Personalization will drive subscription box future

Subscription box companies have had mixed success, especially with a more budget-conscious consumer class — but investing in technology to better personalize products can help.

Why it matters: Homing in on personalization can generate businesses over $1 trillion in value, McKinsey estimated in 2021.

By the numbers: Players that increase focus on personalizing products generate 40% more revenue compared with companies not doing so, McKinsey says.

• 70% of consumers expect companies to deliver personalization, and more than three-quarters get frustrated when that isn’t the case.

State of play: Personalization drives customer engagement and boosts loyalty, Coresight Research finds — and the proof is in the pudding.

• Stitch Fix updated its core recommendation algorithm this year that helped bring together data from customer interactions across its subscription (Fix) and direct-buy options (Freestyle).
• The result: The company saw a 6% increase in revenue from its Freestyle offering and a 4% increase in Freestyle reorders from the offering over a 30-day period, CEO Elizabeth Spaulding told investors in an earnings call in June.

Yes and: BarkBox, a dog toy description service, is focusing on personalization as well by improving its data analysis.

• The company says it is looking at delivering tailored messages that connect with shoppers to keep them engaged.
• The company is poised to invest in more personalization in the coming years, according to Coresight, especially in its Bark Food business, a subscription-based meal plan for pets that’s tailored to the breed, size, age and lifestyle.

The bottom line: The subscription e-commerce market is projected to grow this year, Coresight says, but it needs significant investment in order to drive revenue and profitability.

• This is particularly true for subscription services that touch on beauty, fashion and pet supplies, Coresight says.
• “Subscription e-commerce companies need to retain customer loyalty among strong competition to reduce churn rates,” Coresight says.

Editor's note: This story has been updated to change the name of BarkBox's business line to Bark Food from Bark Eats.