Before investing your capital, you must establish that a trending business idea isn’t just a fad. Find out if and why people actually buy subscription boxes.
There is a subscription box for nearly everything these days. You can find subscription boxes for:
- Dietary staples like milk and meat,
- Treats for dogs, parrots, and chicken,
- Bizarrely collectable stuff, like animal skulls, claws, and teeth,
- Things you would never think to buy yourself,
- Substances you could get arrested for in Kenya, like marijuana,
- Face masks for people intent on staying safe beyond Covid,
- Artisan hot sauce, with boxes chosen on heat preference.
It’s not hard to see why the subscription business model is so attractive to entrepreneurs and why so many established businesses are pivoting to it. It allows you to collect recurring payments, which solves the age-old struggle of getting your customers to buy again.
In a competitive business environment where it costs 5 times more to attract a new customer than to retain an existing one, getting the same customers to buy again month after month is the ultimate sign of a healthy, growing business.
But do people actually buy subscription boxes? Which consumer segment is most likely to buy a subscription box? What attracts people to subscription services, and would you succeed if you started a subscription box company in Kenya?
Let’s find out today by reviewing the global statistics and investigating the psychology behind subscription boxes.
Do people actually buy subscription boxes?
Statistics show that subscription boxes are increasingly becoming the preferred way to buy consumer products online. The global subscription box market will surpass the $20 billion mark by 2025, with the food and drink category leading the way at 30% of sales.
While $20 billion is a lot of subscription boxes, it’s not taken a long time to get here. For the past 5 years, the subscription e-commerce market has grown at a rapid rate of 100% per year.
It’s worth noting, however, that North America and Europe account for more than 70% of the global subscription e-commerce market. It is a fair assumption that the remaining 30% of the market is dominated by the Asia-Pacific e-commerce powerhouses Japan, China, Australia, and South Korea.
By comparison, Africa’s share of the market is negligibly small. That’s not to say the subscription business model cannot work on the continent. If anything, it shows that the model is an untapped opportunity, especially considering that Africa’s consumer market is predominantly young and has a growing middle class.
Who is most likely to buy subscription boxes?
Subscription boxes are most popular with younger consumers, with those aged between 25 and 34 making up 22.9% of all subscription box subscribers.
One of the main reasons why buying by subscription appeals so much to young adults is they have less disposable income to spend on large lump sums on high-ticket purchases like houses. Buying a subscription allows them to pay monthly and may help them save money through the discounts subscription companies typically offer.
Younger professionals also have less disposable income due to the economic strain of childcare, healthcare, and other costs of raising a young family.
Because they lead such busy lives, young professionals also have less time to shop for all their needed products and services. Subscription services help consumers discover new products and offer the convenience of having groceries and personal care products they love and need delivered to their door every month.
The mental energy expended drawing up shopping lists alone can be too much for parents juggling the competing demands of a career and a young family.
A subscription box offers simplicity and predictability and can be tailored to your specific needs. It can also provide needed advice on recipes and ways to complete common chores faster and provide a timely surprise in the mail once every month to break the monotony of work and life.
Young people may be the most likely to get on board the subscription box train, but they are not the only ones. Older people can also see many benefits of buying what they need through a subscription. Let's now look at why people are generally drawn to subscription boxes:
Why do people prefer subscriptions?
For those with money to spend, shopping has psychological and therapeutic value. But for those with less time and money to spend on a trip to the shopping mall, there is no such thing as retail therapy.
For the reasons we will cover below, many consider the convenience of having your shopping done for you and delivered to your doorstep every week or month to be more therapeutic.
Here are some psychological motivations people have when signing up for an automated shopping service.
1. Personalised experience.
Subscription boxes cater to subscribers' specific needs and interests. To deliver personalised experiences, subscription companies collect data on customers' needs, tastes, and interests. This data allows them to choose subscription box items according to what their subscribers like and need.
Consumers develop a strong attachment to brands that get them. They love it when a company shows it understands and anticipates their needs, is willing to meet them with curated products and content, and engages with them through personalised marketing.
Subscription companies in the personal styling and beauty niches are leading the way by sending subscribers custom-fit clothing and custom-made fragrances.
Video streaming companies like Netflix also use their subscribers' data to recommend movies and shows based on watch history and deliver more personalized experiences. It’s no surprise then that 77% of customers expect personalisation within their subscriptions.
2. Economic inclusiveness.
Consumers are always looking to shave a few shillings off their bills. They will consider any offer that promises to save them money and make them feel economically included. This is the human trait direct-to-consumer business models try to exploit.
Subscription companies market products directly to consumers, skipping middlemen, which allows them to charge lower prices. The products they include in their subscription boxes can cost less than half of what their customers would pay at the local supermarket.
Research shows that 28% of subscription box businesses offer a discount for the first box a customer purchases. While many can absorb these discounts, many have no choice as consumers have grown to expect them and, thus, will not sign up if you don’t offer them one.
3. Exclusiveness.
No one likes to wear the same shirt five other people at the office wear. We prefer to wear and use products others can’t easily find. At the same time, very few of us have the time and resources to source these products, which is where subscription box companies' curation services prove their worth.
4. Reward uncertainty.
Surprise boxes, where you receive boxes with mystery items every month, give subscribers something to look forward to every month. It adds excitement to our lives, even though some of the items we receive may not be to our tastes.
Some consumers would prefer the uncertainty that curated boxes offer than the predictability of receiving the same items every month. While the reward of a curated subscription box is predictable, what comes with each box is less predictable.
5. Paradox of choice.
Having a few options is good, but too many can make it hard to choose. This is why shopping online can lead us down the internet rabbit hole of wasted time with very little shopping done.
Subscription boxes solve the decision paralysis we face when we shop for things online by identifying the products we need and sending them to us at a set frequency. This is the reason why 55% of subscription boxes are curation-based.
By giving them data on our needs and tastes, we allow them to customise boxes according to the products and services we need and prefer.
Will the subscription box business take off in Kenya?
Convenience is a universal human need, even though how we deliver it may differ between cultures and according to our level of connectivity and e-commerce adoption.
Consumers in Kenya, therefore, enjoy the convenience that subscription boxes offer, perhaps more than their counterparts in Europe and North America.
What may also differ is how much Kenyans are willing and able to pay for that convenience. The market may also need to be educated on the benefits that subscription boxes offer. The Kenyan consumer is smart enough to recognise value when explained to them.
The subscription box model works for most consumer products and can be implemented by new and existing businesses. An example is a butchery that can offer a subscription box service where customers can choose between a custom and curated box.
With a custom box, customers can select meats and cuts they want you to send them every week. A beef box can include portions of brisket, t-bone steak, sirloin steak, and other steaks ground into mince.
On the other hand, a curated box is created to surprise customers with cuts and meat types they don’t ordinarily buy, like lamb, goat, rabbit, pork, smoked sausages, and cured meats. There are many people for whom such a subscription box can be very appealing.
Your success with a subscription box business will depend on how well you understand your target customer’s needs, tastes, budget, and style. This lets you personalise the customer experience and choose box items they will likely enjoy enough to maintain their subscriptions long-term.
Ready to take the plunge with your subscription box idea? You will need subscription software that integrates with a reliable payment gateway.
Intasend provides the software and payment gateway that businesses in Kenya need to automate billing and collect recurring payments from customers. Our subscription software is designed to make it easy to create and customise subscription plans according to your business needs and customer preferences.
Sign up for an Intasend business account to integrate the Intasend subscription software on your website and enable subscription selling in your business.
