Shoes or kits for intimate hygiene received as a part of a subscription are not a vision of the future but a reality.
Subscription models are becoming an increasingly longer market branch in Poland.
Nike has met the needs of parents this year (meaning 2019, as of now, the service is discontinued) by offering a subscription with shoes for children as part of its "Adventure Club." As the company explains, this service answers the problem of frequently buying new shoes for continuously growing kids.
The first and cheapest pricing plan is 20 dollars per year, and in exchange, customers receive four pairs of shoes over 90-day intervals.
The other plans include more shoes delivered more often for a higher price. There are more than 100 models to choose from.
By entering the market with a new service, Nike is testing the waters — the scale of the "Adventure Club" success will probably be a reference point for deciding whether to apply the subscription model to the adult customer.
Subscriptions models in Poland
Does the idea of shoes seem exotic to you? So what would you say about a kit with intimate hygiene products for women? This idea was introduced by Kaja Rybicka and Marek Gut, who created Your KAYA brand. On their website, you can find intimate hygiene kits with subscriptions ranging from 2-6 months (66-336 PLN).
Such businesses are doing very well, especially abroad; some examples of brands include: myLOLA, Blume, or This is L.
Two distinguishing features of Your KAYA are the focus on products without harmful chemicals and — as Marek Gut convinces — creating a narration that doesn't boil down to unfunny jokes or harmful and stereotypical slogans known from ads of popular brands which infantilize the problem of menstruation.
From a beer to a book
In Poland, another interesting business is SubClub which currently offers four subscription clubs. By subscribing to the first one, customers receive craft beer monthly from abroad. There is also chillbox, which is "a box full of relaxation" where you can find cosmetics, snacks, gadgets, and a book.
Parents and their children can enjoy a "reader's package," which contains two books for kids published by Zakamarki. The last package answers the needs of tea connoisseurs — in it, you can find tea from, among others, Japan, India, or China. The characteristic feature of every package is that subscribers don't know what the manufacturer will prepare for them each time.
How Netflix dominated competition
Subscription models in Poland are primarily associated with Netflix. According to the study by Statis Face commissioned by Blue Media, almost a quarter of Poles already pay for access to platforms with movies and series, such as Netflix and ipla. With around 38 million residents, this would give an impressive number of roughly 9.5 million subscribers.
A report by the Screenlovers seems more reliable as it's based on, among others, data from Ampere Analysis, Nielsen, and Ariadna Polish's research panel. The figures presented in it are less astonishing. However, the increasing popularity of Netflix in Poland can still be seen. Over the past year, the platform increased its domestic user base by half, reaching 775,000 subscribers.
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The number of paid subscribers of VoD services in Poland (statistics for 2018) according to Ampere Analysis:
- ipla: 1,17 million
- Netflix: 775 thousand
- Player: 519 thousand
- Amazon Prime Video: 158 thousand
- CDA Premium: 143 thousand
- Showmax: 100 thousand (the portal was shut down on January 31, 2019).
CDA.pl with paid subscriptions
Even CDA.pl noticed the potential of the subscription model, which for a long time provided only free videos. In January 2016, it launched the "CDA Premium" service, in which users receive paid access to movies provided by distributors.
"Over 200 thousand people currently pay monthly subscriptions to our service. Let me add that we are the only publisher of video-on-demand content in a subscription model in Poland that shares this type of data: Netflix or HBO MAX or other parental services such as ipla or Player don't disclose the number of paid subscriptions," Wolfgang Laskowski, the Management Board Representative for Service Development and Spokesperson for CDA.pl informs.
Apple loses on iPhone sales but is boosted by subscriptions
It's not surprising that Netflix or CDA.pl are becoming an increasingly stronger branch of the subscription market, as there is generally an upward trend.
Over the past year, the percentage of people declaring the use of movie or music streaming platforms has more than doubled — according to this year's study by Autopay Research.
Moreover, subscription software is already used by 18% of Poles (an increase of 9 percentage points) and music or games platforms — 13% (also an increase of 9 percentage points).
An interesting case is Apple, which was powered by skyrocketing sales of subsequent iPhone models over the years. However, this is the first time in seven years that the share of these sales has fallen below 50% of the company's overall revenue.
Meanwhile, the sales importance of services such as the AppStore, Apple Music, and the Apple Pay transaction service has increased.
Shaving as a subscription
Let's remember that the subscription market wasn't only shaped by digital products from Apple or Netflix but also, among others, by Dollar Shave Club, which was created in 2011. Today it has millions of subscribers. Initially, the company delivered only razors. Currently, it offers complete hygiene kits for men.
The originators of the venture say that their store was born due to being tired of constantly spending $15-20 a month on shaving kits. Mark Levine and Michael Dubin proposed their own razors and started selling them as a monthly subscription for 1-9 dollars, where the cheapest pricing plan included a small delivery fee.
Polish copy of Dollar Shave Club
DollarShave Club inspired, among others, Gillette; the company in 2014 launched their own subscription model based on similar rules to those of Levine and Dubin's idea. The Dollar Shave Club was taken over in 2017 by Unilever company. According to unofficial information, the amount for the acquisition was $1 billion.
Interestingly, Dollar Shave Club lived to see its copies in Poland in the form of Easy Shave Club, which was created in late 2014.
"A few years ago, a friend told me about Dollar Shave Club during my trip to the USA. I thought such a business also had a chance to be successful in Poland since people all over the world shave. I imported razors that were the same as those offered by Dollar Shave Club.
It meant offering a solid product, not something that would crumble after a few shaves. Next, we created a website designed for the domestic market, and that's how we took off with the business — Wojciech Bartoszek, the creator of Easy Shave Club, tells The Story Journal. Razors sold by the company are produced by a Korean company Dorco.
