CareCredit - Women's Health April 2024

Holiday Gifting Presents 2-for-1 Customer Acquisition Opportunity

Holiday Gifting Has 2-for-1 Customer Acquisition Opportunity

As brands look to capture consumers’ holiday gifting spending, subscription box providers have the opportunity to drive high-margin a la carte sales on one hand and to acquire subscribers on the other.

In an interview with PYMNTS, Matthew Berk, CEO of coffee subscription and gift company Bean Box, noted that gift purchasers yield profitable one-time sales but tend not to have as high a lifetime value (LTV) as subscribers, while one-time gift recipients often come back for the brand’s subscriptions.

“If [someone buys] a gift, and if the gift purchaser is a first-time purchaser, … the margin is going to be higher, but the lifetime value is typically lower [than when one’s] first purchase is a subscription,” Berk said. “… What we find is it is great to bring in one-off gift purchasers during the season, largely because you’ve acquired the purchaser of the gift as well as the recipient of the gift, and we know a good percentage of those recipients come back and become subscribers.”

Berk added that gifting periods enable the company to draw in “two people for the acquisition price of one.”

More consumers are gifting subscriptions, although it remains relatively uncommon. Last year, for instance, DoorDash announced the ability to gift DashPass subscriptions.

Many surprise box subscriptions rolled out Black Friday and Cyber Monday deals geared toward securing consumers’ holiday season spending. For instance, Japanese snack and candy subscription box Bokksu continues to offer gift cards to consumers who purchase six- or 12-month plans. Atlas Coffee Club has been offering the first bag free. Blue Apron was offering $180 off six boxes.

Meanwhile, consumers’ budgets are strapped. The report “New Reality Check: The Paycheck-to-Paycheck Report – The Saving Deep Dive Edition,” a PYMNTS Intelligence study in collaboration with LendingClub, revealed that on average and considering the effect of inflation, U.S. consumers have seen their savings decrease by 2.1% over last year, and cumulatively by 7.1% since 2021.

Still, many consumers will spend generously on gifts during the holiday season, per the report “The Credit Economy: How Consumers Are Approaching Holiday Spending and Travel,” a PYMNTS Intelligence and i2c collaboration. The study found that spending on gifts will rise moderately compared to last year and average roughly $1,000 across demographics. Plus, 94% of holiday shoppers said they are taking action to make sure they don’t have to cut back on gifts.

Moreover, the National Retail Federation (NRF) predicted record spending this holiday season, projecting holiday spending across November and December to grow between 3% and 4% relative to 2022. Plus, in a similar holiday spending forecast, Mastercard said in September that it expects a “rebalancing” in consumer spending for the upcoming holiday season.

Yet competition is also stepping up.

Customer acquisition has just continued to get more and more competitive over time,” Allison Vigil, president of jewelry subscription service Rocksbox, told PYMNTS in an interview last year. “As that acquisition has gotten more challenging, it’s become even more important to retain the customers that we’re working so hard to find.”