risk them cancelling their regular deliveries. The report recommends diversifying business models to reduce the reliance on subscription as well as launching new products and features.

Shaving subscription business, Cornerstone, launched a “15 minutes” male lifestyle magazine with a readership of 130,000, which keeps its customers engaged and reduces its churn rate. Meanwhile, Birchbox has ramped up personalisation efforts, and released Birchbox Select, which allows customers to tailor their boxes.

Lola’s Cupcakes is another brand which has embarked on the subscription model: “Excitement on the un-wrap, something delicious inside, with a continued stream of innovation are all key success factors in the subscription box market for Lola’s Cupcakes,” said MD Asher Budwig. “Our latest innovation, brownie boxes through the post, is an exciting new chapter for our company. We’ve been watching the subscription box market grow, alongside the success of ‘through the letterbox’ products, and we realised our brownies could work in a similar way.”

Joseph Robinson, consulting director at GlobalData, said: “Spurred on by the growth of mobile devices, the subscription retail segment has moved on from a past focus on magazines and newspapers, to embrace everything from recipe food kits, to shaving gear and self-care. While still in its infancy, the category is now in a phase of growth, with major global brands such as HelloFresh, Harry’s, Birchbox and DollarShave Club increasing their efforts at expansion. At the same time, homegrown start-ups such as Cornerstone are greatly exceeding their own expectations for their subscriber base.”

A spokesperson from Royal Mail added: “Businesses across the UK understand the significant growth opportunities that subscription services can deliver. The market is growing at a phenomenal rate. Future success will hinge on overcoming the key barriers to the take-up of subscription services whilst keeping subscribers engaged.”