Retail Subscriptions: The US Trend Is Taking Over the EU Market

In recent years, retail subscriptions have emerged as a new trend. Paired with the rapidly evolving capabilities of eCommerce, they offer a convenient and cost-effective way for consumers to access their favorite products without having to make frequent trips to physical stores.

As a result, this model has disrupted traditional retail practices in the US and is experiencing a surge in EU merchants and customers opting for it. In this article, we will explain what retail subscriptions are, explore the reasons behind their popularity, and explain how businesses can ensure they are offering these services effectively.

What Are Retail Subscriptions?

Retail subscriptions are a service where customers pay a recurring fee to receive products on a regular basis, typically monthly or quarterly. Some examples of this service include:

• Beauty boxes
• Meal kits
• Clothing subscriptions
• Snack boxes
• Pet sets

The list goes on - there is a variety of options available due to the fact that the retail subscription model is becoming increasingly popular across a wide range of industries.

Why Is the Popularity of Retail Subscriptions Growing?

Retail subscriptions are becoming more and more widespread worldwide due to the fact that they provide users with a wide variety of benefits, namely:

• Convenience. Retail subscriptions are a convenient way for customers to receive their favorite products without having to visit physical stores, as they typically involve delivery directly to the customer's doorstep.
• Cost savings. Subscription services usually offer discounts and turn out to be cheaper compared to purchasing products individually. Additionally, many retail subscriptions offer free shipping.
• Customization. Many retail subscription services offer a personalized experience for customers, tailored to their preferences and needs. Customers can choose the products they want to receive and how often they want to receive them.
• Flexibility. Retail subscriptions are often flexible, allowing customers to skip deliveries or pause their subscriptions at any time.
• Product discovery. Subscription services often introduce customers to new and unique products that they may not have come across otherwise. This can be especially appealing to customers who enjoy trying new products and staying up-to-date with the latest trends.
• Simpler payments. Instead of having to make frequent individual purchases, customers only need to pay a recurring subscription fee, which can be automatically charged to their preferred payment method. This can make budgeting easier for customers, especially for those who want to avoid the hassle of manually making payments each time they need to purchase a product.

With these reasons in mind, it comes as no surprise that retail subscriptions gained popularity in the US and are now confidently taking over other markets across the globe.

The Difference Between the US and EU Approach

The US was an early adopter of retail subscriptions, with companies like Birchbox and Dollar Shave Club launching in 2010 and quickly gaining a large following. Since then, the subscription model has expanded to include a wide range of products and services, and many new subscription-based companies have emerged.

What’s more, over the past couple of years, the popularity of retail subscriptions has grown in the EU, with reports indicating that the market is expected to reach over €12 billion by 2025. This can be attributed to factors such as increased adoption of e-commerce, changing consumer preferences, the COVID-19 impact, and a growing focus on sustainability and ethical consumption.

While retail subscriptions have gained popularity in both the US and EU, there are some notable differences in the approach to this business model, namely:

Adoption Speed

The adoption of subscriptions as a merchandising model was slower among European merchants and consumers compared to their counterparts in the US. Some possible factors that may have contributed to it are:

• Cultural differences. There are significant cultural differences between the US and Europe in terms of consumer attitudes toward subscriptions and the willingness to commit to recurring payments.
• Market size and fragmentation. The European market is more fragmented compared to the US one, which makes it more challenging for subscription-based services to achieve economies of scale and profitability.
• Payment infrastructure. The payment infrastructure in Europe is different from the US, with some countries still relying heavily on cash payments. This poses challenges for the spread of subscription-based services that require electronic payment processing.
• Regulatory environment. The EU has stricter consumer protection laws and regulations than the US, which may have made it more challenging for subscription-based services to get adopted and operate in the European market.

Product Selection

The demand for products differs across the EU and the US, which results in distinct sets of product categories offered to consumers in both countries.

The subscription services market in the US is primarily driven by convenience and value, with replenishment offers being the dominant type of service. On the other hand, in Europe, there is more emphasis on luxury goods and brands often use subscription boxes as a way to introduce consumers to new high-end products.

Pricing Structure

This means that US subscription services may offer more pricing tiers and options to cater to diverse consumer preferences, while EU subscription services may focus on providing essential services at competitive prices.

Additionally, due to the larger market size and competition in the US, subscription services may offer more promotions, discounts, and incentives to attract and retain customers. In contrast, the EU market is more regulated, and there are more restrictions on pricing and competition, which may limit the pricing flexibility of subscription services.

However, it's important to note that the pricing structure of subscription services can vary widely depending on the industry, service provider, and consumer demand.

How to Create a Winning Retail Subscriptions Strategy?

For instance, businesses can enable users to personalize their orders and choose the number of products they wish to receive, giving them the flexibility to customize their subscriptions according to their unique needs. Consumers who desire control over their subscriptions are also sure to appreciate having the option to pause, skip, or upgrade their offers as needed.

Furthermore, clients expect brands to offer multiple payment options, while also making the checkout process frictionless by allowing one-click purchases. Thus, brands that will manage to analyze their target audience and optimize the payment process to match their exact wishes are guaranteed to retain customer loyalty over the long term.