The global outbreak of COVID-19 has dramatically and unexpectedly hit the reset button on the entire retail ecosystem, leaving virtually no corner untouched— though the effects themselves have been highly uneven. And in no segment of retail has that become more apparent that in subscription commerce, which has seen its entire landscape largely changed by a pandemic no one saw coming.
“I think it has changed the way consumers are thinking about their purchase decisions,” Recurly CEO Dan Burkhart noted in this week’s On The Agenda Digital Discussion with Karen Webster, along with FabFitFun CEO Daniel Broukhim and Handy Technologies CEO Oisin Hanrahan.
“In many ways, COVID-19 has accelerated us to the future, because the notion of convenience and some of these other aspects of subscriptions that have been appealing to subscribers have only been accelerated now that they are reconsidering the true cost of going to the store or the mall, browsing aisles and racks, finding something they like and then bringing it home,” Burkhart said.
Consumers, the panel noted, don’t want or need fewer things. They still want to be entertained, they need household goods and food, and they want to be delighted by the thrill of discovering new products. Those things aren’t going away — they are simply being joined by new considerations. Consumers also want to feel safe from disease and possible infection due to the health crisis. They’re looking for value due to the severe economic hit many have taken from the shutdown. And they are rethinking some of their former spending priorities, both now and going forward.
“When they see the photos of the lines outside Lowe’s and Home Depot, people are ready to invest in this thing that we call home,” Hanrahan noted. “I think it’s a shift that we’re likely to see for the next few years, where people will start to transition from travel and entertainment to home investments.”
Racing to meet the emerging needs and rapidly rising expectations of consumers across a variety of categories has presented a host of challenges for the subscription business, a fact to which the entire panel could readily attest. But it has also represented a strengthening current of opportunity, particularly for the firms looking to build on their existing digital subscription services as opposed to retail firms merely trying to crash-pivot into it in response to the crisis.
Meeting The Mark In Challenging Times
A black swan event that burns through the entire retail ecosystem can be an expensive situation – and one that will test a firm in a variety of ways. FabFitFun, a lifestyle membership brand known for its content creation wing and quarterly curated subscription boxes, has doubled down on its commitment to its pricing deals with subscribers, and is holding firm on the quality and quantity of its offerings, despite the fact that getting them out has gotten quite a bit more costly.
“We have been incurring substantial costs as a function of the fact that we have tons of disruptions to our supply chain, making it more expensive to fulfill boxes,” said Broukhim. “You have to put a lot of thought into social distancing and providing protective wear and temperature checks, and paying out the labor force more. These things add up.”
Hanrahan concurred, noting that Handy Technologies, a digital home services marketplace that offers subscription cleaning packages among an array of on-demand services, has seen its business model shift significantly in the last several weeks. Subscription home cleaning demand has dropped, for the obvious social distancing-related reasons. But that has been supplanted by an increase in demand for ad-hoc cleaning services from consumers who have either been exposed or have a special need for an incredibly precisely cleaned home. Providing that service, Hanrahan noted, has been a real-time learning experience in figuring out how to make sure their professionals are safe, properly fitted with the right PPE and ready to serve the emerging tranche of customers.
This labor-intensive project is just one of many the panel has seen happening across the subscription landscape, as firms are extending free-trial periods and offering pause buttons to make it easier for consumers to temporarily freeze services they still want, but perhaps can’t afford.
These things have costs today, Burkhart noted, but they are also an investment in tomorrow, where there is much opportunity for subscription firms to build emerging commerce habits with their customer bases.
Drawing The Road Map To The New Consumer
The real magic to the subscription service, beyond the “secret sauce” any individual company adds to its offerings, said Burkhart, is that the focus on the consumer relationship is really built into its DNA – a cultural mindset that says this isn’t about capturing a one-off sale, but about building a long-term relationship.
“Most of the breakout success stories in the world of subscription commerce have emerged from companies that are new and require a focus on the long-term retention of a customer,” Burkhart said. “And that’s different than older companies that are looking to evolve into offering subscription-based businesses, because recurring revenue might appeal to them. They might get something out the door. But the value-capture mindset is still there, rather than the value-sharing mindset.”
And the value-sharing mindset, Hanrahan and Broukhim readily agreed, is everything.
Pursuing that can mean doing things like adding fashionable masks and gadgets that make it easier for customers to avoid touching ATM buttons, Broukim said of FabFitFun’s pondered new additions. Or, Handy noted, developing better “general home maintenance” subscriptions that bundle services like roofing, painting and yard clean-ups under the central concept of improving and protecting one’s home.
How those details will look is still emerging, but the priority is clear: Give consumers what they want in a way that’s better than what they’ve known.
“When we think about the value we’re actually delivering to customers, as we personalize the experiences more and more, there may not be a better way to shop in the world,” Broukhim said.