Growth in the membership based model is expected to skyrocket as some analysts say “Subscription Services Will Make Up 75% of DTC Brands by 2023”

Monthly subscription services aren’t exactly a new concept, wine club memberships and media subscriptions have been around for decades. Inspired by the success of Netflix, Spotify and Birchbox, innovative apparel brands are increasingly looking to this model to build predictable revenue streams and customer loyalty.

LTP Group and designer / trend forecaster Chantell Fenton discuss how new and existing brands are integrating subscription concepts into their e-commerce offer.

What Are The Options?

There are three types of subscriptions: replenishment, curation, and access. Replenishment subscriptions allow consumers to automate the purchase of commodity items, such as razors with brands such as Dollar Shave Club or socks via The Sock Butler. This is also the strategy behind devices enabled with Amazon Dash Replenishment.

Curation subscriptions are another option. This subscription model offers a personalised shopping experience which aims to surprise and delight consumers. Brands such as Stitch Fix operate in this space with an online styling service. Consumers fill out a style profile and a personal stylist hand-picks pieces to fit the consumers taste, need and budget. The box is then posted to the consumer and they keep what they love and send back the rest. The brand charges a $20 styling fee for each “fix” that is deductible from any purchase in the box.

Lastly, the access subscription model is when consumers pay a monthly fee to obtain lower prices or members-only perks. The H&M Group recently launched Singular Society, using this model. The members-only brand offers those who sign up, home and wardrobe essentials at cost price. Singular Society offers a carefully curated assortment for a membership fee. The entry-level plan costs €9.50 ($12) and allows customers to buy five products per month at cost-price. Proving just how popular this model is, there’s currently a waiting list.

Another innovative brand using the access model is US-based Italic which launched in 2018. Italic is a members-only shopping club which offers menswear, womenswear and homeware from the same factories as luxury brands but at cost price. Taking the brand out of the equation, Italic wants to connect consumers to high quality manufacturers for a truly direct-to-consumer strategy. With a membership fee of $120/year, Italic claims more than 90% of customers breakeven on their first order.

The Benefits of the Subscription Model

In these turbulent times, a subscription business offers one major advantage over other retail models, recurring revenue. As consumers commit to regular payments or product delivery, brands can more accurately predict revenue and demand. The recurring revenue model allows management to plan and invest accordingly. This strategy has worked successfully in the tech industry, so it’s no surprise the fashion sector is looking to incorporate this.

Companies can also gain consumer insights which enables them to more accurately predict and anticipate the consumer's wants and needs. With each box, brands can learn likes and dislikes, improving and adapting the shopping experience with the data generated. Subscription based activewear retailer Fabletics begins by gathering data on where the product is worn, consumer preferences and vital fit stats. This information is then used to inform edits and product recommendations.

Use Exclusives and Incentives To Drive Consumer Loyalty

One of the biggest challenges facing the subscription model is churn, the name given to subscribers lost due to cancellation. These businesses rely on long-term relationships with customers to provide predictable revenue growth and deep insights so brands must work hard to keep consumers engaged with exclusives and incentives. Activewear brand HPE offers a multi box model with  a one-time box, six-month subscription, or annual subscription. The longer the subscription the greater the perks which are designed to entice and reward consumers.

Combine Subscription and Sustainability

As customer demand for sustainable solutions intensifies, brands are increasingly using the subscription model to deliver on these commitments. Catering to consumers with an aversion to ’stuff”, brands like Rent the Runway and The Real Real operate a rental membership model.

Directional brands aim to achieve full circularity via subscription services. On Running recently debuted a new subscription service for the Cyclon, a fully recyclable performance shoe. Runners pay £25 per month for the shoe which will be replaced free-of-charge when the pair is worn out. The shoe is 100% recyclable. The subscription model ensures every old pair of Cyclons is returned to the company to close the recycling loop. Adidas publicly shared that its Futurecraft.Loop pilot struggled because consumers didn’t send the shoes back in time for Adidas to generate the next batch and keep the circle in motion.

For Days, is another brand using the subscription model to achieve circularity, this time the focus is on t-shirts. Consumers buy their first T-shirt for $38, and then when they want to replace it they are charged a further $8. Customers have five days to return the old T-shirt alongside any other items they want recycled.

About LTP

LTP is a Danish owned garment manufacturer for +60 premium brands within active sportswear, outdoor, athleisure and sustainable fashion. LTP was established in 1991, and is probably the biggest Sport & Outdoor garment manufacturer in Europe with bluesign & GOTS setups in Lithuania, Belarus, Ukraine and Vietnam

LTP consists of two divisions; LTP Garment and LTP Contract Furniture producing in nine fully-owned factories.

About Chantell Fenton

Chantell is an experienced performance sportswear designer and trend forecaster, with a passion for wellness, technology and function-first design. Chantell has an in-depth knowledge of how to spot and translate the must-have trends and macro shifts for the sports and outdoor industry. For more details visit www.chantellfenton.com