Top Five Reasons to Love The Subscription Box Business

The retail industry has seen reinvigoration through a new form of shopping.  Over the last 5 years, the popularity of subscription box services has become a new way of discovering products as well as brands. The subscription box experience offers exciting, easy and relatively affordable options for food and apparel with new category expansions each month -- it has become a $1 billion+ industry.

So, what’s to love?

1. The innovation. 

The idea behind the subscription box itself is a curation of items that would appeal to a particular consumer persona. The curation of the items for the box itself is a highly creative process.  Starting with an inspirational persona based on the theme of the box, each month a story needs to be crafted and told through the items in the box that will not only excite that subscriber but be useful. Because the new subscription box delivers each month, there is the flexibility to curate a wide variety of items and seeing what rises to the top. The psychographic of the subscription box subscriber is someone who is statistically adventurous and appreciates first-to-market options. This allows companies a testing ground for items that are more edgy, new and/or just different - sometimes even original design.  The more the box meets its promise, the better the retention rate as well as referral rate (word of mouth) resulting in new subscribers.

Additionally, the popularity of a particular new item can even spark ideas for new boxes altogether.   While the first subscription models for monthly boxes may have started with clothing and makeup, now subscription boxes reach niche categories, like dog treats, romance novels, cat owners and stationery! In fact, according to a McKinsey study, subscription boxes experienced an explosive growth rate between 2011 and 2016, averaging around 100% annually due to the passion triggered niche approach.

2. They literally make you feel good.

Unpacking a subscription box is like Christmas morning. Research and brain studies suggest that the act of unboxing sends signals to the brain feelings of joy, reward and satisfaction. To be more specific, it affects a deep center of the brain, known as the substantia nigra and ventral tegmental area (aka the part that makes you feel good).

Those feelings of joy and surprise are addicting and align perfectly with a monthly experience. Sometimes it’s not even about what is in the box, but the overall experience of it.  The anticipation of receiving the box, the experience of discovery, the ‘trying on’ or trial use of the items and the sharing (or display) of the items with (to) others all play into this psychology.  This can even be seen with the Amazon effect with the some of the most mundane household items that have now become ‘fun’ to shop for due to the promise of the unboxing experience.

3. Resurgence of Brands.

As they say, everything comes back in style. Taking an older brand and now pairing it with items to create an ‘experience’ allow a brand to reintroduce itself to consumers through a more relevant channel.  Brands can find ways to reinvigorate their classic styles through unboxing, creating new loyal followers and users. Think of it like the Netflix library-- a treasure trove of content that can be discovered by a new audience. But instead of West Wing, it is a timeless cable knit sweater with 4 other fun accessories.

4. Community building.

People like to share. Subscribers are united by the curated products that they discover in their box; each item has the potential for a new story. And they want to share those stories with friends, online and on social media. Comments alone can build a community, but it is more than that. Some subscribers not only post about their box, but talk about their experience, using them to spark conversation among other users and creates a bridge of communication and unity.

5. Manufacturing for a known audience.

Over the last decade, apparel manufacturing has changed dramatically. With the rise of “fast fashion” and the circular economy, sourcing and manufacturing has had to quickly evolve. And with that rapid evolution, manufacturers don’t always know what will work with their customers forcing a brand to stay in its brand lane.

One major benefit for the industry, is that subscription boxes (run online), are informed by data. From the beginning of the lifecycle stakeholders know how much to produce, the success of certain styles and what new items may appeal to their customer base to expand and enhance sales. This leads to more efficiency and reduced waste throughout the manufacturing process, which is a bonus for all - consumers, manufacturers, retailers, brands, etc.

Industry expert, co-founder of The Vertical Collective, Katherine Zabloudil shares, “We have seen a substantial change in our overall business-- a shift towards servicing subscription box companies including curation, sourcing and manufacturing. The market is booming.” She continues, “We have helped some of our traditional apparel clients start subscription boxes to help expand their business model, reaching new audiences.”   

