The Benefits of CPG Subscriptions, Featuring Recharge
Consumer packaged goods are perfect for subscriptions. Let’s zero in on the definition of consumer packaged goods to really emphasis how well suited they are for subscriptions:
“Consumer packaged goods (CPG) are items used daily by average consumers that require routine replacement or replenishment, such as food, beverages, clothes, makeup, and household products.”
At Recharge, we categorize “replenishment” as one of three different kinds of subscription offerings (the other two being curation and access). So quite literally baked in the CPG definition is a subscription offering, making CPG subscriptions a match made in heaven. So let’s elevate your brand to celestial status and talk about this heavenly pair.
Subscription modelFirst, let’s give a quick rundown on the subscription model before we get to preaching the gospel of CPG brands utilizing subscription services.
It’s easy to see now that commerce is evolving faster than ever before. Zeroing in on subscription models, the global subscription economy is projected to grow 70% year over year and hit $500 billion by 2025. In fact, subscription-based brands see their AAR grow 9x faster than the S&P average.
Let’s directly look at the effectiveness of some traditional CPG verticals and how successfully they match with subscription models. Food & Beverage subscriptions have the highest AOV of any vertical (and mostly recently saw a staggering 100% subscriber growth from 2019 to 2020).
Not to be outdone, Beauty & Personal Care subscriptions had a boom of 120% subscriber growth from 2019 to 2020. What’s more, in that same period their AAR for the vertical skyrocketed, increasing 189%.
Our State of Subscription Commerce Report analyzes the ways in which the subscription industry transformed between 2019 and 2020, breaking down our findings into key takeaways you can apply to your future business strategy.
CPG companies that aren’t optimizing their digital channels to offer replenishment subscriptions are missing out on these kinds of windfalls.
Benefits to CPG subscriptions
The subscription model is so enticing to consumers and brands because it’s an ongoing mutual value exchange for both parties. For merchants, subscriptions create predictable revenue, better inventory forecasting and analytics, reduced churn, and higher average order values.
Consumers get the convenience of direct-to-consumer shopping, with everyday goods delivered straight to their door on a cadence of their choosing through their customer portal. The subscribe and save business model is also a very attractive offering to customers because—who doesn’t love a good deal?
Capitalizing on recurring revenue streams through replenishment subscriptions will help your bottom line and give you direct relationships with your customers. The nature of recurring orders gives you multiple touchpoints to create a bond with your customers and cultivate a sense of community around your products.
That opportunity for a customer experience interaction is nonexistent in-store for consumer packaged goods brands. There’s little chance for CPG companies to flex their brand voice, to provide customers with more information about products and company values which limits chances to improve brand loyalty.
Subscription based companies have the advantage of using the regular cadence of orders to offer cross-sells (one-time products) and/or upsells that they know their shoppers will find useful with the click of a button. They’re selling directly to consumers, cutting out the need to go to big box retailers, browse aisles and wait in lines at checkout.
Consumer expectations are shifting and brands that don’t offer online channels selling directly to their customers will be left behind in the dust. Those that meet consumer demands with digital offerings, leverage subscription models and provide an outstanding customer experience will reap the benefits of being in the vanguard of the consumer goods industry. Our mission at Recharge is to help brands grow their business by creating a seamless buying experience.
At Recharge, we turn transactions into relationships through seamless subscription commerce. CPG companies crushing it with subscriptions
Let’s look at some real world examples of CPG companies offering subscription services.
Of course, there’s Dollar Shave Club, which in the early 2010s exploded onto the scene with their razors and personal grooming products subscriptions (and then was acquired by Unilver for $1 billion in 2016). But let’s look at some more recent examples of successful CPG brands using subscription models to tremendous success.
Native is a DTC brand that sells clean and cruelty-free personal care products. After disrupting the industry with its subscription-based model and chemical-free deodorants, the brand was acquired by Procter & Gamble and expanded its product line to body wash, soap, and toothpaste.
In combination with BVA and Recharge, Native was able to increase new subscribers by 142%, increase overall subscriptions revenue by 40% and see a 15% decrease in churn rate.
LOLA, creators of 100% organic cotton and gynecologist-approved sexual health products, are another DTC brand who bucked the CPG tradition of starting out in store. Instead, LOLA allows customers to customize monthly subscription boxes tailored to their unique needs, and have them shipped just on time so customers are never caught without period products when they need them.
The opportunity for all CPG brands is ripe for the taking in ecommerce and especially through utilizing subscriptions. Selling direct to online shoppers should be simple and intuitive for any customer visiting your website. Brands that are slow to recognize the momentum of click and mortar will miss out on the boon of DTC subscription based business.
How to get started with subscription services
The first place to start is determining your subscription business plan. Specifically, what offerings you plan to allow for your recurring subscriptions. Honestly, if you’re a CPG business, I can guarantee you it shouldn’t be hard to think of several of your products that are perfectly suited for subscriptions.
That’s the easy part. Getting your subscriptions started? That’s where an agency like BVA and a subscription payments solution like Recharge can make all the difference. Unlock the power of repeat purchases and lower the friction around purchasing for your customers with subscriptions.