By David Dorf-Oracle on Mar 31, 2015
I recall a few years back when flash sales were all the rage, probably peaking when Nordstrom acquired HauteLook. The model readily captures the excitement of discovery, and draws on the competitive nature of deal-hunters. This cue-routine-reward formula has only one flaw -- as competition enters the market, differentiation dwindles. Obviously flash sales are very different from traditional online retailing, but there isn't much difference between flash sale sites. A typical customer is a member of several sites without much loyalty to any particular one. Then the pressure to watch several sites and pounce on deals becomes exhausting.
Subscription commerce, from sites like Birchbox and Stitch Fix, maintain the excitement of discovery plus add the regularity of a subscription with a rewards program that garners loyalty. You get a box of curated stuff every month and points awarded for purchases. Over time the company develops a profile of you so that the box can be better curated for your tastes and style. The model seems to be working well enough for Nordstrom to buy Trunk Club.
Now here are three next steps that retailers should consider:
1. Smarter Subscriptions
Just as the basics are replenished in a store, the same needs to happen in homes. This starts with the dry basics like toilet paper, cereal, and makeup. Retailers should know a customer's preferences and consumption level, and help replenish products just-in-time. This takes historical data and forecasting, or possibly the use of in-home sensors (i.e. Internet of Things). Nobody enjoys shopping for toothpaste, so just figure out when I need more and have it delivered before I run out.
2. Better Personalization
Customers are members of many segments, and its the intersection of those segments that makes them unique. To cull out segment membership requires a mix of soliciting preferences (e.g. what heel height do you prefer?), collecting available psychographic data (what heel heights did you like on Facebook or pin on Pinterest?), and analyzing historical sales (what heel heights have you purchased?). Even so, a healthy amount of A/B testing is required to stay on top of emerging trends as tastes tend to be dynamic. Use the data to make the product selections more tailored and relevant.
3. Inclusive Store Experience
To date, subscription commerce has been a solely digital activity, but many customers still require more physical interaction. For style-sensitive products like fashion, why not provide monthly, personalized suggestions with an opportunity to schedule a try-on appointment in the store? Or perhaps an in-store tasting for the jelly-of-the-month club? Driving customers to the store should increase basket size, and also provide customers with the flexibility to tweak their personalized product recommendation.
I'm watching the market to see if these ideas gain traction. Use the comments to express your own opinions as well.