Inside Outdoor Magazine

Inside Outdoor | SPRING 2018 38 BACK OFFICE and baby items, cosmetics, contact lenses, video games, Harry Potter toys, survival products, lingerie and adult toys, even soil and moss. Large and traditional brands and retailers have jumped into the game, including P&G (Gillette on Demand), Sephora (Play!), Walmart (Beauty Box) and Starbucks (coffee and tea). Unilever acquired Dollar Shave Club in 2016 for $1 billion and grocery chain Alb- ertsons shelled out $200 million for meal-kit company Plated. All the while, about 13 percent of the subscription box ventures tracked by subscription- related website My Subscription Addic- tion have gone un- der, for various rea- sons. Others have experienced a reversal of fortunes, such as food kit provider Blue Apron, which saw its stock price fall 70 per- cent soon after its June 2017 IPO. Such results have led some industry and financial analysts to argue that the market is oversaturated, due to the low barriers to entry, that the ap- peal of the services is “faddish,” and the business model tough to scale. Chief among the challenges facing the market, says McKinsey & Com- pany, is customer retention. Overall, the management consulting firm found that nearly 40 percent of e-commerce subscribers eventually cancel their subscriptions, with rates similar across replenishment, curation and access subscription services. What’s more, many consumers who churn do so quickly, suggesting that companies should be careful not to overinvest in free tri- als or heavy discounts unless these promotional investments have a clear payback. More than one-third of consumers who sign up for a sub- scription service cancel in less than three months, and more than half cancel within six, show McKinsey & Company figures. The meal-kit category seems to have particularly high rates of cancellation within the first six months (60 to 70 percent and higher), likely reflecting highly competitive prices and broad similari- ties among the leading players. For instance, HBR estimated that around 70 percent of Blue Apron’s subscrib- ers churn out after six months. “These businesses depend on their long-term relationships to provide predictable revenue growth and deep insights into customer behavior to per- sonalize the experience,” warned McK- insey & Company. “Churn can dramati- cally undermine their viability, since the cost of replacing lost subscribers could not only make it difficult to meet their growth objectives but also quickly drain their cash reserves.” The top driver of can- cellation across all three types of subscriptions is not receiving adequate value for the money, named by 29 percent of churning curation and access services sub- scribers. But general dissat- isfaction ranked fairly high across several criteria across all three categories, “which is a hard- er negative to mitigate than tweaking pricing or changing the selection,” argued HBR. And make no mistake, it can be difficult for subscription e-commerce companies to acquire news consum- ers. On the acquisition side, only 53 percent of consumers even know about one of the top services, show McKinsey & Company findings, and conversion can be weak: only 55 Most Important Driver of Cancellation of Subscription Box Service Sub Type Prefer to buy as needed Found better subscription Dissatisfied with product/experience Lack of flexibility Value for the money Replenishment 24% 11% 25% 19% 20% Curation 20% 10% 27% 14% 29% Access 25% 9% 25% 12% 29% Source: McKinsey & Company Cairn delivers a box of “curated for you” outdoor gear and goodies on a monthly or quarterly basis.