It might feel as if summer has just ended, but fewer than eight weeks remain until Christmas: The holidays are almost here. And according to a survey conducted by Harris Poll, more than 80 percent of shoppers plan to spend as much as or more than they spent last year on gifts, and brands in every industry want a piece of that spending pie.
In this Q&A, OceanX CEO and founder Georg Richter gives his predictions for the next quarter and holiday shopping in subscription and direct-to-consumer (DTC) retail.
#1 What are your predictions for the DTC retail industry for the upcoming holidays?
Georg: Direct-to-consumer selling actually does have seasons. The holiday season is the least active in terms of starting or investing heavily into new initiatives. It’s the time of year when all brick-and-mortar and e-commerce retailers spend the most money on media and advertising and go heavy on promotions, especially around Black Friday and Cyber Monday. It’s not a good idea for most subscription companies to try to acquire customers during the holiday season, unless the focus of your subscription is around gifting — CPOs are simply prohibitive. As an example, a vitamin or even razor subscription might not be seen as a loving gift as opposed to a curated box from FabFitFun.
It’s likely that we will see more subscription marketers offering their goods in traditional retail environments — Target has often been the first place these products show up. Target is testing a new hybrid concept from Quip for the holidays where you can buy the electric toothbrush kit in the store but you need to go direct to Quip for the replenishment heads. But that won’t last forever. We will see Birchbox at Walgreens and perhaps the new line of razors from Harry’s called Flamingo targeted at women at CVS. These partnerships work for both parties, as the subscription brands get a wider reach and the retailers look more modern.
Which subscription-focused retailers do you think will see success during the holidays? Who is poised to win and why?
Georg: As explained earlier, subscription companies won’t be as focused on enticing new members to subscribe, but they will still add members through gift-giving. I believe subscription delivery services like Stitch Fix or FabFitFun or a wine club subscription like Winc make nice holiday gifts, and I’m sure many others feel the same way. The more expensive or curated subscriptions will be the winners as opposed to more subscribe and save and replenishment models.
What is the biggest trend you expect to really take off for retail and subscription retail this holiday season?
Georg: The biggest trend ahead is certainly increased curation, personalization, and customization. It’s difficult to execute, but it builds interest and loyalty among a company’s customer base, leading to a higher lifetime value. It’s a win-win for the subscription retailer and its consumers.
Increasingly, AI will be used to find the right combination of products for a specific person. And sooner rather than later, we will products such as vitamins, skin, and hair care become customized using blood or DNA tests. We are already seeing a little of this with companies like Care/of in vitamins and Function of Beauty in hair care. Today, it’s still mostly one product or set of products for all users, but that can’t be the way of the future.
In my opinion, marketing for subscriptions is still too Millennial-focused. That has to change: Subscription companies must expand in both directions to market more to Baby Boomers and Generation Zers. The increased use of technology for communication and online ordering will help here. Voice search alone is projected to jump to $40 billion in just four years, which provides subscription companies the opportunity to expand their target audiences.
Finally, there is another trend in the market already but that still has legs: organic and natural products. These programs do already exist, but the hurdle so far has been affordability. Fortunately, prices are coming down.
What should DTC brands do this holiday season to stand out?
Georg: It will be difficult and costly for brands to stand out. Of course, there is always room for the introduction of game-changing technology, products, or gift ideas. For instance, a company could bring colored contacts into the mainstream, offering a way to change our eye color this Christmas. Or perhaps someone in the jewelry or hobby industry, which saw the least holiday spending in 2017, will come up with a new product that will net them more of the season’s spending windfall.
The holiday season might mean something different to subscription and DTC retailers than it means for traditional retailers, but it’s still a chance to make sales and add members. Only time will tell for certain who wins out this year.