As we reflect on the 2016 growth, headlines and changes in the subscription and membership businesses that shape what we are calling the ‘New Membership Economy’, we also look forward to 2017 and anticipate what will be in store. We focus on subscriptions for physical goods so we are focusing these predictions on box subscriptions and memberships and not on the other SaaS and digital subscription models that are also a major part of the overall subscription economy. Here are our top 8 predictions for subscription box businesses for 2017.

#1 Continued consolidation, acquisitions, mergers in the box businesses

The “death” of the subscription box business has been greatly exaggerated.  True- there is not an unlimited demand for sample makeup and skin care boxes and small niches like beef jerky of the month are not going to shake the world’s economy.  The jury is also still out whether Unilever’s purchase of Dollar Shave Club for $1B may prove to be economically wise in the long term.  But many of over 3000 subscriptions in the market place are still serving and delighting their customers.  Some may not be growing at the explosive rate they once were but many are still successful. Smart businesses will start to see opportunity in consolidating a handful of separate successful box programs under roof for efficient operations and large players will look to acquire programs with unique technology or a desirable demographic to help keep up their growth rates.

#2 Expansion to new categories for subscriptions

From 2013 to 2015 subscriptions were heavily focused on skincare, small items that need to be replenished every month like razors and small niche items of the month for specific target demos.  2016 saw the growth of two newer categories- food and apparel.  Food subscriptions from Plated and Blue Apron and apparel from Stich Fix and MeUndies have grown through a mix of unique features, personalization, quality product and aggressive marketing.  In 2017, we believe these categories will continue to grow but new categories such as whole health which mixes nutrition with education and experiences will start to thrive.  We also predict that certain states like California, Washington and Colorado will figure out ways to apply subscriptions to massive opportunity in the marijuana industry.  The main stumbling block here is the inability to use credit cards and federally backed banks for anything related to cannabis.  But with reported revenues of $6.7B in 2016 and expectations to grow to $20B by 2021 in the USA and Canada, we think that subscription commerce will find a way to get a large chunk of the pie.

#3 Traditional CPGs and brick and mortar retailers launch subscriptions as part of larger omni-channel strategy to compete with Amazon

This prediction is a long time coming but many of these large established brands who set up their entire business on a B2B/wholesale model are starting to see the light.   Or maybe they noticed that they are starting to lose massive market share to newer brands or losing the entire customer to Amazon who is rolling out private label along with subscription via Prime and Subscribe and Save. Regardless, big CPGs and chain brick and mortar brands will launch subscriptions some in the place of simple single purchase e-commerce.  Unilever $1B purchase of Dollar Shave Club, the Gillette Shave Club, and the launch of boxes from Sephora and Target that drive to retail are just the start.  We expect all major CPGs will have at least one subscription brand in their portfolio launched or acquired in 2017.  Smart brick and mortar retailers who can’t keep shutting retail doors forever for everything from apparel to fragrance will launch a subscription as part of the customer centric omni-channel strategy.

#4 Device to doorstep execution becomes make or break for subscription success

Even with great product, a cool brand, a high performing website and creative marketing you are still not guaranteed to be successful or profitable in the subscription economy.  Many large scale subscription programs with thousands of members and great brand recognition may still not be making any money.  The reason- out of control costs for both acquisition, operations, logistics and customer service.  The 5%-10% difference between good execution and great execution makes all of the difference.  Where many great programs miss the mark are in the details that many overlook like credit card fees and rules, fulfillment and packaging costs, how they handle returns and in customer service costs.  To be successful in the long term, subscription programs will need efficient and scalable execution from device to doorstep to see sustainable profit margins.

#5 Subscription and e-commerce players will flip the script and open brick and mortar

We are already starting to see this trend with store location openings of Warby Parker, Trunk Club, Birchbox and even Amazon with bookstores and Amazon Go.  We expect this trend to continue and can easily see successful online retailers like Memebox, Glossier and Stich Fix open flagship or pop-up stores to test the market and if successful start to expand their footprints with new and engaging retail locations and experiences.

#6 Unboxing will be live and be considered a key part customer service and marketing

Unboxing videos have been massive on YouTube for years.  A search for “unboxing” on YouTube shows over 55 million results.  This trend will continue and will expand more to other social media platforms like Facebook, Snapchat, and Instagram and will be done live as all of these platforms push for more live video.  Making sure that packages get to key influencers with large audiences at the right time so they can use live video to showcase the amazing products and packaging will be part of both marketing and customer service as smart brands will not want to upset their core fans and subscribers.

#7 One to one personalization and customization at scale

For subscription box businesses we see personalization and customization unfold in a few key areas all touched by the 2016 buzzword of the year “Artificial Intelligence”.  A.I. will have a place everywhere from learning what marketing works to bring in a customer, to learning how members interact with their membership options like shipping dates, to customer service chatbots that help guide to personalized and custom made products that are shipped with message personal to each member.  These services could all be done before but only with heavy investment in human capital which made doing this very difficult on the budget and at scale.  The rise of AI and mix of more robots on the fulfillment side will start to create a more personalized experience.  It may sound counter intuitive that machines could give a more “personal” experience but at scale and over time we believe they will.

#8 Experiences will become a part of the subscription box

Subscriptions boxes currently provide some level of experience in the opening of the box and the anticipation of what is inside.  But for the most part, subscriptions are still products of some kind shipped to your door on a monthly basis.  We believe that smart brands will start to mix in more real world and unique experiences into their program to differentiate themselves and continue to acquire customers and minimize churn.  Live chats with the celebrity or designer who curated your box or a chance to meet up with other members to tie a real community will start to be part of programs so that customers become members and feel a sense of belonging.