As direct to consumer wine sales throughout the US continue to grow at a pace of 10-25% year over year, we know that wine club competition today is more fierce than ever. I encourage direct wine sales team members to gather together and update strategic sales & marketing plans by incorporating what we know about competition today. Here are some questions to consider:
- How is your wine brand remaining relevant to consumers within your respective region as well as online customers throughout the nation?
- Is it time to add a subscription-based box model for out-of-state brand loyalists to better engage?
- Do your club packages include curated or interactive experiences that are refreshed on a regular basis?
- Is it time to survey your most loyal members to better understand how they would like to stay engaged?
- Is time to add a seasonal theme to current club releases so that membership options are more engaging and exciting?
Wine consumers have an incredible amount of choice when it comes to membership programs and subscription services. Connecting brand loyalists to a variety of loyalty programs is no longer a straight-forward process as connected consumers are overwhelmed with a plethora of offerings from brands they admire.
I have just wrapped up an online audit of the most popular online subscription-based services along with top wine club membership programs and thought I would share some of my findings. Take a look at the article shared by McKinsey & Company below and also consider attending the Wine Club Management Webinar taking place on May 3rd at 11:00 a.m. PST to get the Top 5 Tools for Success. This hands-on web training is presented by Dina L Northcutt, a former DTC Programs Coordinator at Chateau Montelena.
Thinking inside the subscription box: New research on e-commerce consumers
“The subscription e-commerce market has grown by more than 100 percent a year over the past five years. The largest such retailers generated more than $2.6 billion in sales in 2016, up from a mere $57.0 million in 2011,” according to a consumer survey study released by McKinsey & Company February 2018. The research shows that 15 percent of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis, frequently through monthly boxes.
To better understand the drivers of the subscription e-commerce market, McKinsey & Company surveyed more than 5,000 US consumers. The goal was to assess the overall penetration of e-commerce subscription services and the demographics and buying behavior of their consumers. McKinsey & Company also wanted to understand why consumers subscribe and why they cancel their subscriptions, an overriding worry for players in this space.
E-commerce subscribers tend to be younger urbanites with money. Compared with the general US population, they are more likely to be 25 to 44 years old, to have incomes from $50,000 to $100,000, and to live in urban environments in the Northeastern United States. These subscriptions particularly appeal to women, who account for 60 percent of them. Male shoppers are more likely than women to have three or more active subscriptions—42 percent versus 28 percent, respectively—suggesting that men particularly value automated purchasing and the ability to limit store trips.
There are three broad types of subscriptions: replenishment, curation, and access. Replenishment subscriptions allow consumers to automate the purchase of commodity items, such as razors or diapers. Curation subscriptions seek to surprise and delight by providing new items or highly personalized experiences in categories such as apparel, beauty, and food. Last, access subscribers pay a monthly fee to obtain lower prices or members-only perks, primarily in the apparel and food categories. Curation services, with 55 percent of total subscriptions, are by far the most popular, suggesting a strong desire for personalized services. Replenishment accounts for 32 percent of subscriptions and access subscriptions for 13 percent.
Many of the most popular services (including Birchbox, Dollar Shave Club, and Ipsy) charge relative low monthly fees of $10 or less. Others, such as Blue Apron and Stitch Fix, have higher fee structures and can therefore generate higher revenues on a smaller customer base; for example, Blue Apron’s average order value was $58 and its average revenue per customer was $245 in the third quarter of 2017.
To continue subscribing, consumers (particularly curation and access subscribers) expect personalized subscriptions to become more tailored over time: 28 percent of both groups said that a personalized experience was the most important reason for continuing to subscribe. Curation subscribers also want to be surprised and delighted and to feel they are getting good value for the money. In contrast, access subscribers emphasize convenience as a reason to subscribe, in addition to personalization.
SO WHAT DOES THE FUTURE HOLD? The good news is that subscription e-commerce consumers can be sticky once they find a service they like. Replenishment services have particularly high long-term subscription rates: 45 percent of members have subscribed for at least one year, about ten percentage points higher than the level for curation or access services. The companies with the highest long-term subscription rates include Amazon Subscribe & Save, Dollar Shave Club, Ipsy, JustFab fashion, and Loot Crate.
TIPS FOR SUCCESS? The subscription e-commerce market is growing quickly. For consumers, subscription products or boxes offer a convenient, personalized, and often lower-cost way to buy what they want and need. Companies in the space must develop great experiences (as opposed to great subscriptions) to avoid high churn rates and to accelerate both growth and profitability.
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