For some brands, the perennial question around unsold merchandise is whether to discount or discard. It’s been a bigger concern under the pandemic with shopping habits disrupted, but subscription commerce is coming to the rescue with an enigmatic answer: the mystery box.
Innovating around the issue of deadstock discounting, a growing number of subscription firms, including Heat and Scarce, are combining the inherent appeal of subscription commerce with the joy of discounts and the thrill of unboxing to turn unsold goods into a surprise hit.
As The Financial Times reported on Wednesday (Oct. 6), “The clothes come from stock that would otherwise end up in cut-price outlets — or in a landfill. During the pandemic, factories, brands and retailers have been left with mountains of unsold goods. As of last April, Swedish fast-fashion giant H&M was sitting on £3.4bn of leftover merchandise.”
FT added that “offering constant cut-price sales to deal with the deluge affects a brand’s equity — and some brands still destroy their unsold stock rather than risk devaluing it.”
Mystery boxes are solving that riddle. As Scarce Co-founder Jacob Metzger told FT, “We wanted to prevent this old inventory from going to a landfill or sitting in a warehouse. We wanted to give it a second life.”
The trend ramped up in 2020 starting with streetwear and is now crossing into luxury goods, as brands from Balenciaga to Palm Angels and more get curated and sent to subscribers who don’t know exactly what’s inside. What is guaranteed with each box “drop” is value — a $400 mystery box from Heat, for example, assures close to $700 in mystery merchandise.
See also: 43% of Consumers Participate in Product Drops, Flash Sales
Boxing the Power of Discounting
Subscription mystery boxes are a clever solution that solves problems for suppliers by leveraging the exclusive allure of product drops, along with the desire to save on items people want.
In The Product Drops: Retail’s New Conversion Play report, a PYMNTS and Scalefast collaboration, researchers found that savings are a major motivator, noting that “71% of consumers who express interest in sales events value having access to products at a good price. Most consumers consider this to be important regardless of the sale type in which they participate.”
There are risks, however, as Vogue Business recently noted that “discounting, while a quick sales boost and often necessary after shocks like the pandemic, can erode brand perception if relied upon too heavily. While luxury brands benefit from the exposure when selling products on multi-brand retailers, they have to contend with the discounting decisions.”
See also: The Product Drops: Retail’s New Conversion Play
Innovation Keeps Subscriptions Fresh
As subscription fatigue and shifting consumer interests weigh more on the sector, innovative approaches like curated mystery boxes of items are one answer.
For example, The 2021 Subscription Commerce Conversion Index, a PYMNTS and sticky.io collaboration, found that 56% of subscription commerce companies “are adding new, money-saving features like discounts and guarantees or refunds in the hopes of attracting and retaining cost-conscious subscribers.”
“These changes have helped enhance consumers’ overall retail subscription commerce experience, leading to an increase in the sector’s Subscription Commerce Conversion Index (SCCI) score, which measures and tracks the quality of consumer sign-up and subscription service experience. The average retail subscription provider earned an Index score of 47.9 in Q3 2021 — up from 46.1 in Q2 2021.”
Appealing to budget-aware consumers who were raised on unboxing videos on YouTube and desire new fashions and footwear are picking up on the mystery box trend.
For example, FT reported that Heat “has sold more than 16,000 boxes” since its November 2020 debut, “and expanded its customer numbers to 660,000.”
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