Can Subscription Startups Stand Up To Big Retail?

Subscription services have been experiencing a renaissance of late.

There are over 1,000 startups offering monthly delivery of everything from cosmetics, to bespoke menswear, to luxury designer jewelry. Many of these services have experienced phenomenal success, high growth and impressive backing from venture capital firms. Now, according to a recent article by Fortune, they may be getting a run for their money from some formidable opponents, as big retailers like Walmart and Amazon get into the game.

As the article points out, the concept behind subscription boxes is as old as the milkman bringing clinking glass bottles to the doorstep. There is an emotional connection to this “surprise” left on your doorstep, however expected. What subscription box services of today — companies like Birchbox, Blue Apron, Club W, OwlCrate, BarkBox, and Bespoke Post — have that the milkman didn’t was the element of surprise.

Many models allow subscribers to choose from an assortment of items available on a rolling basis, list their preferences in a profile or leave the contents of their monthly package completely up to the service. This triggers a sensation that is familiar, especially this time of year — receiving a gift; in this case, however, it is from yourself.

The success of these services in recent years has caught the attention of investors. According to the Fortune article, Birchbox has received $70 million in funding, and Blue Apron has received $135 million, with the most recent round giving it a $2 billion valuation. These services are certainly at the top of their game, but the competition is heating up.

Walmart and Amazon are just two of the retailers who have started “tip-toeing” into the space and certainly bring a lot of experience to the table. As Fortune points out, they come armed with the data, logistics and infrastructure needed to make a subscription-based service profitable long-term and on a global scale. The subscription box business is complex, requiring smart, nimble and holistic cross-functional integration and execution to thrive and excel over the long haul.

Another headstart these brands have over the newcomers in the market is an emotional connection with an existing consumer base. For a business built on the promise of being consistently delighted, a solid track record of delivering on promises to consumers carries a lot of weight. Both Amazon and Walmart have unique relationships with their customers built over many years of doing business together. However, businesses wholly dedicated to the boxed subscription business may have an advantage in that they can focus more exclusively on injecting creativity into the user experience.

Subscription services are proving a popular and easy-to-wrap Christmas gift. Whether these holiday newbies equate into yet more customers to support the subscription boom remains to be seen.