What you need to know

There’s a subscription service for just about any product across categories these days, including beauty boxes, meal kits and pet food. The category has exploded in the past decade after a short list of pioneers saw success from subscription-based models, which spurred a flurry of other companies, including retail chains, to launch their own subscription offerings. Despite the flurry of new entrants in the market, consumer adoption remains relatively low, with only just over a third of consumers currently participating in at least one service. As more people shop online amid COVID-19 and look to save money, adoption should expand naturally. Still, subscription services have significant barriers to overcome to move the needle among nonparticipants, including addressing negative perceptions about the value proposition and “contract” terms with an out clause.

Key issues covered in this Report

  • The impact of COVID-19 on consumer behavior and ecommerce

  • How the recession could boost subscription service sign-ups

  • The types of subscription services consumers belong to or are interested in joining

  • Motivators and barriers to subscription service participation

  • How subscription service companies are evolving to stay differentiated and relevant

Definition

This Report examines usage and perceptions of online subscription services and automatic replenishment services across key categories (including Beauty, Food and Drink, Apparel, Household products). This includes motivators and barriers to participation and addresses how retailers can make these services more enticing to consumers. Business models vary from recurring and replenishment; on-demand whereby a consumer schedules a delivery as needed; and ongoing discovery whereby a consumer pays a set fee to receive a box of retailer-selected items based on their preferences. The Report focuses on retail-oriented subscription services for tangible goods that largely entail home delivery (eg Blue Apron, Stitch Fix) and does not include subscription-based media and entertainment-related programs (eg Hulu, ClassPass).

This Report builds on the analysis presented in Mintel’s Understanding Consumer Usage and Attitudes toward Subscription Services – US, September 2018.

COVID-19: market context

The first COVID-19 case was confirmed in the US in January 2020. On March 11, the World Health Organization declared COVID-19 a global health pandemic, and on March 13, President Trump declared a national emergency in the US. Across the US, state-level stay-at-home orders rolled out throughout the months of March and April, remaining in place through May, and in some cases June. During this time, referred to as lockdown, nonessential businesses and school districts across the nation closed or shifted to remote operations. Consumers began shopping more online while also changing their spending priorities, providing subscription services with new ways to market the benefits of convenience and value that they offer.

During re-emergence, all 50 states have relaxed stay-at-home orders and allowed businesses to operate with varying levels of social distancing measures in place. The continued spread of COVID-19 infections has driven some states to slow down or reverse course on reopening plans. During this time, consumers are placing an increased focus on value-based shopping, and some may pay more attention to subscription services, seeing them as a way to stretch their dollars.

Mintel anticipates the US will remain in a state of flux through 2021, until a vaccine is available.

Consumer research for this Report was fielded in July 2020 and reflects consumers’ attitudes and behaviors during the COVID-19 pandemic as restrictions on movement began to ease and businesses began to reopen across the US. The Report was written in October-November 2020, when all states were open, but some states began rolling back and reinstating restrictions due to increasing COVID-19 cases.

Economic and other assumptions

The analysis provided reflects an estimated range of the market’s prospects in light of the upheaval caused by the COVID-19 crisis. Our economic assumptions are based on CBO 10-year economic projections released on July 2, 2020. The CBO expects US GDP to fall by 5.8% in 2020 and recover to 4.0% growth in 2021.Unemployment estimates from the CBO indicate a 10.6% rate for 2020, declining to 8.4% for 2021, which is slightly more positive than initial expectations (11.5% in 2020 and 9.3% in 2021), though expectations are that it will remain above 5% through 2025.

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