As recipe box business Gousto secures £33m in new funding following a coronavirus-prompted sales boost, Retail Week looks into whether all parts of the subscription market have benefited and whether it will leave a lasting impact on how consumer buy goods
- Gousto boss Timo Boldt says the business has seen “seismic shift in demand – our mission has elevated to feeding the nation”
- WGSN predicts a rise in the popularity of beauty and wellness subscription boxes after lockdown is lifted
- Established retailers such as Morrisons have already entered the market
The number of subscription box services, from food to beauty to crafts, has been steadily growing over the last few years, but before coronavirus hit, some were questioning the longevity of the business model.
In February, Birchbox – one of the trailblazers of subscription beauty boxes – revealed it was laying off 25% of its staff globally.
However, with more people stuck indoors during the coronavirus lockdown, the appetite for new ways to get groceries, skincare products, crafting materials and more has risen and these businesses are seeing a boom.
Food box frenzy
Food and recipe boxes, in particular, have been given a boost, as consumers look for new ways of buying their groceries without having to venture to supermarkets.
Consumers are also using their time to create new dishes. A GlobalData survey found 40% of UK consumers are “experimenting in the kitchen” during the lockdown.
According to Gousto chief executive Timo Boldt, sales of its family boxes are up 30% and it is experiencing 10 times the amount of daily traffic to its website since the pandemic began.
“Given that people are in lockdown, we are seeing a pretty seismic shift in demand – our mission has elevated to feeding the nation,” he says.
While recipe boxes are a clear winner during the pandemic, WGSN beauty editor Theresa Yee believes other sectors, such as beauty, personal care and wellness, as well as crafts, may have seen an uplift given that more consumers are turning to at-home beauty treatments and self-care in the home now, as well as taking up new hobbies.
Yee predicts beauty boxes will have done particularly well: “Consumers, especially generation Z, love being able to play around with products before they buy, but they can’t do that now non-essential retailers are closed.”
Brands like Birchbox, and competitors Glossybox and Lookfantastic, are well-placed to fulfil this desire for young shoppers, as their boxes include five sample size products the subscriber can try before purchasing full-size versions, bringing the fun of the beauty store to their homes.
Long-term boost
Before anyone had heard the word ’coronavirus’, a Royal Mail report published last year predicted that the market would be worth £1bn by 2022.
But will the coronavirus fillip further grow this market?
Yee believes that some areas of the subscription market will have a sustained benefit when lockdown ends and shops reopen, and tips beauty boxes as a potential winner.
“When coronavirus is over, people will still think about having products delivered, and will continue to be concerned with staying well and healthy. This will certainly mean a rise in beauty and wellness subscription boxes.”
A changing model?
Despite the touted growth in beauty subscriptions, WGSN beauty editor Theresa Yee believes not all will benefit.
”I think that the Birchbox model, where deliveries of a random selection of products are made each month, might be a thing of the past,” she says.
Instead, Yee believes shoppers will opt for more flexible, personalised subscriptions.
“Beauty Pie is a personalised subscription service where you build up credits with the brand based on how much your membership fee is each month, but you don’t have to spend them every month. This gives a lot more flexibility, and you can choose the products you want so they don’t go to waste.”
Yee also singles out FabFitFun, which incorporates beauty products, home workout items and other accessories as a potential winner. Subscribers to the service get to pick up to five items in the box, with other items in the delivery tailored to their preferences.
The fact that the brand is focused on home workouts works in its favour during the pandemic, as many consumers are now exercising from their living rooms – a trend that may continue after lockdown is lifted.
Yee also believes sustainability will need to be a big consideration across all sectors using the business model in future.
“In food, lots of brands are using upcycled food ingredients. Misfits Market, for example, is a weekly food box which gives misshapen or ugly looking fruit and vegetables that would ordinarily have been thrown away. As consumers we’re becoming more aware of waste, which is why the Beauty Pie model works well,” she says.
“We’re also seeing sustainability concerns in personal care brands, for example, deodorants, shampoos and razors, where you have refillable products or zero packaging.”
More niche categories such as crafting boxes that parents might have subscribed to in order to keep kids occupied during the lockdown are also tipped to have a sustained boost.
“We’re seeing crafting boxes grow in popularity, which I think will continue after the pandemic is over, as people have taken up new hobbies and will have become used to doing more activities at home,” says Yee, citing Crayola as a brand that have created a good offer.
Boldt is expecting a longer-term boost, as coronavirus has accelerated the shift to online shopping in general.
”People who have never bought food online are now doing so, and many of them will enjoy the experience and become future customers.
“Gousto has always benefited from the rise of online and convenience, and the pandemic is expediting such trends. Households that are trying out online food shopping for the first time will find that brands like ours were helpful when they needed it most, which will be a positive thing in the long term for meal kits,” he says.
“Online food only accounts for 7%-8% in the UK, so we not only have to educate people on buying online but also create the category”
Timo Boldt, Gousto
However, GlobalData associate analyst Thomas Brereton is sceptical about the enduring appeal of such subscriptions.
“Without coronavirus, the scope of the food subscription box is limited,” he says.
“There is a small target audience, largely of younger working adults, who do not wish to spend the time planning out meals and making their way around the supermarket, but equally do not have the flexible spend to sporadically go out to restaurants.
“Meal kits also require the user to be at home for a certain number of days at a time to use the food, which is why it is popular during the lockdown, but may not be so practical once it is lifted.”
Boldt concedes that “subscription boxes are inherently under pressure, as most start-ups fail”.
Hefty marketing budgets, which is in some cases unsustainable, can be necessary to build awareness and acquire customers.
“Online food only accounts for 7%-8% in the UK, so we not only have to educate people on buying online but also create the category and build up the image of the brand in people’s minds,” says Boldt.
Meanwhile, churn rate – the number of customers that cancel their subscription – is another big challenge these businesses have to overcome. Companies have tried various techniques with shaving subscription business Cornerstore citing the launch of lifestyle magazine 15 Minutes for customers as effective in reducing its churn.
Retailers and subscription start-ups
Another big threat for businesses of this ilk is that established retailers, with their already large customer bases, can create their own subscriptions and steal market share.
In food, grocers such as Morrisons have already created their own recipe boxes and in beauty, magazines such as Marie Claire have their own subscription boxes. Yee thinks it is only a matter of time before retailers such as Boots and Superdrug follow.
While big retailers have existing customer data and stores in which to market subscription offers, Yee points out that start-ups may have access to more niche brands that could be a USP.
Brereton says there is an opportunity for retailers and subscription start-ups to work with each other.
Snack box retailer Graze has had success selling its products on supermarket shelves as well as by its subscription service. Viewing retailers as a route to market can minimise marketing costs and potentially bring in those impressed by what they’ve bought as new subscribers. Meanwhile, Birchbox has partnered with Walgreens in the USA to sell its boxes both online and via in-store pop-up shops.
There is also an opportunity for retailers to go deeper than just partnering with subscription businesses.
French grocery giant Carrefour bought meal kit provider Quitoque in 2018 to bolster its burgeoning recipe kit business. Further acquisitions could be likely as retailers seek to open new, regular revenue streams.
While subscription boxes may be benefiting from a coronavirus boom, in the long term perhaps retailers will be the beneficiary as the model is established as a potential avenue of growth.
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