Subscription Brands Test To Navigate Tough Climate

PYMNTS research reveals that retail subscription commerce companies stand to lose up to $2.2 billion per month by not innovating, experimenting, improving experience and providing value.

On that circumspect note, PYMNTS asked a panel of subscription experts to describe overcoming challenges in a time of change both for subscriptions and the economy writ large.

PYMNTS’ Karen Webster was joined by Sticky.io CEO Brian Bogosian, Wantable CEO Jalem Getz, Beachly Brands CEO Kevin Tighe II, and Fish Fixe Co-Founder Emily Castro, who all agreed that recurring revenue in troubled times offers predictability — provided it’s handled adeptly.

Dealing with a highly perishable item — seafood — Castro said Fish Fixe responded to supply chain disruptions by outsourcing logistics and using new suppliers.

“We just had to pivot, and luckily the way we have our subscription service [set up], someone wasn’t relying on a certain product. Alternating items worked out. We have flexibility,” she said.

Beachly’s Tighe described his apparel firm’s supply chain snarls, noting that the company spent an additional $20,000 at one point to reroute a cargo container filled with merchandise.

“But trying to balance out the profitability aspect simultaneously, it’s been an intricate dance. It’s a fun time to be an entrepreneur,” he said.

For women’s “try before you buy” direct-to-consumer (D2C) fashion brand Wantable, it wasn’t so much unpredictable supply chain as it is the inability to predict which customers might not pay for their box.

Getz said rising adoption of single-use credit cards and a slew of new payment types can be dicey. “Customers are moving towards this notion of getting the opportunity to test or try on a product, in our case, before they make the purchase,” he said.

“That brings down the friction to getting the customer to take product, increases the friction on the risk of bad debt fraud.”

On that point, Bogosian noted that subscription platforms integrate tools like Sticky.io’s Transaction Select — “a negative database with tens of millions of cards in it of consumers who are more likely than not to charge back or to not pay for something. It takes a lot of these tools, and in the aggregate, they can all provide a very substantial difference for your business.”

See also: Experimentation, Personalization and New Features Fuel Subscription Optimism

Overcoming Price Pains

 The conversation turned to price increases and changes to product mix as the subscription commerce panelists talked about creatively overcoming an endless supply of problems to solve.

PYMNTS finds that 49% of D2C subscribers are motivated by better pricing and a guarantee that products are made by the manufacturer and not a knockoff or last-minute substitution.

Castro said Fish Fixe offers a curated box “on which we are able to control the cost, and then we have one where the customer is allowed to fill their own box. The price on that one obviously isn’t fixed.” Even so, it gives customer more control over box contents, thus its price.

The company is emphasized value and the health benefits of eating fish, “and we’ve had to limit some of our higher priced, or items that maybe are harder for us to get inventory on.” Fish Fixe also stopped paper mailers and switched to QR codes for promotions to cut marketing costs.

Fish Fixe also raised prices — a decision that most panelists were struggling with.

Bogosian said platform data from numerous subscription brands has led to several initiatives.

“An obvious one is lower acquiring costs of Mastercard, Visa, American Express. We also provide debit rails. We’re finding that about 50% of subscription transactions on our platform are debit.”

“If you can save another 50 basis points on a transaction by running those and having them routed, that’s also another way to pretty materially reduce overall costs.”

Tighe added, “There are these psychological pricing thresholds, and $99 is one of them. So, for us, when you go from two digits to three digits, when you’re trying to acquire a customer, even a $5 increase might hike your customer acquisition costs substantially where you lose the value.”

Put another way, price increases are not an option for some, and not an easy decision for anyone.

Beachly is handling pricing by “leaning into high-margin channels like eCommerce,” Tighe said.

“Our margins are great. We estimate that to be adding an extra $25 of revenue per customer per year. We also rolled out an add-on where they can add more products to their box before it ships. That’s adding an extra $16 of revenue per subscriber per year.”

For Wantable’s “try before you buy” boxes, Getz said “our approach recently has been focused more on driving up that AOV. What Kevin was talking about is key to us. If your costs are going up, 10% for labor or 10% for shipping, your rents are going up, your fulfillment center, whatever it happens to be, the best way to solve that is to get the customer to spend more with you.”

Wantable is pairing higher average order value with fewer shipments to further reduce costs.

Related: Subscription Commerce Conversion Index: The Exclusive Access Effect Edition

Swimming With Subscription Sharks

What one business can do with relative ease another cannot do at all. That’s where platform efficiencies and simple nontechnical solutions often perform best.

Fish Fixe even appeared on “Shark Tank” last November and, after a lively exchange, Lori Greiner offered $200,000 for a 25% stake. The firm took it — along with priceless earned media.

When a subscription brand has tweaked everything it can think of and hits a wall, Tighe said, “It’s an opportunity to take a step back and collect data and make sure that the assumptions you’re making are right.”

“If we’re leaning into certain value problems, make sure those are the ones that are subscribers do really enjoy.”

Wantable is turning to social commerce more, flipping the script on the D2C hustle of finding something on a retailer’s site then going on Instagram and buying direct.

“Now they will do the exact same thing, but that loops them back to our brand, ” Getz said. “So, 78&Sunny as an example is one of our brands. You can go to 78&Sunny and you can buy that product, but it’s produced by us and sold by us. We found that to be very successful as part of our strategy.”

The curated fashion firm also has a base of 1,500 to 2,000 Instagram influencers, Getz said.

Summing up, Bogosian added that “Flexibility for consumers is key.”

He cited merchants using subscription pause, swapping out items in a curated subscription box, substituting products, offering upsells at checkout, and “having very rich data on that consumer, not only what they’ve purchased, but what they’ve looked at on your site, being able to understand what some of their preferences and likes and dislikes are” is crucial this year.

See also: Fashion Subscriptions Pivot to Curation and Deeper Personalization as Boxes Evolve