What’s Happening to Subscription Services?
The pandemic changed the way people live their lives. With many businesses shut down and people afraid to go to traditionally crowded spaces like stores and restaurants, we had to find new ways to shop. Amid the difficulties of 2020, new ways of interacting with the world emerged and some ways grew unexpectedly fast, including the subscription services market.
These services, which include streaming platforms, subscription boxes, product subscriptions, media and publications and memberships, saw an 84% increase in subscribers throughout 2020, with each segment experiencing record numbers, according to the Subscription Trade Association.
Subscription services have long been associated with publications and streaming services but our interest is mainly in the explosion of subscription offerings in food and beverage and consumer packaged goods, household staples like detergents, coffee, baby formula, pet food and more. Our new survey of more than 1,100 U.S. consumers allowed us to track some telling subscription services trends for these types of home staples. Download the 2021 Connected Packaging Survey report.
Here’s what we found:
Subscription Service Adoption Skyrocketed During the Pandemic…
Less than half of participants affirmed using subscriptions for household staples pre-pandemic (when the first survey was conducted in 2020), whereas these types of services saw a big increase in 2021. Nearly seven in 10 participants say they now purchase certain household staples through subscriptions, showcasing 48% growth year-over-year.
Subscription Service Adoption for Household Staples is Growing
There are several potential reasons for this increase. First, many people may have been less inclined to go shopping in person because of fear of infection or long wait times as stores attempted to limit occupancy. That led to a spike in subscription services across all product categories, which included personal care, food and beverage, home care, pet care, medical goods and office supplies.
Furthermore, with schools and daycares closed, parents faced more demands on their time. Working parents especially found themselves strapped for time as the demands of child-care eroded the hours that could typically be safeguarded for focus on work (and vice versa). As a working parent myself, I sought out anything that could save some precious time given to household chores and errands, and this reasoning remained even after I acclimated to the risk of infection from in-person shopping.
In fact, approximately 30% of Jabil’s survey participants live in a household with children below the age of 12. They are also more likely to purchase household staples through subscriptions across all categories, with almost 80% affirming that they use subscription services for household staples.
Households with infants may be one of the biggest demographics for subscription services. More than 75% of them currently use subscriptions for household staples. Compared to the average survey participant, this audience is 41% more likely to use subscriptions for food and beverage, 37% more likely for home care and 24% more likely for personal care goods. It should also go without saying that they are most likely to purchase infant care goods through subscriptions. A new addition to the family is a lifestyle shift, making space for new consumption habits. CPGs that can capitalize on these changes and build a relationship with this demographic stand to benefit in the long-term.
Compared to all survey participants, households with infants are...
…But Satisfaction with Subscription Services Decreased
Despite the increase in subscription service adoption for household staples, we did notice a decrease in satisfaction with these services. In last year’s survey, nearly a quarter (24%) affirmed that they had no complaints about subscription services for household staples. This year, the percentage of fully satisfied customers have fallen to just 10% of users. This means subscription services for household staples have seen a 58% drop in fully satisfied customers year-over-year.
Fully Satisfied Subscription Service Users for Household Staples
The reasons for this aren’t fully clear, but there are some possible drivers for this drop in satisfaction with subscription services. During the pandemic, people took up subscriptions not necessarily because they became more attractive, but because the alternative of in-person shopping became precipitously less attractive. Consequently, many of the consumers flocking to subscription services would not be “subscription enthusiasts,” per se.
That wave of new participants could be more inclined to dissatisfaction with certain aspects of the experience. As new products and services cross the chasm from eager early adopters to pragmatic mainstream consumers, we might expect to see a drop in enthusiasm over time; in this case, accelerated adoption may have accelerated this change.
How to Address Consumer’s Concerns about Subscription Services
There are several factors holding consumers from using subscription services for household staples. According to our survey, the biggest dislikes of consumers who use subscription services are that the services are not easy to cancel, causing them to over-buy or that products are more expensive.
Here are ways CPG brands can address these concerns:
“Subscription Services Are Difficult to Cancel”
One of the primary factors holding consumers back from subscription services is the fear that it will be difficult to cancel. More than two thirds of our survey participants list this as their top concern. Consumers don’t want to waste time calling customer support or searching a brand’s website if a service doesn’t work out. They also don’t want to overbuy. Having one extra bottle of laundry detergent is handy but no one needs (or wants) five.
Brands can alleviate this fear firstly by making unsubscribing or adjusting the frequency of their deliveries easy; consumers shouldn’t have to get on the phone or send a letter. It should be a few clicks on their computer. To supplement this, CPG brands should offer a thorough onboarding process that explains exactly how to cancel or adjust the subscription, and that inspires confidence in consumers that they will receive just the right amount of product.
HelloFresh is a great example of how to do this well. They explicitly state that it’s easy to pause or cancel the service, and they offer a simple questionnaire up-front so that consumers can feel assured that the subscription will send the right amount of food, and provide them with options that meet their preferences.
