Dive Brief:
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Monthly subscriptions of boxed goods from beauty products to pet supplies is a thriving area of retail, with a tricky set of logistics, according to the New York Times. My Subscription Addiction, which reviews subscription services, said that the number of companies listed on its website has grown to around 1,200, from 800 a year ago.
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In a subscription model, boxes of curated items like books, meals, or dog treats, sometimes full-sized, sometimes sample-sized, are delivered to consumers each month for monthly fees from $10 to $30 or so.
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Startups like Birchbox, a beauty-products retailer, or Blue Apron, which sends recipes and boxed ingredients, are also attracting significant investment funding.
Dive Insight:
At a time when Columbia House, the music-retailer based on catalog sales and monthly deliveries, has gone out of business after years of operation, subscription-based retail is actually thriving.
The approach is becoming so popular that even traditional physical retailers are starting to pay attention. Sephora recently launched a Birchbox-like beauty subscription called Play! by Sephora, at the same $10 per-month price as Birchbox.
But many purely-subscription businesses, whether larger scale startups or mom-and-pop operations, have found that starting the venture is a bit simpler than sustaining it. Birchbox, for example, is keen to move beyond its subscription sales of boxed samples to increase sales of full-priced products, and has moved into brick-and-mortar retail to help accomplish that.
Some such businesses also find it hard to maintain access to the sample size or discounted items that make the deliveries sustainable, an issue also encountered by deal site Groupon. That is, many businesses are happy to offer limited discounts on an occasional basis to attract new customers, but can’t keep that up and stay in business. And that makes it hard to fill boxes every month.
Plus, logistics can get wearying, with boxes needing to be packed and sent out so regularly.
Still, for those business that can find ways to make it pay, the monthly package approach does seem to have great traction with consumers.
“The main limitation on our growth is that we can only put together so many boxes ourselves,” Robert Madden, co-founder of OwlCrate, a monthly subscription of young-adult books-plus-accessories. “We’re still sort of in a state of shock about how this took off.”