As the holiday season approaches, retailers are looking for as many ways possible to generate revenue and increase customer acquisition. And consumers are looking for inspiration for gifting ideas. One effective strategy helping retailers dominate the holiday season is offering subscription products and services as gifts.

Subscription services have been exploding in growth over the last few years. Consumers are also becoming more interested in gifting subscription boxes/services. In 2019, subscription services were up 2 percentage points over the holiday versus in 2018, according to NDP.

In addition to their growing popularity amongst consumers, gift subscription services offer a multitude of benefits and opportunities to retailers, such as introducing new customers to their products and services, increasing customer lifetime value (LTV), deepening customer relationships, and providing new customer behavior data and insight. This makes them a great idea to introduce not just for the holiday season, but beyond.

Here’s a look at how you can take advantage of a gift subscription service for your retail business.

Choose a subscription service that will pique customer interest

When you think about what type of subscription service you want to offer, it’s important to think about both the products and services you have to offer as well as the trends you’re seeing in consumer behavior and shopping patterns.

For instance, especially among Gen Z and millennials, there’s been an increasing focus on buying experiences over products, and this trickles down to how they think about gift-giving. “Some of the most popular categories that we’ve seen over the last couple of years are food subscriptions, followed by beverages and electronics, health and fitness, fashion, and beauty and grooming,” says Thomas Marks, VP of Marketing at sticky.io. “What’s making these experiential gifts more popular is that they’re things you interact with more frequently. It’s an experience versus just a sweater that you take out of the closet and wear twice a year.”

Similarly, Paul Chambers, President and Co-founder of SUBTA, sees activity-based subscription services as being popular. “We’re seeing a lot more of that coming into the holiday season,” says Chambers, noting that during the COVID-19 pandemic, the subscription boxes that have really thrived have been focused on education for children, family activities and those that help people get out and “do things” or introduce people to more ways to connect to other people.

Marks also advises retailers to focus on subscription boxes or services to create experiences that will have a lasting effect.  “There’s no end in sight to quarantine and stay at home orders for a large part of the country,” he says. “I think people are going to be sensitive to wanting to gift experiences for people that will help them cope with the situation that we’ve all been in for months.”

How to design your subscription service for the greatest success

Now that you have some ideas about what might make a great subscription service for your business, the next step is to get it launched. To start, you will need a unified ecommerce platform that can support subscription-based services. While most platforms include order management, product management and checkout capabilities, not all offer the flexibility you will want to make the experience for your customers as convenient and seamless as possible.

Make sure your platform offers:

Self-management

The brands that are most successful with subscription offerings allow customers to manage the subscription themselves. Whether that’s pausing a subscription for a month or increasing/decreasing the volume that’s contained within the subscription. For instance, if a recipient of a wine subscription gift wants to increase the number of bottles for one month because they’re having guests, then the platform should allow them to do so easily.

“The brands that are really successful have enabled their customers to have flexibility within the subscription offer itself,” says Marks. “Don’t just give the buyer a two-month subscription, give them the option to make it a three-, four- or five-month subscription to increase that value.”

Another key aspect of being able to self-manage the subscription is having the flexibility to renew, cancel or even pause a subscription. “We have seen a lot of brands having success with the concept of customer self-management, where if they want to pause the subscription for a month or if they want to switch out a product that’s in the subscription, the customer’s empowered to do that,” says Marks.

Subscription transfer

Setting up an introductory gift subscription offer for a short duration, whether it’s two or four months, allows the recipient to become hooked on your product and become a true fan. Thus, you want to make it extremely easy for the recipient of the gift to be able to take over the subscription and the responsibility for payment. This will keep the subscription going beyond the length of the gift, resulting in more revenue over time.

How to maximize the benefits from your subscription service

Unlike one-off ad hoc purchases that comprise most retail transactions, subscription services are a recurring transaction, which allows you to deepen the customer relationship. “Customer lifetime value grows significantly, but we even look at customer relationship value,” says Chambers. “Not only are you continuing to be part of their lives on a weekly, quarterly or annual basis, but now you’re building a relationship with that consumer like you’ve never been able to before, because you’re continuing to help put your brand in front of them and be part of their lives.”

Another advantage of this ongoing relationship is the ability it gives you to better understand your customers’ individual behaviors and how they interact with your products. For example, with a replenishable product, you learn how often they need that replenishable — and that may vary from customer to customer.

Another advantage of subscription gifting is the ability to upsell and cross-sell recipients throughout the relationship. “Merchants can offer more cross-sells, upsells and dynamic bundling after the holidays,” explains Marks. “It’s the perfect time to follow-up with additional products and services.”