Is it too late to start a CPG subscription? Well, No.
The State of the US Direct-to-Consumer Subscriptions Industry 2022 Report
PipeCandy and Rodeo collaborated on the most comprehensive report on the current state of CPG subscriptions. Download the entire report here. This blog post answers the question, why do CPG subscribers actually subscribe to products.
Research projects that by 2023, as many as 75% of direct-to-consumer brands will have a subscription-based offering.
But, when is the right time to start a CPG subscription for your brand, and would it be too late if you didn’t start until you reached millions in ARR? Our comprehensive report with PipeCandy, says precisely that and details the upcoming predictions of the current state of CPG subscription brands. Let’s dig into more about these in this blog post.
Start a CPG subscription to boost revenue streams.
Consumers are becoming more conscious about their spending habits and are actively looking for ways to save money without sacrificing their lifestyles. In addition, consumers today want experiences that leave a lasting impression.
To appeal to this growing segment of consumers, businesses need a new strategy that focuses on convenience and cost savings with less effort. Subscription services are a great way to do just that.
Why and When should you start a CPG Subscription?
There's never a wrong time to start a CPG subscription, but there are certain times that may be better than others. So, if you're considering starting a CPG subscription, the best time to do so is now.
Based on recent research by Univdatos, the global DTC subscriptions market was worth an estimated $58.3 billion as of 2021, growing at a CAGR (compound annual growth rate) of 68%.
Observing the market trend, it’s not too late to start your CPG subscription. There's no need to wait for a sale or special revenue milestone - you can create your subscription at any time to help manage cashflow, create predicable recurring revenue and provide your consumers with convenience. to stay ahead of competitors and meet your customers needs.
- No technical debt and established customer base: There would be no technical debt when starting your subscription business. That’s because you start with an existing customer base and don't need to shift technological platforms to set up things. Customers’ experience is also not compromised in any way.
- Room for experimentation and growth: With the flexibility of collecting first-party purchase behavioral data, brands can experiment and solicit feedback on creating a valuable subscription experience and testing subscription ideas.
- Offer a customized customer experience: Because there’s historical data, you can design (and propose) a subscription program based on a customer’s past purchase behavior to personalize their subscription.
Subscriptions offer convenience and growth opportunities, but did you know there are different types of subscription models? Let's go over each so you can choose the right fit for your business.
Types of CPG subscription models to choose from
There are three segments that CPG subscriptions can usually be categorized into - replenishment, curation, and access.
1. Replenishment: These products can operate on a ‘create and forget’ subscription model. This way, you can purchase essential products such as household groceries, personal care products, or anything that won. And according to McKinsey, the replenishment segment makes up about 32% of all DTC subscriptions.
Ex: The Dollar Shave Club CPG brand falls under the replenishment subscription model. Dollar Shave Club offers a great selection of razors and blades at very reasonable prices. In addition, they have flexible subscription options, so consumers can tailor the plan to fit their specific needs.
2. Curation: CPG brands curate experiences to tailor one’s personal needs in a subscription box on a time-time basis. This makes up 55% of all subscription CPG businesses. Brands that want to elevate their customer LTV select this model.
Ex: StitchFix helps customers try out new styles without a commitment and without having to leave their homes.
3. Access: The access subscription model is all about exclusivity and VIP treatment.. Access or membership categories make up 13% of all DTC subscriptions. Example - access to free shipping, VIP events, community, etc.
Ex: Amazon Prime runs on an access subscription model wherein Prime members get 1-day delivery of all products that fall under the ‘Prime’ category. Prime members also get full access to the gated content on Amazon Prime.
State of Subscription in 2022 and predictions for the future
When the pandemic hit us in 2020 and stores shuttered and stay-at-home mandates were enforced, brands were forced to expand their ecommerce strategy, and subscription service adoption skyrocketed.
As we reported in the State of Subscription in 2022, about 400,000 new ecommerce stores emerged, and subscriptions spiked as demand for medicines, commodities, meals, and beverages rose massively.
And not just that, at $22.5 billion, subscription boxes are the largest segment with a market share of 39%, growing at a CAGR (compound annual growth rate) of 20% YoY.
The remaining share of the market could be attributed to membership subscriptions, which happens to be the fastest-growing segment within DTC subscriptions, as observed by Rodeo in the report.
The takeaway- there’s no time like the present to start your subscription. With the right tech stack you can get started quickly and with little financial risk.
Companies benefited from the subscription model for their CPG brand.
Let’s look at a few brands like BarkBox, FabFitFun, and Winc that massively grew in revenue after starting subscriptions.
In 2012, Bark launched BarkBox.com with its flagship product BarkBox. This brand helps dog and pet owners give details of their pets and get personalized toys and treats every month. The monthly subscription has 500,000 subscribers, and sales have grown 70%.
Another brand FabFitFun - an online subscription service that sends out boxes with primarily female products every quarter, expanded into subscription boxes in 2013, which helped them generate more than $200 in revenue for 2018 alone.
The key to the brands’ success? Personalizing the subscription experience to each customer and letting them choose their favorite products
Here’s a small snippet about a winery that went high in sales with a subscription model. Initially launched in 2016, customers told Winc that the Summer Water Rosé wine was too dry. So the brand adjusted the taste to fix the issue, and sales increased.
When they hit $12.3M in all-time sales, Winc’s Summer Water Rosé became popular enough that the brand launched a separate subscription called Societé for members who just wanted to receive that bottle. In 2018, the club had a 1,000-person waitlist.
Not a bad example of growth through a subscription delivering a personalized experience!
It’s never too late to start your CPG subscription
With the growing demands of consumers’ shopping experience and their personalities moving towards conscious buying trends, it’s absolutely the right time to tap on opportunities to dig into other revenue streams for your brand.
Similarly to what BarkBox, FabFitFun, or Winc have done, you can choose the subscription model that works best for your business, kick-start your CPG subscription program and accelerate your sales to the next level.
If you’re ready to start your subscription program, check out Rodeo and we’ll show you exactly how to build a subscription program that meets yours and your consumers’ needs.