COVID-19 turned the world upside down. Not only did it change how people live and work, it also affected their shopping habits. Consumers scrambled to find safe ways to get the products they love, while brands rushed to adjust to a world beyond brick-and-mortar stores.
With a year of coronavirus under our belts, the Ordergroove team looked back over the past 12 months and identified the most important lessons we learned about subscriptions during the first (and hopefully) last year of COVID-19.
Consumer Demand Is on the Rise
Consumer demand for subscription offerings skyrocketed in the last 12 months. Our data shows that both subscriber and subscription enrollment increased year over year in 2020, indicating a dramatic shift in consumer buying behavior.
Subscription enrollment jumped 48% and subscriber enrollment spiked 27%. What’s more, internal Ordergroove data shows that subscriber retention rates were stable during the same period. In other words, not only did more shoppers purchase subscriptions, they stuck with them, even as retail started to reopen across the country.
When these data points are viewed together, it’s clear the pandemic rapidly accelerated consumer demand for subscriptions. Not only this, the health crisis likely permanently changed how shoppers purchase goods online. It’s unlikely consumers will give up the convenience and cost savings associated with subscriptions when the nation fully reopens.
Cookiecutter Subscriptions Aren’t Enough
Brands rushed to roll out subscription offerings in 2020 to meet growing consumer demand and offset the economic impact of the pandemic. As a result, competition in the subscription space grew exponentially.
To differentiate themselves from their competitors, we advised merchants to rethink their subscription offerings to add more customer value and subsequently drive subscriber enrollment.
Features that helped differentiate subscription offerings in COVID-19 included:
- Free/reduced shipping
- Best price guarantees
- Curated experiences
- Subscribe more, save more incentives
While a differentiated subscription offering is vital, the pandemic and changing business landscape also reinforced the need for brands to reevaluate their retention efforts.
Retention Is More Important Than Ever
The cost to acquire subscribers went through the roof during the pandemic. To offset this increase, it’s critical brands develop subscription programs that balance attracting shoppers with retaining them.
The good news is that many features that differentiate a subscription offering and subsequently increase enrollment, also benefit retention. There are, however, subscription features that specifically impact retention.
Brands that saw strong subscriber retention rates during the pandemic implemented features associated with subscription management such as the ability to to skip an order or swap a product. Our data shows that subscribers last 135% longer when they have the ability to skip an order and 71% longer when they can swap products.
Shoppers Love Pets, Home Goods, and Makeup
Our favorite lesson from COVID-19 is that people love their pets! In 2020, pet-related subscriptions jumped 340% year over year — the greatest increase across industries we track.
The explanation for pet subscriptions’ surge is multifaceted but can be partially attributed to the dramatic increase in demand for adopting or fostering pets (particularly, dogs) across the world. In fact, the number of foster pets in U.S. homes increased 8% between March and September of 2020, according to PetPoint, which collects industry data for dog and cat adoptions.
Other industries that saw significant growth in subscription enrollments were home goods and beauty. Home goods saw a 288% increase in subscriptions year over year and beauty achieved a 177% increase in subscriptions during the same period.
A Frictionless Buying Experience Is a Must-Have
In a sign of subscriptions’ growing importance, both Salesforce and Shopify released subscription products in 2020. Last May, Salesforce launched Quick Start for Subscriptions, a tool to help brands rapidly launch a subscription program. Then in November, Shopify introduced Shopify Subscription APIs, which enable merchants to build new subscription experiences directly within Shopify Checkout.
The platforms’ embrace of subscriptions is huge for eCommerce. It significantly lowers the barrier to entry for brands and will lead to more subscription innovations. Shopify’s APIs also close the door on “hijacked carts.”
As a quick refresh: Prior to the new APIs, Shopify merchants could support a subscription offering using apps that weren’t fully integrated with Shopify’s checkout. Many of these apps would redirect customers to an external and often suboptimal checkout experience. This led to subscriber friction, cart abandonment, and ultimately increased customer acquisition costs.
Shopify’s APIs signal to brands that a frictionless buying experience is critical to success.
AI-Driven Personalization Is the Future
Across the board, consumers expect and desire personalized shopping experiences. In fact, research indicates that 80% of consumers are more likely to make a purchase when brands offer personalized experiences.
As the subscription space grew more competitive during COVID-19, innovative brands started to experiment with artificial intelligence (AI) as a way to drive personalization and to optimize their subscription programs.
Put another way, the last 12 months set the groundwork for AI’s acceleration in the subscription space.
Here are some of the ways brand are experimenting with AI-powered subscription:
- Improve curated experiences: Brands are using preference tests to determine the right product fit for subscribers prior to purchase. They are also utilizing feedback loops to personalize future orders.
- Refine replenishment frequency: Shoppers consume products at different rates. With AI, brands can better tailor delivery dates to their subscribers’ needs.
- Improve promotions: Companies are using AI to offer tailored promotions based on consumer interests, past buying behavior, and promotions they’ve previously engaged with.
The most common use of AI is centered on churn mitigation. For example, Ordergroove uses AI to anticipate when a subscriber is at risk of churn and informs merchants so they can proactively communicate with the shopper by providing them with the opportunity to skip their next order. This can drastically reduce the likelihood of a consumer being overstocked on a product and canceling their subscription order completely.
The last 12 months flipped eCommerce on its head. Nowhere is that more noticeable than in subscriptions. As we move into the second year of the pandemic, brands can look to the lessons we learned and use them to create robust subscription programs that not only stand out from their competition but keep shoppers coming back for more.