So, what’s not to love about the subscription box business?

On Demand Manufacturing for an On Demand Market

If you’ve been paying attention to the apparel industry over the last couple of years, then you’re likely familiar with the term “fast fashion.” Fast fashion has been a seemingly unavoidable go-to phrase in the industry, as it articulates a shift to faster manufacturing and tightened delivery timelines. Fast fashion captures runway trends -- new, emerging styles can be on shelves and in the hands of consumers within months, and often with a relatively low price tag. Think brands like Zara, H&M and Forever 21.

However, other associations with fast fashion aren't as positive. Many of these brands are thought of as being low quality and wasteful. In fact, almost 32 billion garments are created for domestic markets each year, with 65% ending up in landfills. All of that textile waste makes fashion the second-most polluting industry in the world. And according to McKinsey and Company, the average consumer purchased 60% more items of clothing in 2014 than in 2000. The implication being that clothes wear and tear more quickly since the shift to fast fashion business models.

That being said, many manufacturers argue that the industry can increase speed to market without sacrificing quality and risking an over-surplus of items.

The answer is on-demand manufacturing. On-demand manufacturing is a business model that embraces technology, innovative manufacturing techniques and smarter shipping solutions. Some boutique manufacturers are thinking about supply chain differently. They are able to utilize real time customer feedback to improve products and capture trends without delay. What this end up translating to is a reduction in waste.

If a product is performing really well, they can respond to that demand and make more, and vice versa. If a new line is not selling, they can rollback manufacturing. Technology-- for example online orders and returns-- allows manufacturers to respond in real time to demand, resulting in less unwanted, unsold products. You only make enough for what people want, instead of filling stores with garments that will never sell.

“There is a long held assumption in the apparel industry that in order to produce items quickly and cost-effectively, then quality must suffer,” says Morgaine McGee, co-founder of manufacturing company, The Vertical Collective. “But we have found that there are creative solutions to maintain a high standard. Additionally, by embracing more efficient shipping strategies, we can tighten delivery windows and allow more time for production.”

For retail giants, like H&M and Zara, this high-quality, low-impact approach may not be entirely possible. That being said, many big brands are taking steps to change by participating in recycling programs and other initiatives to make up for the overstocking. These efforts are being driven by consumer demand for environmental consciousness and more sustainable materials, less waste.

Overall, an increased demand for faster delivery, runway looks, sustainability, and the option of personalization via online retailers is changing the landscape. And, there are manufacturers who can do it all-- industry veteran Katherine Zabloudil sums it up perfectly, “When it comes to accelerated, custom and quality, you can have your cake and eat it too.”

The Future of Manufacturing: Real Time Feedback and Efficiency

How consumers feel about a given company and its products has been the centerpiece of marketing courses and studies for decades. Consumer insights drives advertising campaigns, new product rollouts and, most importantly, the bottom line. In fact, when looking at Fortune 500 companies, an average of 11% of the annual revenue is dedicated to marketing budgets-- that translates to hundreds of millions of dollars each year. Understanding how the average buyer makes purchase decisions and pinpointing what factors contribute to these transactions, is a billion dollar business. And now, getting that information is easier than ever.

The rise of the internet led to an explosion of ecommerce, social media and a whole new way for marketers to understand how people purchase. With online searches and online shopping, companies are now able to see consumer behavior digitally and in real time, creating a treasure trove of usable data and insights. So, how important is this feedback loop? Short answer, very. Organizations that leverage customer behavior data to generate behavioral insights outperform peers by 85% in sales growth and more than 25% in gross margin.

Of course, this works both ways. Real time purchasing insights, also means real time customer feedback. With smartphones in hand, shoppers are researching products, writing reviews, and conducting online price comparisons before they make a purchase. This shortened feedback loop creates an opportunity for businesses to capitalize by building in new efficiencies to the development and manufacturing process that use and encourage this behavior.

