Online subscription model attracts shop-shy

A subsector of online retailing is rapidly emerging as retailers try to find new ways to retain their customers' loyalty, but is it sustainable?

A subsector of online retailing is rapidly emerging as retailers try to find new ways to retain their customers' loyalty, but is it sustainable?

The subscription commerce model, pioneered by the likes of the Dollar Shave Club, is being tried successfully by a growing range of merchants.

Typically, online subscribers receive a monthly shipment of products at a significant discount to the recommended retail price.

It has found favour with regular visitors to Nicholas Egonidis' DailyJocks fashion blog, which was established three years ago to connect men with special offers on designer apparel.

The site, which has a strong gay following, has a million visits a month.

Six months ago, Egonidis launched a monthly underwear club offering members the choice of designer briefs, trunks or jockstrap delivered for $20; about half the average recommended retail price.

Products come from local designers who see it as a marketing opportunity to expose their wares to men who are frequent purchasers but avoid shops.

The club has 5000 subscribers and a churn rate of just 2 per cent.

Cosmetics and beauty site Lust Have It claims to have hit a similar sweet spot by offering monthly bundles of six premium samples to women.

Supplied free by manufacturers, the samples' estimated value is typically $50-$100. They are aggregated and sold for $14.95 a month to subscribers, who number in their thousands, according to Lust Have It chief executive Greta Stojanovic.

Like Egonidis, she sees the model as a means for manufacturers to put their product in front of suitable buyers - and a chance for the buyers to get a bargain on repeat purchases.

Some traditional retailers are also keeping a watchful eye on the sector. Women's exercise-wear company Lorna Jane has an extensive online following, including 40,000 Facebook "interactions" a week.

Lorna Jane digital strategist Sam Zivot said subscription might figure in the company's future plans.

"It's something we would definitely consider - it's just having the infrastructure to support that," Zivot said.

But Naren Sivasailam, a senior industry analyst at market research company IbisWorld, said that while individual players might be enjoying success, subscription was likely to remain a niche in broader online retail.

Estimated to account for about $11 billion a year in domestic sales, online shopping is growing at 28 per cent a year, according to Ibis research.

"Looking around, [subscription commerce] is obviously a trend and a trend that's been received quite positively," Sivasailam says.

The model appeared to suit products such as cosmetics but Sivasailam questioned whether it would take off.

The cosmetics and clothing markets were cluttered with online and high street choices and subscription suppliers would need to offer extraordinary bargains or fantastic choice to make a significant dent, he said.

Praveen Sengar, an e-commerce analyst at Gartner, agreed, likening the trend to the rapid rise and subsequent plateauing of daily deals sites, such as Groupon and Spreets.

He said it was one of many marketing channels available to retailers.

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