By Georg Richter, OceanX
The subscription economy has been making waves since 2010,
when Birchbox debuted a subscription box that quickly gained popularity. Now,
the space holds fierce competition, with hundreds of companies vying for
customers across a wide range of industry verticals, from clothing to beauty to
meal kits. No matter the vertical, it’s clear that the retail world is
changing.
The emergence of direct-to-consumer channels means big-name
brands have to compete with the high expectations created largely by Amazon and
successful, digitally native e-Commerce brands such as Warby Parker and Harry’s.
In the evolving world of subscription retail, customer relationships are
crucial, and innovative companies need to develop forward-looking skill sets to
survive and thrive amid the competition.
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Tending To Technology
Tech has become quite a nebulous term, as almost any company
today can be considered a tech company in some regard, but that makes tech
talent all the more important. And in the case of subscription retail and
direct-to-consumer sales, technology is the backbone of the business.
Not only is technology the core of the marketing and
shopping experiences, but it also encompasses digital advertising, A/B testing,
retention marketing, shopping cart experience, payment processing, supply chain
and even customer service. Furthermore, tech skills are necessary when it comes
time to scale the entire retail experience.
Drawing Upon Data
Data, analytics and business intelligence are all key
ingredients for successful subscription brands. Pulling accurate
backward-looking reports is only the tip of the iceberg: Separating insights
from noise and then applying that data to inform decisions in as close to real
time as possible requires skill and effort.
Successful subscription businesses such as Stitch Fix mix tech with real people
to create a customer experience that sticks, but making that magic happen
requires a thorough knowledge of how to read and assess data. Pulling and
assessing data from every step of the customer experience with the brand and
then using that data to make tweaks to the business is crucial.
In today’s data-rich world, an astounding 43% of small businesses don’t even
track their inventories, the most baseline benchmark of record-keeping. For a
subscription business, this inexcusably lax attitude is not a viable option as
you will inevitably lose the connection with the subscriber.
Overseeing Operations
It’s one thing to launch a brand and ship a box of items out
to a small base of core customers, but it’s another matter to deliver different
orders on different cycles to hundreds of thousands of subscribers. For a
company to create a successful direct-to-consumer initiative, skilled
operations personnel will need to create efficient supply chains that deliver
boxes on time, but even that won’t be enough.
You can’t compete with Amazon’s delivery speed and price, so
you need to deliver a product that puts the Amazon “experience” to shame. There
is now an expectation that over time, the service will become more personalized
and customized, and you need a flexible operational structure in place to live
up to that expectation.
Mastering Marketing
Marketing is necessary for every business because brand
awareness attracts customers, but the subscription economy is unique in that it
requires a mix of acquisition and retention marketing. Creativity will be
vitally important in these roles, along with an understanding of the evolving
media landscape and the data chops to know which marketing channels generate
the highest customer lifetime values.
To acquire customers and stand out, you can’t just rely on
Google AdWords and Facebook. You need to constantly test, then be able to scale
and expand on channels that are working. Once you have a subscriber, the ways
you communicate with them, the unboxing experience, and the ways you foster a
sense of belonging to something special can be keys to extending his or her
lifetime value. Even something like customer service can be considered a
retention marketing role, as customer service is your best line of defense to
battle churn.
Leading For The Long
Haul
It’s no secret that it takes strong leaders to get everyone
rowing in the right direction. Leadership is key in the subscription economy,
as leaders’ informed, calculated decisions move a business forward. Make no
mistake: Company executives shouldn’t be the only leaders. For a brand to win,
each role needs to be filled by someone who is a leader in his space.
This goal can be accomplished by smaller companies and
startups with relative ease, but it’s much harder to implement in larger organizations.
Still, though all the other skills listed are important for a subscription
business’ success, leaders who are passionate about their customers’
experiences are at the heart of the subscription economy.
The subscription economy and new direct-to-consumer sales
channels are shaking up the retail world, and many companies with entrenched
business models will find themselves losing ground to newcomers in their
spaces. On the other hand, for those that can adapt and acquire some of the
skills necessary for success, the rapid changes represent an opportunity to
reach new customers and build lasting relationships.
As companies connect with their customers through a
subscription model, they can gain insights from this data-rich environment that
can benefit all aspects of their businesses, including traditional retail. For
modern businesses, direct-to-consumer is a no-brainer.
Georg Richter is founder and CEO of OceanX,
which is reinventing the membership economy by transforming
customer-brand interactions and providing a powerful engine for subscriptions. Richter
specializes in implementing next-generation technologies and innovative software
solutions that transform industries.
