Need data around the growth of the 'subcription box' market
Hello! It is my pleasure to respond to your query about the subscription box market. I have provided you with an overview / history of the industry and financial data, including the current market valuation and expected growth. Additionally, I’ve listed the market sectors and major competitors, and as much other industry information as I could find that might help with the proposal deck to your investors. A deep dive of my findings is below.
SUBSCRIPTION BOX HISTORY & OVERVIEW
According to SubscriptionCommerceInsider, although subscription-type services have been around for a long time (think: magazines, books, wine clubs, etc), the true “subscription box” industry started sometime around 2010/2011. At the beginning, three (3) stand-out companies included:
• ShoeDazzle: Shoes subscription box
• Birchbox: Beauty sample subscription box
• BeachMint: Affordable jewelry subscription box
Since 2012, a wide selection of copycat / similar businesses has arisen, and millions of dollars of venture capital has been raised by startups in this industry. As the numbers of these companies grew, subscription box directories developed to keep track of all the services for interested consumers. Some of these directories include:
• Find Subscription Boxes
• My Subscription Addiction
• Hello Subscription
• Subscription Radar (UK)
• All Subscription Boxes (UK)
SubscriptionCommerceInsider reports, “Today, the subscription box industry is thriving with thousands of entrepreneurs running many small, and some much larger, subscription box services, catering for everyone from pet owners to stationery fanatics.”
Additionally, there are two major platforms that allow for the easy, turnkey development of a subscription box service (with a variety of available features). These are: CrateJoy and Subbly. The same (or similar) business model is used across most/all businesses within the industry, since it is such an easy-to-copy/modify-for-use model. According to FastCompany, “There is also a sense that the barriers to entry into subscription commerce are fairly low: All you need is a website, some marketing tools, and relationships with suppliers who want a new channel for getting products or samples to consumers.”
Several investment groups have placed their funds with multiple subscription box startups include: Accel Partners, Grace Beauty Capital, Slow Ventures, and Lerer Hippeau Ventures.
MARKET SIZE & EXPECTED GROWTH
According to FastCompany, the subscription box industry has been growing at an annual rate of about 200%, and generated $5 billion in revenue in 2014. I searched extensively for newer market valuation information, though none was available (expect to see more data by the end of this year, according to experts). I did, however, find extensive information on the site visits seen by retailers in this industry. We’ll talk more about that next.
Digiday reports that between January 2013 and January 2016, there was a 2963% growth in the total monthly visitors to subscription box sites. They state that, according to MySubscriptionAddiction, which is a directory and review site for this industry, estimates that there are 11 million subscribers in this market. Connexity reports that there were over 21.4 million visits made to the subscription boxes that they followed in January 2016, which was up from 722,000 the previous year.
The websites that drive disproportionately-high numbers to subscription box sites include: Buzzfeed, Twitter, Pinterest, Facebook, and YouTube. Additionally, since most consumers in this realm are early Gen Xers or late Millennials, 52.8% of all subscription box site visits in the US were done on mobile phones. So, ensuring you focus your marketing efforts on these social media sites – and that your platform is highly-mobile-friendly will ensure the biggest market share for your business.
According to SubscriptionCommerceInsider, “With the barriers to starting a subscription box business continuing to fall, expect to see many more budding entrepreneurs launching new twists on this successful model, pushing it in creative new directions and into new markets around the world.”
Alternatively, Digiday and analysts at Forrester believes that the major boom in this market is over, and the market may have reached its saturation point. Since this is a difficult sector in which to start a business, and only about 1 – 5% of consumers are the market size for any given business, “the overall business opportunity just isn’t that large”. Additionally, the article reports that the market also has a problem of scale. Although the cost of acquiring subscribers is generally low, when these companies start to scale due to growth, “the cost-per-customer acquisition no longer provides enough of a margin to keep these businesses sustainable”.
According to experts, overall, the market has grown substantially in the last three (3) years and expected growth is continued. However, new business ventures need to ensure they are not entering an already-saturated niche of the market, or they may not meet with success. The biggest driver for this industry, according to FastCompany, is consumers getting the most-box-for-their-buck, so new companies should focus on a niche with few major competitors – and give the most to their consumers (for the least dollar amount) possible.
MARKET SECTORS & MAJOR COMPETITORS
According to FastCompany and the founder of Cratejoy, Amir Elaguizy, there isn’t solid data available on the number of companies in this industry, though he estimates the market to be around 10,000 different companies across a wide variety of sectors. These companies cover a wide range of sectors including (just to name a few):
• Beauty products
• Household products
• Food items
• Kitchen products
• Shaving supplies
• Pet supplies
• Clothing (of all types)
• Luxury items
• Marijuana products and supplies
• Adult (sex) products
• Gardening products
• Items for kids
• Many more!
According to Connexity, the top five (5) companies in the US market with the most monthly visitors to their websites are:
• Birchbox: 3.6 M
• Dollar Shave Club: 3.6 M
• Loot Crate: 3.1 M
• Blue Apron: 2.8 M
• Graze: 1.7 M
According to SubscriptionCommerceInsider, the companies in this industry to have raised the largest investment capital include:
• Birchbox: Beauty sample subscription box – Raised $71.9 M
• BeachMint: Affordable jewelry subscription box – Raised $74.7 (Note: This company has partnered with Conde Nast’s Lucky)
• Dollar Shave Club: Affordable shaving supplies subscription box – Raised $147.8 M
• Harry’s: Affordable shaving supplies subscription box – Raised $287.1 M
• NatureBox: All-natural snacks subscription box – Raised $58.5 M
• BarkBox: Dog products subscription box – Raised $21.7 M
• ShoeDazzle: Shoes subscription box – Raised $66 M (Note: This company was acquired by JustFab)
• JustFab: Personalized fashion subscription box – Raised $254 M
• Ipsy: Beauty product subscription box – Raised $100 M
According to Connexity, the typical subscription box client is the 25 – 39 year old female with above-average education and income, who predominantly lives in multicultural urban neighborhoods in big cities / surrounding suburbs, and who are active and health-conscious. If the products in your box fit with this profile, you are sure to find the most success in the market.
SubscriptionCommerceInsider points out that an “average subscriber” has seven (7) or more different types of subscriptions, and has somewhere around 12 more subscriptions on his/her wishlist for future purchases. Slice Intelligence reports that subscription-based businesses typically see a higher frequency of purchases from their consumers, but with lower-than-average order sizes.
WAYS TO SUCCESSFULLY MARKET YOUR SUBSCRIPTION BOX BUSINESS
ClickZ offers 16 ways to successfully market your subscription box business. These are summarized below:
• Be unique in some way to differentiate from competitors; serve a niche market
• Your box should solve a problem (like easy healthy eating, for example) or help customers save time/money
• Provide multiple plan options (too few and you don’t give customers enough options; too many and customers get overwhelmed)
• Your website and platform should have creative, functional, and user-friendly designs
• Design your platform from the user’s perspective and use data to improve usability, functionality, and design
• Market-test new products, designs, etc and keep only the top scorers
• Your website should include as much extra “help info” as possible
• Create a community of users within your platform
• Create and market content by experts in your market
• Create and use social media platforms for marketing and community-building often; use email marketing and maintain a solid frequency (not too much or your users will be annoyed)
• Make the cancellation process pleasant and positive, as well as not too complicated (so as to not burn bridges with clients who may return to the service at some point)
Additionally, I have included a link from Subscription School, which details how to properly price your subscription box for the best appeal to your intended consumers. I wish you much luck with your new venture and hope you find all the success you can!
Thank you again for your question, and I hope this information gives you what you need. Please Ask Wonder again for any other questions you may have!