Subscription Services and Their Impact on Retail


Co-author: Alejandro Castro

Subscription services are becoming increasingly popular. Once offered by e-commerce retailers, subscription services have caught the attention of traditional retailers.

The concept is simple. Much like newspaper or magazine subscriptions of days past, a consumer pays a monthly fee for a box containing clothing, supplies, or even jewelry, all worth more than the fee.  There are subscription services for all types of goods ranging from dog toys to watches.

These services provide guaranteed income opportunities for traditional retailers. While retailers may have fluctuating income based on peak and low seasons, subscription services provide constant flow of income that can offset a particularly low season. With these benefits, however, come risks. As consumers frequent brick and mortar stores less and less, traditional retailers should weigh whether the gains attributed to these novel services are more significant than losses caused by decreased in-store foot traffic.

Subscription services can be a double-edged sword — bringing in additional customers and a steady stream of guaranteed monthly income, but also drawing consumers away from stores. In-store consumers tend to purchase extra goods that they would not otherwise buy. Thus, the move towards subscription services could also cost retailers income realized through impulse in-store purchases.  Retailers will have to balance whether the advantages are worth the potential losses.

Retailers should also review subscription services regulations, including state laws such as California’s Automatic Renewal Law and the Federal Restore Online Shopper Confidence Act. These laws require business to provide subscription services terms in a clear and conspicuous manner, and they impose consent and cancellation requirements.

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