How Direct-to-Consumer Brands Can Leverage Subscription Gifting
Consumers are spending differently due to a myriad of effects stemming from the ongoing global pandemic. This year’s holiday shopping and gift-giving season is sure to feel the impact of these changes in consumer behavior. Is this the year that Black Friday loses its importance and Cyber Monday takes its place as the biggest shopping day of the year? That remains to be seen, but the potential upside for e-commerce and direct-to-consumer brands seems to be ripe for the picking.
Many big box stores have already announced that they plan to close for Thanksgiving, and Amazon pushed its Amazon Prime Day to October 13 (compared to July 15 in 2019). Last year, Prime Day sold $7.16 billion worth of goods, up 71% from $4.19 billion in 2018 and topping both its Black Friday and Cyber Monday sales combined.
How can e-commerce and direct-to-consumer brands take advantage of the increase in online shopping to acquire new customers and grow revenue? In this post, we’ll share how subscription gift giving is the DTC gift that keeps on giving.
How COVID-19 has changed buying habits
Whether due to precautionary measures, financial influences, or technology, consumer buying habits have transformed during the COVID-19 pandemic. Here’s how COVID-19 is impacting the way consumers are buying and being reached:
Along with personal fears, regulations like social distancing, capacity limitations, and quarantining are decreasing foot traffic in stores and malls across the country.
High unemployment rates continue to slow discretionary spending, with hundreds of thousands of new claims per week in the US.
Improving technology and integrations are increasingly meeting demands for “touchless” home delivery.
These factors will likely continue to push consumers in all demographics to shop online this holiday season. In fact, two-thirds of boomers now say they’ve improved their shopping experiences with buy online, in-store pickup, and curbside pickup, up from less than half pre-COVID-19.
What does COVID-19 mean for DTC during the holidays?
With changing buying habits, it’s never been a better time for DTC brands, which definitionally eschew third-party retailers and instead directly connect manufacturers and customers.
With more consumers opting for at-home products and services for entertainment, work tools, food, and even gifting, DTC businesses are taking advantage of subscription models.
Why should DTC businesses offer gift subscriptions?
Pre-pandemic, many DTC businesses faced challenges because they weren’t necessarily integrated into consumers’ everyday lives; unlike competing products, they often couldn’t be found in a variety of retail outlets. This is where a subscription business model can help, by:
Keeping your brand top of mind
Creating long-term customer relationships
Providing flexible plans to match customers’ needs
Driving predictable monthly recurring revenue
How do gift subscriptions work?
Gift subscriptions harness the enthusiasm of your best, most loyal customers and lower your customer acquisition costs. Gift subscriptions, like refer-a-friend programs, have an inherent ‘social proof’ that recipients appreciate.
Recurly offers two different gift types: cards and plans, which can be created and managed via Recurly’s direct interface (the UI) or our API. Both options are suited to B2C companies and provide a satisfying user experience for the giver and receiver, further supporting customer acquisition goals.
Recurly-powered gift cards are ideal for B2C merchants who sell digital goods and have a number of different plans. In these cases, gift card recipients need the flexibility to choose the gift they want.
Recurly also offers gift plans which, similar to gift cards, leverage a subscription business’ ‘raving fans’ and help it to acquire new subscribers at a lower acquisition cost. Gift plans are suited to businesses that ship physical goods because the plan starts upon purchase, so shipping can be immediate rather than waiting for the recipient to redeem a gift card. Gift plans are also suited to businesses which have only a small number of plans, so they don’t need the flexible purchasing options provided by gift cards.
Scentbird, a perfume subscription brand, features gift subscriptions prominently, encouraging website visitors to give the gift of a Scentbird subscription.
Subscription bundles appeal to gift givers
A popular tactic for direct-to-consumer holiday subscriptions and gift-giving is bundling. Subscription bundles provide complementary value by adding products or services that enhance an existing subscription. Harry’s, the popular DTC shaving brand, offers a variety of bundles; what makes Harry’s stand out is the ability to not only purchase a bundle, but also add on a subscription. This ability makes it super easy for a consumer to get just the product, or the product and the subscription, and to give a gift.
Rocksbox also does an excellent job of making it easy for consumers to gift subscriptions of its jewelry collection. With three gift subscriptions to choose from, gift givers can choose a plan that meets their (and their lucky recipients’) needs.
Stop, collaborate, and acquire customers
As the cost of customer acquisition continues to skyrocket, many DTCs are starting to work together on new products, giveaways, and events all in the effort to more affordably acquire new subscribers. An excellent example from the blog of Metrilo, an e-commerce platform provider, is Winc, a DTC wine company. According to Metrilo, Winc “is very careful whom they target. People who buy from Parachute, a DTC bath and bedding brand, are likely to care for carefully crafted, possibly bespoke, items. They are open to direct-to-consumer brands, too. This makes them a good match for Winc because both brands promote a similar lifestyle with an artisan aesthetic.”
Increased online shopping this year will prove to be an unexpected boon for DTCs, which must make the most of this opportunity to convert their existing subscribers into gift-givers of their products. This will help DTC brands more affordably acquire new customers and create the recurring revenue that will grow their business beyond the holiday season.