I wrote last October about subscription box fatigue. Recent data shows that the industry has plateaued, that growth has flattened after a period of intense growth. I do think that as a maturing industry, the subscription box business will be seeing a shake out. And it’s not just me – these datasets from the same source, comparing subscription box web traffic in 2017 and in 2018, show that traffic in September 2017 was much greater than traffic in April 2018. Some analysts agree.

Ian Agar at PitchBook says investment activity is slowing:

• While the early 2010s saw a huge rise in the business of selling subscription boxes, the data suggests it may have hit its peak as venture capital activity in the space slows down. There were a record-high 70 VC deals in subscription box companies in 2016, according to PitchBook data, but 2017 and 2018 recorded only 56 and 50, respectively-numbers last seen in 2013 and before.

At Fast Company, Elizabeth Segran says, “We’ve hit peak subscription box.” Writers and opinionators at Bloomberg, TheManual.com, BBC World Service, and the American Marketing Association say the same thing. Keep in mind that there are 3,000 to 4,000 subscription box offerings available to U.S. consumers, depending on who you ask — but Forbes reported last year that “Nearly 47% of subscription box offerings were started in the past 12 months.” It looks to me like the market is saturated, and there is more churn than growth.

In this competitive market, what are the characteristics and strategies that are helping some subscription box providers survive? Here are three trends that offer some hints.

TREND ONE:
Small Goods for Consumers to Try On and Try Out

Packages that fit in mailboxes enjoy a real advantage in fulfillment costs. That suggests that cosmetics and clothing have an advantage over bulkier products. And when we look at the subscription box categories that do best, sure enough, those are the types of products shoppers like best:

(Source: eMarketer, Digitas, via Statista)

Ignore the headline on that graph: those are the most popular categories including both boxes and streaming services, per the original Digitas research. That makes the point even more strongly. The consumers polled are prioritizing beauty and clothing over all other subscription offerings, certainly over all other box offerings. The advantage in shipping here helps make that possible.

However, it is not just small packaging that gives this category its win. People need to try certain purchases out, and subscription boxes offer at-home shoppers the chance to sample a wide range of products, and, for clothing, to try on and return the ones that are not a fit.

Here’s some anecdotal proof that this category has real traction. Take a look at this trend piece in Glamour, in which Leah Bourne explains that traditional retailers are jumping into the subscription business:

• Classic workwear purveyor Ann Taylor, fashion-forward brand Vince, and even trend-focused label Express have all launched subscription services over the last few months that allow shoppers to test a curated selection of pieces at home before either buying their favorites and sending back the rest (and then being replenished with different options).

In addition, clothing retailers at both the high-end (Chloé, Fendi, Stella McCartney and Little Marc Jacobs) and mass-market (Walmart) are beginning to offer kids clothing boxes, according to Observer’s Gabriela Barkho. The same goes for plus-size offerings. And you know that there’s something to this when Amazon is piling on, per its new Prime Wardrobe box. The new service aims to make it easy for shoppers to try on new clothes and return them just as easily.

At one point there seemed to be a subscription box for every product imaginable. I suspect that the ones that are easier to mail, and that consumers want to touch and try, will be more likely to survive.

TREND TWO:
Amazonian Take-Over

It is not just with Prime Wardrobe that Amazon is muscling into the subscription box arena. More overtly, Amazon is both buying box services outright and also offering to partner with box providers by handling sales. Take a look at Amazon’s subscription box page, with well-regarded brand BarkBox right at the top.

Casting a cynical eye on the trend, here’s Motley Fool analyst Tim Beyers in an interview this month:

• I think the overlooked story of 2019 is Amazon (NASDAQ:AMZN) buying up the subscription box businesses. There’s a lot of subscription box businesses. … A lot of subscription box businesses have done very poorly. In order to disrupt this, what Amazon has started doing is picking up some of these businesses and offering them a lifeline, saying, “Look, give us your customer list, let us sell on our platform, but we’re going to control the customer, we’re going to control the relationships, you’re going to fulfill the orders.” That puts them in control. It’s a way for Amazon to profit from other people’s work, which they’re really good at.

Pymnts.com has a less jaded take that suggests subscription box companies can come out ahead by partnering with the online behemoth:

• BarkBox – a curated collection of dog toys and treats that shows up on dog lovers’ doorsteps once a month … Amazon’s subscription team approached CEO Matt Meeker with an offer to become part of the subscription box store. Once integrated into the subscription hub, Bark would hold onto the job of filling and curating boxes, while Amazon would take on the more administrative side of facilitating the transaction -customer acquisition, sign-ups and payments.

The Bark CEO told Pymnts that “We wanted to use Amazon as a customer acquisition channel, same as Facebook and Instagram, where there’s a higher cost of acquisition. Being early is a huge advantage on Amazon, as it was on Facebook in 2012,”

Earlier this year, Business Insider offered a uniformly positive take with “17 subscription boxes you can order on Amazon.” And another well-regarded brand, LootCrate, jumped into Amazon’s hub last year.

A deal with the devil, or a way to stand out in a crowded market? Either way, this trend bears watching.

TREND THREE:
Back-End Providers Make It Easier to Scale

For subscription box companies that want help with the back end and prefer not to deal with Amazon, a number of subscription box platform providers have appeared to serve the need.

Fast Company’s Elizabeth Segran explains the trend:

• There’s clearly money to be made in subscription commerce for a startup that figures out how to monetize it, and keep subscribers engaged with compelling content. And new startups are popping up every day with new concepts. Platforms like Cratejoy make it very easy: The website allows anybody to start a subscription box, get new subscribers, create automatic mailing lists, and even find branded packaging for your box.

With clients including Ann Taylor and American Eagle, cleverly named CaaStle is offering subscription box fulfillment with a “Clothing as a Service” model. Columbus CEO’s Mary Sterenberg interviewed CaaStle co-founder and CEO Christine Hunsicker:

• “We’re pioneering and creating a whole new economy for apparel. We’re doing something completely disruptive to the industry,” Hunsicker says. And its bold moves are getting noticed. CaaStle this year was named one of the top innovators in retail in the United States by business-audience publisher Fast Company.

Along with more established platform providers such as Subbly and Cratejoy, CaaStle is showing a way forward for subscription box firms that are looking for help growing at scale.

Insider Take:

As the novelty of subscription boxes begins to fade, consumers are going to look at offerings with a more skeptical eye. The services that will retain the most customers are those that offer a compelling value especially suited to the retail medium, such as fashion and beauty. Other competitive advantages will fall to those who are able to reach new customers, as through Amazon exposure, or who use other platforms to make the transition to success.