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November 16, 2022

Recession? Inflation? The global subscription box market is still thriving!

Ben Malka
Growth and Operations Manager

Everything is considered to be “a roller coaster” these days. How’s business? It’s a roller coaster. How are the growth numbers looking? It’s a roller coaster. And let’s not forget one of the biggest roller coasters that has been in our faces for the past two years—the state of the global economy and its after effects.

It goes without saying that numerous industries were affected by the recession, inflation, and all the other unpleasantries that stem from volatile economies. But can you guess which vertical managed to remain rock solid in terms of growth? You guessed it! The subscription box market.

The numbers speak for themselves

As stated in a report by Recharge Payments, in 2020, new subscribers flocked to the subscription market at unprecedented rates, leading to dramatic year-over-year growth across verticals. In 2021, subscriptions became more than something new to try—they became a reliable part of consumers’ daily lives.” Additionally, through the course of 2021, merchants of all sizes and verticals saw their subscribers spend more and stay on longer, increasing average order value, customer lifetime value, and monthly recurring revenue.

Sure, there are some naysayers who would argue that the beginning of 2022 saw “the great unsubscribe,” as consumers cut their subscription spending to combat rising inflation. However, the truth of the matter is that despite such claims, the global subscription box market is thriving! By how much? Well, according to a report by The Business Research Company, it increased from $72.91 billion in 2021 to $120.04 billion in 2022. And it is expected to reach $904.2 billion by 2026. Sweet!

So why is all this growth taking place? There are a few factors that came into play here. 

The reasons behind the growth of the subscription box market

Let’s start with some background info for context. 

The Russia-Ukraine war majorly prolonged the chances of speedy global economic recovery from the COVID-19 pandemic. Instead (focusing on the business-side of things) the war led to economic sanctions on multiple countries, a surge in commodity prices, and supply chain disruptions, affecting many markets across the globe.

One would expect consumers worldwide to really cut down on their expenses in such turbulent times, but instead the exact opposite seemed to have taken place as their behaviors and expectations changed. And in turn, subscription box companies also upped their game to keep their customers interested and wanting more, all while casting a wider net to attract more customers.

Changes in consumer behavior and preferences

There are a ton of reasons why consumers globally decided to stick with online shopping, and subscription options. 

For starters, it increases convenience, reduces reliance on store visits, and lowers travel costs. This approach also provides detailed information about products and services, enables price comparisons, and there’s simply more availability in a wider range of products (which tend to also be better products.) No crowds. No lines. Can’t go wrong! And the whole discovery element is also pretty darn exciting! 

As a side note: all this continued activity led to a slew of major $$$ mergers and acquisitions. For example, Barkbox (a subscription box for dogs), merged with the Northern Star Acquisition Corp, valuing Barkbox at $1.6B. The Hut Group acquired Cult Beauty for $275M, and also acquired Brighter Food for $43M.


Changes in company growth strategies

To add to all this excitement and further propel their growth, subscription box companies diversified their growth strategies, while phasing out the out-of-date ones. These newer strategies included:

Offering occasional discounts and trials for new customers

This method allows companies to attract new audiences while satisfying existing customers. As we elaborated on in a previous post, with great loyalty schemes comes great results. I recommend you check that post out, for pointers on how to boost the success of loyalty programs.

Capitalizing on the curated box model

The curated box model has become a hit with consumers because they can customize according to their preferences. It is easy to build customer loyalty with this method. Yes, I did just mention loyalty again, because loyalty focused marketing is sustainable marketing. And it goes without saying that sustainable growth is profitable growth. 

Using predictive AI to amplify user acquisition strategies

All that talk about focusing on loyalty comes down to this. The insights from loyalty focused marketing efforts help companies gain a better understanding of their CAC/LTV ratio. There is great power in understanding this metric, because it enables companies to find the best way to get the most out of their budget to drive the best possible results. By focusing on serving existing customers better, their LTV increases. This in turn gives AI-based predictive marketing solutions a greater pool of data to work with in terms of identifying attributes of profitable customers to attract more like them. In turn, this leads to greater profitability. The largest data-driven subscription box brands, such as the likes of BoxyCharm (owned by Ipsy) decided to tap into the power of AI to take their growth campaigns to the next level. You can read more about that here.

The only way to go is UP!

Recession? Inflation? Oh please, that’s not stopping subscription box companies from taking over the world! According to research by iMarc Group, top subscription box companies, such as Birchbox, Blue Apron, Dollar Shave Club, Glossybox, and Harry's, are also introducing long-term subscription services for developing customer loyalty along with catering to specific consumer tastes and preferences. This is obviously all in an effort to further bolster their growth. And of course—as customer acquisition becomes increasingly difficult and expensive due to tight competition stemming from all the crazy complications from ad networks, focusing on customer retention is crucial for subscription box brands to save budget and maximize profitability. 

If you and your team are looking for a quick and easy way to keep track of the profitability of your growth strategy, you need to know that it all comes down to the ratio between how much money you have available to expand into your marketing, and how long it will take you to see profit on every dollar that was invested. Here’s the formula for that:

Marketing Expansion Multiple (Current Marketing Spend) = Available Marketing Capital / budget till recycling (Current Marketing Spend)

For even more actionable growth marketing insights to get on the fast track to exponential growth for your subscription box company—check out the posts on our blog!

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