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Our Take on Recharge’s State of Subscription Commerce Report

We’ve said it before, we’ll say it again: we love subscriptions. They can be such a win-win for both consumers and brands. That’s why we were excited to read Recharge’s latest State of Subscription Commerce report, which reviews the health of the eCommerce subscription industry and delivers some interesting insights. 

It’s forecasted that subscriptions will continue to grow – from about $650 billion in 2021 to $1.5 trillion by 2025. The Recharge report found that subscriptions in 2021 remained true to this upward trend, although the spike was bigger in 2020. 

Is this projected growth – more than doubling in four years – realistic? Or is 2020-2021 a blip caught in between the forces of a pandemic and now other financial and global pressures and a rising cost of living? 

We can’t see that far ahead in our crystal ball. However, what’s clear is that to stay competitive, subscription programs may have to work even harder to prove their value to consumers. And by “value,” we don’t just mean price. Brands can deliver value in other ways, including convenience, customization, access and community.

eCommerce subscription growth is still healthy

But back to the Recharge report. For now, at least, the short answer is: subscriptions are still hot. In fact, many consumers say they have two to three subscriptions at any time. Another survey found that 23% of US consumers who began a subscription during the pandemic are likely to continue.

While subscriptions may not be right for every brand or business, the variety of types of subscriptions that consumers value – subscribe & save/replenishment, curated boxes, streaming services, item share/rentals, VIP membership/access – is giving more brands more options for creating successful programs.

How much did the eCommerce subscription industry grow in 2021? Recharge reports that existing subscription brands, across all verticals, grew their customer base by 31% in 2021 over 2020. 

The report breaks it down further by vertical. Here are a few highlights: 

  • Beauty and personal care: This vertical has the most subscription customers than any other category after a 120% increase in subscribers in 2020; 2021 saw an additional 25% increase in customer base, 27% increase in monthly subscriber rate, and a 72% increase in monthly recurring revenue (MRR). 
  • Fashion and apparel: The fifth largest vertical in terms of overall subscription customers, fashion and apparel saw 13% growth in overall customers, 27% increase in monthly subscriber growth, and 62% higher MRR.
  • Health and wellness: Third largest vertical in terms of overall subscription customers; the health and wellness category saw 34% growth in the number of customers overall, 39% increase in monthly subscriber growth, and a whopping 138% increase in MRR (this makes sense in a pandemic!). 

Verticals with the highest levels of overall customer growth were pets and animals (64%), food and beverage (41%), and home goods (39%). Pets and animals saw the sharpest rise in number of monthly subscribers (75%) – think about all those pandemic puppies! 

Subscription growth by vertical (2021)

Increased subscriber numbers are just part of the story

Also interesting was the information on customer lifetime value (LTV) and average order value (AOV) in the Recharge report.

Recharge’s research shows that subscriptions are successful in increasing LTV, with retention rates averaging 42% after 12 months (compared to an average of 1% monthly retention rate for regular eCommerce). But it’s not magic; brands have to put in the work. Retention rates go from 80%+ in the first month to 50-60% after four months.  

They also found that higher AOV does not necessarily correlate to highest annual gross merchandise value (GMV). Instead, brands of any size that can engage customers with offerings like one-time purchase options or subscription upgrades see higher AOV. 

Experienced subscription brands fared better than newcomers

Unsurprisingly, Recharge found that brands with subscription programs in place longer did better overall, bringing in more active subscribers than the newbies in 2021. Recharge speculates that this is because they’ve had time to fine-tune and optimize their subscription business. 

Also – very interesting to us! – Recharge found that technology makes a difference. Their research shows that brands with more third-party integrations, including customer service, email marketing and SMS apps (that help provide more seamless subscription CX) have greater success with subscriptions. 

What will the future bring for subscriptions? 

2020-2021 shopping and subscription trends do seem like they stem from lifestyle changes caused by the pandemic. However, just like the “work from home” trend that’s currently morphing to a hybrid model for many (e.g., two days in the office), some of them may be here to stay, at least in some form. Hopefully you’re keeping your pandemic pet, you still may need new home office furniture, or maybe you’ve developed a new appreciation for your own wellness.  

In addition to new habits that may be here for the longer term, Recharge puts forth another theory: that subscriptions hold appeal for more consumers because we’re looking for stability in our lives. Products and services that we can depend on bring us peace. It makes sense that that was the case during the turbulent times of the last two years – but perhaps turbulence is the new normal and we can use all the stability we can get. 

Furthermore, all the usual benefits – convenience, discounts, access to differentiated products or experiences – are still strong reasons why consumers will continue turning to subscriptions.

Grow your own subscriptions

In addition to all of the statistics, the Recharge report provides insights and best practices for maintaining a healthy subscription program – check it out! Other resources on our blog you may find helpful include tips for optimizing your subscription program using analytics, and guidelines on how to provide customers with a better subscription management experience. We’ve helped many of our clients implement customer-centric subscription management experiences that grow LTV. Contact us if you’d like to learn more.