Business analysts Euromonitor say the gardening ‘box scheme’ subscription model has potential.
Euromonitor says the model has been booming across many industries, from beauty to food and beverages, and while it was considered for a while as a fad with low longevity prospects and little chance of success, the consistently growing number of competitors on the market now suggests the opposite.
Euromonitor added: “With a niche-enough business idea to avoid fierce competition, the subscription model ensures a brand a recurring and predictable revenue, which allows it to financially plan for months ahead. Economies of scale arise when the business builds a large consumer base, as it may sell enough to make larger-quantity wholesale purchases and benefit from higher discounts. In terms of marketing strategies, budgets can be spent and focused on non-subscribers, as the brand only has to sustain the quality of the box delivered every month to retain existing consumers. However, many consumers are afraid of contracts – to be fair who has never had trouble cancelling an internet or phone plan? – and although many companies state ‘no strings attached’, consumers are not fully convinced and the slightest disappointment will result in them perceiving their purchase as a loss of money. For a subscription business this could lead to a never-returning consumer.
The two main types of subscription model are continuous replenishment, such as Amazon Subscribe & Save, and subscription boxes, tailored to preferences. Home and garden is less likely to enter a replenishment model than other industries such as home care because these are not products consumers purchase repeatedly and regularly.
However, subscription boxes are providing home and garden consumers with “many solutions to their needs: convenient delivery and, most importantly, novelty, one of the key strengths of subscription boxes”.
In 2015, gardening represented 10 per cent (US$98 billion) of global home and garden retail value sales and could benefit from subscription boxes because of growing interest in indoor gardening, Grow-Your-Own and organic products.
When it comes to gardening, urban consumers and apartment dwellers would be targets to provide with fertilisers, ranges of seasonal seeds and pots and planters. Consumers are keen on healthy lifestyles and are looking to go green, but often don’t know how, which is why subscription boxes are one of the best means of putting a product in front of a consumer and getting feedback very quickly, says Euromonitor. Consumers are provided with unique and interesting products in an ocean of product options and are able to personalise their box. Urban Organic Gardener allows customers to personalise the seed samples to their preferences and PlowBox customises the assortment according to the climate customers live in.
Subscription boxes are still considered as a monthly treat most likely directed at developed markets with high average disposable incomes. While North America and Western Europe are already saturated with subscription boxes, Asia Pacific, which has seen home and garden retail value sales through internet retailing significantly increasing, could represent the region with the greatest prospects.
Fast-moving consumer goods giants have been entering the subscription business model – with the latest moves being recorded by Unilever and its Dollar Shave Club acquisition and Procter & Gamble with the Tide Pods subscription.
Although the cost of acquiring customers is low, the margin is often not enough to keep the business alive. Having the brand value attached is when the business can be profitable, which is why only the biggest established brands have the potential to succeed. So why take the risk?
There is a very small chance a gardening player will succeed in seducing a consumer who already subscribes to a competitor’s product. It is also another way for gardening brands to compete with private label, as consumers who already have a subscription are less likely to be attracted by discounts, promotions and private label’s lower prices. In markets where private label has gained significant market share, such as Western Europe, this strategy is particularly relevant for brands.
Euromonitor home industries analyst Angéline Le Ménach said: “Home and garden players would be wise to collaborate with subscription box brands in order to introduce their products to subscribers and eventually convert them into regular full-size product customers. It is also an effective way to test new products through samples and readjust distribution or marketing strategies according to subscribers’ feedback. On top of this, subscribers fill out a complete profile and provide in-depth descriptions of their preferences and habits in order to receive the best products tailored to their needs. This is why the data collected through the subscription box model are extremely valuable for partnered brands, which then understand how to reach their target markets in traditional distribution channels.”