15% of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis, frequently through monthly boxes.

A sign promoting the Amazon Prime Now delivery service is displayed outside a Whole Foods store, Thursday, Feb. 8, 2018, in Cincinnati. Amazon, which owns Whole Foods, plans to roll out two-hour delivery at the organic grocer this year to those who pay for Amazon's $99-a-year Prime membership. Amazon.com Inc. said deliveries started Thursday in Austin, Texas; Cincinnati; Dallas; and Virginia Beach, Va. 

  • The subscription e-commerce market has grown by more than 100% percent a year over the past five years, with the largest retailers generating more than $2.6B in sales in 2016, up from $57.0M in 2011.
  • E-commerce subscribers are most likely to be 25 to 44 years old, to have incomes from $50,000 to $100,000, and live in urban environments in the Northeastern U.S.
  • 15% of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis, frequently through monthly boxes.
  • Amazon Subscribe & Save, Dollar Shave Club, Ipsy, Blue Apron and Birchbox are the five most popular subscription sites in 2018.

These and many other insights are from an in-depth survey McKinsey & Company completed to better understand the dynamics of the subscription e-commerce market and its major trends. The results of the survey, Thinking inside the subscription box: New research on e-commerce consumers are a fascinating glimpse into the current state of the subscription economy. McKinsey’s research team interviewed 5,093 U.S.-based respondents, 4,057 of which were online shoppers who had spent at least $25 online in the past month. For additional details on the methodology, please see the study hereA PDF of the study is available here (9 pp., registration on site required).

Key takeaways from the study include the following:

  • 15% of online shoppers have subscribed to an e-commerce service over the past year, with 46% of respondents subscribed to an online streaming-media service including NetFlix. Subscription-box services that deliver products regularly include Blue Apron, Dollar Shave Club, Ipsy and Stitch Fix. Subscription-based media includes Amazon Prime Video, ClassPass, Hulu, Netflix, Spotify, and others.
  • Women account for 60% of subscriptions, and men are more likely to have three or more active subscriptions. The median number of subscriptions an active subscriber has is two, and nearly 35% have three or more. Men are more likely than women to have three or more active subscriptions (42% versus 28%) suggesting that men value automated purchasing to save time by reducing store trips.
  • 55% of all subscriptions are curation-based, making this category the most dominant in the 2018 subscription economy. Curation-based subscriptions’ dominance reflects online customers’ demand for a continued series of personalized, high-quality experiences.Replenishment-based subscriptions account for 32% and access subscriptions, 13%.
  • Amazon Subscribe & Save, Dollar Shave Club, Ipsy, Blue Apron and Borchbox are the five most popular subscription sites in 2018. McKinsey found that Amazon Subscribe & Save and Dollar Shave Club have nearly twice as many subscribers as the next services on the overall top ten list. Saving time by reducing regular trips to the store combined with price savings are two catalysts driving the growing adoption of replenishment subscriptions today. Add to this the typical subscription customer is upscale with higher-than-average income with little free time and the appeal of subscriptions becomes clear. Many of the most popular services (including Birchbox, Dollar Shave Club, and Ipsy) charge relative low monthly fees of $10 or less. Others, such as Blue Apron and Stitch Fix, have higher fee structures and can, therefore, generate higher revenues on a smaller customer base; for example, Blue Apron’s average order value was $58, and its average revenue per customer was $245 in the third quarter of 2017.
  • 28% of access and curation subscribers say having an excellent personalized experience is the most important reason to continue their subscriptions. For replenishment subscribers, convenience (24%) was the most important consideration, though the value for the money (23%) and personalized experiences (22%) were also important. Subscription churn rates are high, and consumers quickly cancel services that don’t deliver superior end-to-end experiences.

 

  • Only 55% of online shoppers who consider a subscription service subscribe. Despite the hype surrounding subscription business models and the cloud apps and platforms supporting them, making a subscription-based business work is more difficult than it looks. Replenishment-based subscription services have a higher conversion rate (65%) than curation (52%) or access services (51%). McKinsey found that 40% of e-commerce subscribers have canceled their subscriptions, further underscoring the importance of delivering an excellent customer experience on an ongoing basis. The companies with the highest long-term subscription rates include Amazon Subscribe & Save, Dollar Shave Club, Ipsy, JustFab fashion, and Loot Crate.