Wow — 2017 was an amazing year for retail subscriptions and memberships. We saw two big IPOs, by Blue Apron and Stitch Fix. The largest e-commerce retailer in North America, Amazon, launched an apparel subscription program called Amazon Wardrobe.
Subscription-based brands like Loot Crate, FabFitFun, and BarkBox expanded their core offerings, tested brick and mortar retail, and built on their communities. Large brands and retailers Under Armour, Gap, Old Navy, Ann Taylor, and even J.C. Penney have launched subscriptions as part of their omnichannel strategies.
Some of our 2017 predictions came true, and others were a bit off the mark. However, missing a few won’t stop us from making our top 10 — plus one bonus — subscription retail predictions for 2018. Some of these predictions are offshoots of 2017’s, and others are brand new. We hope you enjoy, and we will grade ourselves again in 12 months.
#1 Large and established retailers will continue to adopt subscription models as part of true omnichannel strategies
We could probably make this prediction every year for the next decade and be right. For 2018, we expect to see apparel’s established players continue to lead the way by testing subscriptions and memberships to offset the challenges of the brick-and-mortar environment. The programs and their press releases will emphasize relationships instead of transactions and highlight recurring revenue as a key metric. However, we don’t think we’ll see this in only the apparel space; we see great opportunities for large retailers in the pet industry, beauty and skin care, and even large department stores to really dig into subscriptions this year.
#2 Large CPG firms will either merge or acquire direct-to-consumer retail, and many will focus on retailers with strong e-commerce and subscription commerce
The day and age of massive consumer packaged goods brands that market on TV and fight for retail shelf space is coming to an end. It will be a slow change, but it is now inevitable. To stay relevant and to appease dividend-hungry stockholders, the large multinational CPG companies will merge with or acquire existing retailers with strong e-commerce and subscription commerce platforms in order to create more integrated direct-to-consumer operations and compete with Amazon and Walmart. Following in the footsteps of Unilever’s purchase of Dollar Shave Club, Amazon’s buying of Whole Foods, Walmart’s purchases of Jet and Bonobos, Kellogg’s purchase of RXBAR, Nestle buying Blue Bottle Coffee, Mars investing in Kind Bars; why not expect Unilever or P&G to make another run at Honest Company or Revlon to make a play for Ipsy or Glossier?
#3 ‘Subscription-first’ brands will test brick-and-mortar retail
Birchbox has its SoHo flagship store. Fabletics is increasing its retail footprint. FabFitFun tested a weekend outdoor pop-up event. Harry’s is in more Target stores. For the holiday shopping season this year, there was even a multisubscription-based pop-up concept called Pop Box in Chicago. We predict that more retailers we consider to be subscription e-commerce brands will test pop-up shops and stores within stores and will even commit to brick-and-mortar small-store concepts. Popsugar, BarkBox, Ipsy, and Bespoke Post are high on our list for subscription brands we think should test retail to better connect with their core customers and to find new ones.
#4 Voice and chatbots will be used for subscription management and purchasing
Voice via Amazon Alexa and Google Home and chatbots, mostly via Facebook Messenger, will be part of our everyday lives. Because subscriptions are relationships, we expect the management of those relationships to move where people want to interact. We expect customers will be able to subscribe to their favorite subscriptions via voice and, maybe even more powerfully, be able to manage and personalize by communicating with a combination of chatbots and real people in messaging apps: “Alexa, please pause my subscription for two months.” “OK, Google: Please add shaving cream and lotion to my next order of razors.” “When will my next shipment arrive?” … The questions and requests will increase and the responses will improve as machine learning and AI gain more access to the requests that are specific to subscriptions.
#5 Cryptocurrency will be used for subscriptions and recurring billing
It is an official rule that you can’t make a 2018 prediction without the words “cryptocurrency,” “blockchain,” “bitcoin,” or “ethereum.” So we expect this technology to start to enter the world of subscriptions like it has other industries. Once bitcoin starts to stabilize and becomes a means of transaction, we expect a few subscription retailers to start to accept it as a means of payment. Perhaps it might be just for a quick PR hit, or perhaps the blockchain that underlies bitcoin and other cryptocurrencies will be more efficient than credit cards for recurring billing. There are already some recurring transaction elements being built into places like Coinbase and for developers to use across the ethereum blockchain, but it will take some time for that to trickle into the e-commerce sites that handle most transactions.
#6 Subscriptions will go global
With two IPOs, a few large acquisitions, and new subscription programs from startups and established players, it is safe to say that subscription business in the United States is strong. We expect this wave of the subscription economy to expand globally with places like Canada, the United Kingdom, Western Europe and China starting to test their own versions of many of the successful subscription retail businesses.
#7 Machine learning, data science, and AI will be increasingly applied to subscription billing and customer retention marketing and communication
Another set of buzzwords for 2018 predictions includes “machine learning, data science and artificial intelligence.” However, these three elements, which work hand in hand, are already making big waves in subscription and will be applied further as we move into 2018. Specifically, we predict that involuntary churn, or when a customer is lost due to a billing error or something as simple as a credit card expiration, will dramatically decrease with the application of machine learning to customer billing and fraud. On the other side, we see that personalized, timely, and targeted communication aimed at retention, mostly via email and even digital advertising, will keep people engaged with a brand for a few more cycles.
#8 Data combined with great storytelling and influencers will create the next Stitch Fix or Dollar Shave Club
There is still a lot of opportunity across the subscription retail landscape in many verticals. The next big breakout subscription success in any product category will start with a great product. It will mix in amazing and authentic storytelling generated from real-world influencers who use the product and then will be a data-gathering and data-assessing machine to fine-tune and scale. Apparel, meal kits, and razors may be tapped markets, but oral care, supplements, pet care, and curated programs targeted at under served audiences like Baby Boomers will have breakout success that we all should have seen coming.
#9 There will be two main types of subscriptions: transactional/‘subscribe-and-save’ and holistic/customer-centric
There is still a lot of opportunity across the subscription retail landscape in many verticals. The next big breakout subscription success in any product category will start with a great product. It will mix in amazing and authentic storytelling generated from real-world influencers who use the product and then will be a data-gathering and data-assessing machine to fine-tune and scale. Apparel, meal kits, and razors may be tapped markets, but oral care, supplements, pet care, and curated programs targeted at under served audiences like Baby Boomers will have breakout success that we all should have seen coming.
#10 New industries will continue to test subscriptions: 2017 was cars. Next year?
The overall subscription economy, which encompasses more than just retail, continues to evolve. In 2017, we saw subscriptions for movies with MoviePass and car subscriptions from Volvo, Porsche, Cadillac, and Ford. Last year, we said that it would be a big year for apparel and food, which were both correct, and for cannabis, which is still a bit early. Next year, we think there could be a big shift to “subscriptions” for the use of artificial intelligence. Companies, and even individuals, can tap into the power of IBM Watson for a monthly fee and apply it to their businesses or startups as needed.
Bonus — “because this one goes to 11”: A real focus on the customer journey and experience will create the subscription winners and losers for 2018
OK, this one is less of a prediction and more just common sense for all retailers — but especially subscription retailers. Everyone needs to focus on solving customer needs and creating amazing experiences at every touch point in order to stand out and compete with the rise of value, convenience, and huge product assortment, which will continue to be dominated by Amazon and Walmart.
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