Onboarding is your opportunity to address a lot of the things that people are scared of, including making sure you're getting product to them at the right cadence, clarifying how pricing works, how to pause or cancel. Many customer concerns can be decreased simply by creating a great customer experience from the get-go.
When it comes to overextending free trials, consumers may not have to worry much longer; governments are stepping up to make it easier for people to unsubscribe after a free trial ends. A bipartisan group of lawmakers in the U.S. recently introduced the Unsubscribe Act, which would require sellers to allow customers to cancel a subscription in the same way they signed up; require sellers to provide notice when a free or reduced-price trial is about to end; and to provide customers with a clear understanding of the terms of the contract. Additionally, sellers wouldn’t be able to automatically transfer a free trial customer to a contract longer than one month.
“Subscription Services are More Expensive”
The second-top concern survey participants listed was that subscription services are more expensive—which a third of survey participants affirm. While this may be perception, it isn’t necessarily true. CPG brands and retailers can use subscriptions to offer savings to loyal customers.
Let’s say that someone buys a subscription for laundry detergent. That is more profitable for the manufacturer of that detergent, because they don't need to spend on advertising or securing shelf space. They can use cheaper packaging because they don't need to create romance packaging to attract the consumer’s attention at the store. For these reasons, the margins can be higher in e-commerce than brick and mortar retail.
Subscriptions can also help companies with supply chain prediction and management. With subscriptions, demand is more predictable. For companies that have a large, well-established supply chain operation, securing predictability in demand through automated repeat purchases can make distribution cheaper. They can pass those savings down to the consumer.
That said, the value and expense of the subscription depends on the service and commodity offered, so some subscriptions may command a higher price point. For instance, I've done coffee subscriptions where I know I'm paying a premium, but it’s worth it to me; if you can promise me I will never not have coffee in my house, I'll pay a little extra.
Customers are willing to spend more for greater value, so if brands can clearly communicate the factors that make them worth the price, then it can help consumers reconcile the expense.
CPGs Are Finding Their Sweet Spot with Subscription Services
All kinds of markets are starting to offer subscription services – from socks and underwear to zero-plastic wooden Montessori toys. But how many of those do you actually need?
The real advantage of subscription services is when consumers’ favorite brands intersect with household necessities. There are some things – like baby food – where consistency is an advantage. Once parents find a brand of food they like, they tend to stick to it, and they need to keep their pantry stocked. I think those kinds of items are great candidates for this automated reorder service (e.g., subscriptions), whether that's time- or usage-based.
Subscriptions can also be a more sustainable option, which appeals to millennial and Gen Z consumers. First, companies can send concentrates. For instance, if you have a durable dish soap pump, businesses don’t need to send a whole new bottle of dish soap; that's 95% water by weight. Instead, they could send a tablet or a concentrated pouch the consumers can add water to. Plus, brands can cut out the excess material often involved in romance packaging since these products won’t have to compete for attention on a nickel-plated shelf with other products.
This is a win-win: the consumer is happy to be doing something that's more sustainable and not having to dispose of extraneous packaging and the brand is saving money on shipping while taking steps toward corporate environmental responsibility.
All brands can find a place in the market by offering a unique value proposition. For instance, brands leveraging subscription services can mix things up to delight and surprise the customers. With products like fabric softener, brands can send consumers seasonal scents if the customer expresses interest in that option. Luxury items especially can leverage this technique. For example, my husband and I used to have a beer subscription where we just ticked off the types of beer we liked, and the company would surprise us with fresh, curated brews every month.
Making the Jump to Usage-Based Auto Replenishment
Right now, many subscription services operate based on set time intervals. For example, BarkBox subscribers receive a box with new dog toys and treats every month. But for some products, it makes more sense to arrange delivery based on usage, through connected packaging.
Usage-based auto replenishment benefits the customers because it can address several of the causes of their dissatisfaction with subscriptions. It ensures they don’t run out of a product if they use it up before the prearranged time for a refill or end up with a stockpile of too many of the same product if the timing isn’t right.
Auto Replenishment Use for Household Staples is Gaining Steam
It also benefits the brands because it gives them fresh data on consumer usage. It provides information beyond the point of sale, such as how consumers are using the product and the quantity they use in a given time period. With insight into user data, a brand can analyze the consumer habits across various demographics, regions and time zones and then leverage this information to predict demand, refine product design, test new features or lines or perhaps drive special marketing promotions or offers.
The way people shop will continue to change. Brands aren’t content with impersonal interactions; they want to build a relationship with customers and retain loyalty. Meanwhile, consumers are seeing the advantages of automatic reordering, and these will grow as brands improve their subscription services.
Download the 2021 Connected Packaging Survey Report
Insights from over 1,000 U.S. consumers on their perceptions and attitudes on connected packaging, subscription services, auto-replenishment, data privacy and more.