The rapid growth of retail subscription services may come to an end

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TRADE COFFEE moved less than 1 million bags of whole and ground beans between the start of operations in April 2018 and the start of the pandemic in March 2020. By early 2022, it will have sold an additional 4 million, said its boss, Mike Lackman . It benefited from a covid era craze for subscriptions. Confined to their homes, consumers around the world have pressed “subscribe” on all kinds of boxes delivered to their doorsteps, from drinks and meal kits to scented candles, razors and underwear. Sales in America jumped more than 40% in 2020 to $ 23 billion according to eMarketer, a research firm. But holding on to those customers as the blockages begin to ease will be difficult.

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Investors love a business that has recurring sales and tons of customer data. The Subscription Trade Association estimates that global revenues grew at an average annual rate of 17% between 2014 and 2019. This has encouraged venture capitalists to invest nearly $ 3 billion globally in subscription companies. online between 2018 and 2020, according to PitchBook Data. But finding customers is expensive and keeping them has proven difficult, given the high cancellation rates among those who find themselves throwing away unused product at the end of the month. Shipping costs eat away at the margins.

Competition has intensified, both from a new influx of startups and large established companies that have launched or acquired their own services. Early entrants such as Walmart, which introduced Beauty Box in 2014 with popular cosmetic brands, and Unilever, a UK consumer goods giant, which bought Dollar Shave Club for $ 1 billion in 2016, were joined by personalities like URBN, which owns fashion brands such as Urban Outfitters. In 2019, she launched Nuuly, a clothing rental service.

More businesses are fighting over a pie that will grow more slowly as customers return to physical stores. Companies like Mr. Lackman’s are trying to adapt. It gives subscribers more flexibility as to how often they receive coffee. Stitch Fix, an online clothing marketplace, introduced one-off purchases. But acting more like an ordinary online retailer diminishes the benefits of selling subscriptions and may not prevent buyers from clicking the “unsubscribe” button..

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This article appeared in the Business section of the print edition under the title “Outside the box”

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