Despite appearances, Easy Shave Club's target audience is not young people who would be familiar with new technologies.
"In our country, mostly older people shave daily. Younger people usually limit shaving or have beards.
Meanwhile, older people often are not proficient in using the Internet and are sometimes wary of the word "subscription." That's why we developed a flexible model of cooperation with our subscribers. We believe that we can always reach an agreement," Wojciech Bartoszek explains. According to him, currently, in the Easy Shave Club database, there are over 1000 subscribers.
Wojciech Bartoszek reveals that the company is planning to, among others, offer razors for women as well.
"We would like to open up to this market because, among other reasons, women are, according to our observations, more active in social media.
We remember that razors for women from Dorco are an interesting alternative for leading brands — both in terms of price and quality," the originator of Easy Shave Club announces.
Services in the subscription model — Allegro and Empik are on the move
The subscription model plays an increasingly significant role in the traditional E-Commerce market. In August 2019, Empik launched its "Empik Premium" service. By paying a recurring subscription, you get, among other things, a 15-20% discount on products, plus free delivery. The cost of the subscription is about 10-50 PLN per year.
Allegro also decided to take a similar path. By paying 10,99 monthly or 49,00 yearly, customers have access to free delivery to parcel lockers and pickup points.
"Poles are very satisfied with our service, thanks to which they save enormous amounts of money. A few months ago, it was 250 million PLN saved on delivery costs.
Users of "Allegro Smart" generally shop six times more often than those who didn't choose this service," Michał Bonarowski, Public Relations Officer in Allegro Group, tells us.
Advantages of the subscription model from the perspective of an entrepreneur
You can see that the subscription model can be applied to more and more industries. Michał Jędraszak, Chief Executive Officer in Straal, believes that it brings more benefits in places where certain conditions are met.
Apart from such obvious things as meeting a continuous or recurring customer need, he lists, among others, the limited accessibility of a product without a subscription, for example, regarding a high price or the need to make a considerable effort to make a purchase.
According to Michał Jędraszak, crucial advantages of the subscription model include the following:
- Up-selling — offering a customer a product of higher quality or class and, therefore, a higher price
- Cross-selling — offering complementary products. For example, when buying shoes in an online store, you can see information about complementary products, e.g., shoe polish
- Greater stability and predictability of profits
- Possibility of cheaper up-selling and cross-selling to the existing subscriber base
- Increased cost-effectiveness resulting from the fact that maintaining an existing customer is five times cheaper than acquiring a new one
- Ability to reach out with an offer to new customer groups — who were previously excluded due to economic barriers
Maintaining a customer
We could say that maintaining a customer in the case of the subscription model generates lower expenses. However, Michał Jędraszak, who himself agrees with this statement, emphasizes that it depends on the industry, the subject of the transaction, and many other factors.
Customer acquisition and retention are activities aimed at attracting and keeping customers.
"The way of thinking about acquisition and retention of customers has crucial significance. In traditional trade, an acquired customer was defined as anyone who purchased a given product or service and was ready to repeat the purchase.
This approach has resulted in limited precision in estimates and significant expenses for marketing campaigns aimed at retention. In the case of a subscription, the customer remains in a relationship with the seller for the entire time the subscription is paid, and the risk of them leaving for a competitor is much lower," the expert describes.
Let's not forget that retaining a customer is not so easy either.
"From a business perspective, it's important how long a given subscriber has to pay for a subscription to start generating profits for the seller. Naturally, this time should be as short as possible.
This doesn't mean, however, that maintenance doesn't cost anything. On the contrary, as I mentioned earlier, the subscription business has to ensure that the customer is satisfied with their membership in the "club," which also costs money.
However, it's worth remembering that in modern marketing, the goal that every brand strives for is not only for the proverbial Smith to buy the product but for them to recommend it with conviction to their family, friends, and in all the right social circles," Michał Jędraszak explains.
"Consumers trust other consumers much more than the advertising campaigns of brands; that's why informal "ambassadors" are worth their weight in gold. In other words, expenses for retaining a customer, that is, their satisfaction, are simultaneously an investment in acquiring new customers because they increase the effectiveness of acquisition and reduce its cost.
So the question of lowering the maintenance cost can't be answered with a specific number because the terms "maintenance" and "retention" have different meanings in the context of subscriptions," the CEO of Straal summarizes.
Everything as a subscription?
Examples of Nike or Your KAYA show that consumers increasingly lean toward buying physical products as a subscription. The question is whether the subscription model will dominate the market so much that the purchase of ordinary products in a subscription will become something natural.
"I think that in some industries, it's unavoidable or almost certain. I think about industries where IoT solutions are developing the fastest.
Subscriptions for consumable goods for office equipment, detergents, and cleaning products for smart home appliances, and the automotive industry — especially in the age of autonomous vehicles — are just some of the sectors driving the growth of subscriptions for physical products.
Naturally, in the case of cheap products that the consumer buys occasionally, subscriptions do not and are unlikely ever to make much sense," Michał Jędraszak says.
Do Poles monitor their subscription spending?
It seems like everybody profits from the subscription model, both entrepreneurs and customers. However, it's concerning that people have a problem controlling their subscription spending. "As the study showed, Poles do not control their subscription spending, although they claim to have a sense of control over it. This is a pretty dangerous signal," Michał Jędraszak points out. He believes that more and more applications for managing subscriptions and related expenses will appear on the market.
Disclaimer
The sample prices presented in the article do not constitute a commecial offer within the meaning of the Polish Civil Code.
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