For example, let’s say Nike created a new workout pant that has a different kind of pocket on the pant leg-- but via social media they quickly discover that thousands of customers keep snagging that pocket on things because of the way it’s positioned, tearing the pant leg. Nike could more quickly react to that product defect and alter the pocket if they had processes in place to account for this kind of feedback-- saving vast amounts of money on shipping, manufacturing and returns.

Although the example was a hypothetical, there are businesses thinking this way about consumer data, and some have the foresight to put practices into action.

Local Southern California apparel manufacturer, The Vertical Collective, is using real-time consumer feedback to streamline design, product development and manufacturing. Through their unique approach of using customer insights, they are able to determine and make modifications to designs that mirror consumer demand.

By thinking about audience insights as a tool for design, companies with prescience are able to incorporate customer priorities into the planning process to guarantee a saleable product.  

“When companies come to us to revive their products and do a complete refresh of their line, we always ask to see the customer feedback and social media comments,” says The Vertical Collective co-founder Katherine Zabloudil. “Buyers and brand loyalists are the key to unlocking detailed design and functionality elements that provide a point for difference.”

Customers know what they want, are willing to share those thoughts, and now have the venue to do so. Smart brands will listen and learn.

How the Web Broke Retail: The Disruption of the Second Largest Industry in the World

The Internet’s Effect on Apparel Manufacturing

Throughout history there have been several major disruptors: the printing press revolutionized the exchange of ideas, the telephone changed how people communicate, and the internet-- well, the internet changed everything. These disruptions cause a rebirth, the death of the old and the rise of the new-- typically giving way to innovation. Over the last two decades entire industries have gone extinct, and businesses have had to quickly adapt to the migration online. One industry that is still trying to find its place in this new world, is the apparel industry.

In the last month, retail giant Payless announced bankruptcy. Another casualty of the “Amazon affect”-- people getting everything they need online, and getting it same day. This relocation to online purchasing renders brick and mortar useless for younger generations. Many may argue that the predecessor to Payless is the online only shoe store Zappos. Or the complete decimation of travel agencies with the rise of [name your preferred airline site here]. And this trend is not exclusive to shoes or travel. According to the Pew Research Center, 79 percent of Americans have shopped online. However, only 10 to 15 percent say they shop online one or more times a week.

The apparel industry has seen a complete upheaval in how clothes are distributed and purchased. And with the global apparel market being valued at 3 trillion dollars, 3,000 billion, and accounting for 2 percent of the world’s GDP*, the impact of this is huge. People want high quality goods, purchased online and delivered at their door tomorrow.

With less brick and mortar stores to hold large selections of merchandise, and consumers demanding quick delivery, apparel manufacturers are rapidly innovating on how to reduce excess inventory and unsold product, while trying to dramatically shorten their production timelines.

Co-Founder of The Vertical Collective Morgaine McGee says, “With so many retailers moving online, manufacturers have to innovate and respond to consumer demand by creatively accelerating the development and production of goods.” The apparel expert continues, “Not only has speed to market become a major factor, but so has control of inventory. Excess product means paying for more storage and therefore more costs. This leads many to on-demand manufacturing -- you buy one, you make one. Less waste.”

Although models of fast-development and on-demand merchandising are being widely adopted by the apparel industry, many companies are unable to adjust. The traditions that built this industry have become its achilles heel. Partnering with companies like The Vertical Collective, allow large companies to benefit from the nimble ways of a manufacturing start ups. Those that can integrate the old with the new are finding success with a combination of approaches. But those that cannot adapt and adopt, will eventually be left behind.  #RIPPayless.

Trump's Tariffs Laws Affect Local Apparel Manufacturing: Demystifying Trade Conversations

Trump's Tariffs Laws Affect Local Apparel Manufacturing: Demystifying Trade Conversations

Lately, there has been a lot of news about international trade policy, new tariff laws and a “trade war” with manufacturing power-house, China. For many, this has little impact on a day to day level. When people think tariffs, they usually think of major industrial exports and imports like steel. But recent laws put in place are affecting many small businesses across the United States. Especially those who work frequently with Asia.