Trend Alert: Apparel Subscriptions Are Here to Stay
Consumer behavior is changing, and many retailers in the apparel space are struggling to keep up -- according to Goldman Sachs, 55 percent of U.S. store closures due to bankruptcy this year have been in the apparel space -- while others are innovating and taking market share. This change in consumer behavior could be why more and more shoppers are turning to subscription clothing box startups such as Stitch Fix and Le Tote.
Stitch Fix is the most successful of the subscription disruptors. The company raked in $730 million in sales in the last fiscal year, according to The New York Times. And it just added more than 100 new brands to its service, hoping to cater to consumers who want access to more high-end products.
Stitch Fix employs personal stylists supported by data analysis and machine learning to tailor offerings to individual shoppers’ style profiles. Customers pay for only what they like and want to keep, and they can return the other items for free.
This in-depth personalization is the true differentiator: Customers like to feel a sense of belonging to something special. A personalized, curated and guided subscription experience is a sure way to inspire that feeling.
The paradox of choice.
Shopping for apparel in large department stores such as Macy's, brick-and-mortar chains such as Old Navy or even in retail stores such as Target or Walmart can often be overwhelming. The same can be said for shopping on those brands' websites or on Amazon. Too many choices can lead to decision paralysis.
It turns out that guided choice, which Stitch Fix and Le Tote provide, might be better than presenting a huge inventory of options. These brands show a real interest in helping their customers make choices, so those customers trust the brands and are willing to pay for their expert curation and guidance.
Some consumers might feel they lack the creativity or confidence to choose the "right" clothing colors and styles. A great stylist, however, can provide that feeling of safety while also inspiring a person to step outside of his or her comfort zone. Stylist-supported choices provide both good looks and confidence.
Focusing on customers' needs first -- as Stitch Fix does by hiring stylists to devote their attention to individual subscribers -- is the right approach in this new membership economy. Department stores, by contrast, tend to be completely product-focused, buying in bulk until customers happen to purchase what they offer.
Making subscribers feel known.
People are likely to rely on personal recommendations from loved ones or influencers for everything from physicians to fashion. This works for subscriptions as well: Social proof is an accelerant for companies gaining ground in their space. Dollar Shave Club, for example, made a big name for itself in the razor world starting with a single YouTube video that was a viral hit. Unilever purchased the subscription company, which makes up 47.3 percent of the online market for razors, CNBC reports, for $1 billion in 2016.
Subscription startups looking to instill the same sense of belonging and stand apart from Amazon and other apparel retailers should keep the following tips in mind:
1. Treat people like people.
Amazon and big companies like it might have mastered online sales and fulfillment, but while the giant retailer can provide recommendations, reviews and detailed product info, it still doesn’t treat its customers like real, individual humans. Amazon’s Prime Wardrobe, for example, lets Amazon Prime members select clothing and accessory items to fill a box. Any items they don’t wish to keep can be returned within seven days for no charge.
However, unlike Stitch Fix, there looks to be no curation or guidance for their choices. Consumers have to choose from hundreds of brands and products. This lack of expert styling is likely to overwhelm customers and, ultimately, prevent them from developing the same sense of belonging that Stitch Fix has so adeptly created. Treat every customer like the individual he or she is, and try to improve that connection with each interaction.
2. Keep surprising subscribers.
Make sure every box surprises and delights its recipient. Add personalized touches to each package, such as a special thank you note, a beautiful box that's exciting to open and even share, an unexpected gift or an extra product that is available exclusively through you.
The surprise itself, of course, will be pleasant, but the anticipation of a surprise with every box is also a good way to keep members engaged. Moreover, personalizing that surprise is even more likely to keep customers coming back. Fifty-six percent of consumers surveyed by Virtual Incentives said they are more likely to purchase from a brand again if it provides personalized rewards.
3. Prioritize customer service.
Customer service is challenging in online retail, even more so in the apparel space, where things like feel, fabric, style and fit can be very subjective. Whether it’s via phone, chatbots, email or social media, it’s difficult to communicate context through those mediums the same way it is made clear when communicating in person. Responsiveness is key -- brands risk losing a customer each time they don’t respond to an issue in a timely manner.
Brands must be available on a variety of platforms: phone, text, chat and social media, to name a few. Self-service resources that improve over time for customers online are also expected for subscriptions. Go above and beyond customer expectations by having customer service representatives follow up with everyone who has an issue resolved to see how the experience was. In a study reported by Annex Cloud, 97 percent of consumers indicated they're more likely to feel loyal toward companies that take their feedback to heart.
The apparel space is evolving every day. Selling clothing online seemed challenging not so long ago, because retailers assumed customers had to try things on in a brick-and-mortar store to ensure a good fit. But as consumer habits change, retailers -- both online and in-store -- must evolve to stay relevant. Companies such as Stitch Fix have proven that subscription boxes are increasingly profitable when managed correctly. Follow these tips to join the ranks of the successful subscription startups.