How is the impact of coronavirus connected to the emerging subscription box industry?
By Esha Deokar
Subscription Boxes: An Overview
It has been a rough couple months for many people stuck at home right now. Whether or not you are living with someone at-risk, going outside, even for essentials has become a tricky process. While some stalk grocery stores at 6 A.M., gloves in hand, others prefer or even need, to stay at home to receive their food. And it’s not only food! For either monthly or annual fees, artists, bookstores, and entertainment companies are sending consumers goods and services right to their doors.
Subscription services, however popular at the moment, are not a new phenomena. In the early 2000s, the business began to take off, one of the stars being the popular company Birchbox. Birchbox is a subscription box for the makeup and beauty lover, allowing consumers to try different sample-sized products for a recurring cost. As the business slowly gained more traction, other areas of business began to pour in. For example, Lululemon began to offer subscriptions for both clothes and workouts ––even throwing in shipping –– for an annual fee of $128.
Before the coronavirus, the business model was relatively simple. Alex Barseghian from Forbes Magazine breaks it down into two elements. First, personalization for customers sat at the forefront, as companies exploited the convenience of home delivery to add to the growing online shopper presence seen in the last decade. Additionally, companies began to build on somewhat of a sunk cost fallacy; if an existing in-store company offers a subscription deal, the consumer may feel as if they need to shop at the store even more in order to make the subscription defensible.
Delivery and Distance
In the times of the coronavirus, however, the business model has gained even more traction in the field. A mere month brought Heart + Honey, a subscription service that offers adult toys, a 12% rise in overall subscriptions. While the circumstances may be dire and some businesses are certainly struggling due to it, the subscription industry has been rapidly improving. The National Retail foundation analyzed the disruption that the industry is causing, positing the idea that it may be –– similar to the frenzy at most grocery stores right now –– a short-lived fad. It is important to note that most of the people who are using these services are relatively affluent, as delivery costs and other expenditures may be too much for some.
Two of the services that are starting to plateau, or rising much slower, such as those like Heart + Honey, which specialize in things such as adult toys or makeup. Two of the fastest growing subscriptions: food and the internet.
Most online food service businesses are garnering a much needed increase in sales and profit. The breakout star of food subscription boxes, Blue Apron, was steadily decreasing until the outbreak hit this March. Brad Tuttle, from Money, reported that the company’s stock price dipped below $2.30 earlier this month. However, as demand began to increase once more, Blue Apron stock hit $16 in late March. The monumental increase, which is due to unusual circumstances, is acting as quite a boon for these previously plateauing companies.
Additionally, Freshly has delivered over 1.5 more million meals in March from February, showing the drastic increase in demand from consumers. Companies such as Freshly and Blue Bottle are capitalizing on the panic and fear that most Americans feel when they venture outside in public.
Furthermore, as demand increases, companies are slowly raising their prices. Shipping costs usually stay around $10 dollars for each order, which ends up pricing many people out of the industry. Still, even though these companies continue to raise prices, it does not seem to sway consumer volume. Amazon Fresh has consistently reported no available delivery times due to the high volume of consumers looking to purchase food and groceries remotely.
Even though the internet does not carry the same niche as a brand new box delivered to a doorstep, online entertainment companies are also seeing a trend in their subscription services. Nat Ives, from the Wall Street Journal, reports on the increase that many streaming services are experiencing as of late. For example, paid subscriptions for television rose by 32% in mid-March, as people try to shift pieces of their lives onto an online model.
Additionally, meditation apps such as Headspace and Breethe, are offering discounted or free services for healthcare workers. JAMA Network conducted a survey on healthcare workers in China who were actively involved with the coronavirus. They found that a majority of their participants –– 71.5% –– reported distress, while 50.4% reported depression or depression-like symptoms. As such, even though the subscription business seems to be booming as of late, it is the responsibility of companies to actively price their products fairly in such a difficult time, not only for the American consumer, but for the world.
The New Normal: Is This Long-Lasting?
Many questions remain regarding the sustainability of the subscription box model. Will it last? When will people return to in-store businesses? Do companies have the right to price high based on their revenue and profits? It goes to show that the current pandemic has brought forth many pressing economic questions that seem quite unprecedented. While a large factor in the future of this market lies in the future of our stay-at-home tendencies, the current popularity of such services might propel this market to a regular among post-pandemic American households. □
- “Subscription Box Business Model” Subscription Commerce Insider. Retrieved from http://subscriptioncommerceinsider.com/
- Barseghian, Alex. (2020). “What’s Behind the Rise of the Subscription Model?” Forbes. Retrieved from https://www.forbes.com/sites/forbestechcouncil/2019/08/12/whats-behind-the-rise-of-the-subscription-model/#756c65a935c3
- Ives, Nat. (2020). “From Adult Toys to Business Software, Coronavirus Is Rearranging the Subscription Landscape. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/from-adult-toys-to-business-software-coronavirus-is-rearranging-the-subscription-landscape-11585692808
- Soltes, Fiona. (2020). “The Status of Subscription Boxes.” National Retail Federation. Retrieved from https://nrf.com/blog/status-subscription-boxes
- Tuttle, Brad. (2020). “Coronavirus and Meal Kit Delivery Subscriptions: What to Know About Blue Apron, Home Chef, and More.” Money. Retrieved from https://money.com/coronavirus-blue-apron-meal-kit-delivery/
- Umoh, Ruth. (2020). “Meditation Apps Like Headspace Are Offering Free Subscriptions to Healthcare Workers Amid Coronavirus Pandemic.” Forbes. Retrieved from https://www.forbes.com/sites/ruthumoh/2020/04/07/meditation-apps-like-headspace-are-offering-free-subscriptions-to-healthcare-workers-amid-coronavirus-pandemic/#4eab0d2d2279
- Lai, Jianbo. Ma, Simeg. Wang, Ying. (2020). “Factors Associated With Mental Health Outcomes Among Health Care Workers Exposed to Coronavirus Disease 2019.” JAMA Network Open. Retrieved from https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2763229
- Image source: Freshly. Stamford Advocate. 2020. Photograph.