Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / Why DTC Brands Are Switching to Subscriptions
Transcript
- Lucas: So, Luna, you know how every DTC brand these days seems to be pushing a subscription? I was looking at some numbers this morning — the subscription e-commerce market has been growing at a compound annual growth rate of around 20 percent over the past few years, and it's not slowing down. Luna: That's wild. But it feels like some brands just slap a 'subscribe and save' button on their product page and call it a day. Is it really that simple? Lucas: Not at all. And that's exactly what we should dig into today. The difference between a subscription that works and one that just adds friction can be the difference between doubling your customer lifetime value or watching your churn eat your margins. Luna: Before we dive in, I want to mention something that's been on my mind. We've been doing this show for a while, and it's completely ad-free. That's only possible because a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo. It's a small group, but it literally funds us making this many episodes. Lucas: Yeah, and it means we can keep these conversations honest and specific, without worrying about pleasing sponsors. So if you've gotten value out of any of these episodes, that's the way to keep it going. Appreciate every single one of you who does. Luna: Alright, back to subscriptions. So what are the main models that DTC brands are actually using? Lucas: There are really two big buckets. Replenishment subscriptions — think razors, vitamins, coffee — where you're buying the same thing on a regular cycle. And then curation subscriptions — think beauty boxes or snack boxes — where the surprise is part of the value. Luna: And the economics of those are pretty different, right? Lucas: Completely. Replenishment is about habit and convenience. Dollar Shave Club is the classic example. They built a whole brand on 'forget buying razors at the store.' The retention is driven by making it easier than remembering to buy. Luna: But I've read that Dollar Shave Club actually had a lot of churn in the early days. How did they fix that? Lucas: They leaned into the subscription mechanic — they started offering a mid-tier plan with a handle and extra blades, and they made it cheap enough that cancelling to save a few bucks wasn't worth the hassle. Also, they invested heavily in making the unboxing experience shareable, which brought in new subscribers at a low customer acquisition cost. Luna: So it's not just about the product, it's about the whole experience around it. Lucas: Exactly. And then you have curation models like Ipsy. They send a monthly Glam Bag with five sample-size beauty products. The value isn't just the products — it's the discovery. People stay subscribed because they love the 'what am I getting this month?' feeling. Luna: But Ipsy also has a lot of data on their subscribers, right? I remember they use quizzes to personalize each bag. Lucas: Yeah, they ask about skin tone, hair type, style preferences. That personalization is what keeps churn low. If you feel like the box was made for you, you're less likely to cancel. It's a great example of using data to make the subscription sticky. Luna: So what's the big mistake brands make when they first launch a subscription? Besides just adding the button? Lucas: I think the biggest one is not thinking about the cancellation flow. They design the signup flow with all this care, but then make canceling a pain in the neck. That might reduce churn in the short term, but it creates a lot of resentment. And those customers go on social media and tell everyone. Luna: So you're saying the cancel flow is actually a marketing tool? Lucas: It really is. If you make it easy to pause or skip a delivery, people are more likely to come back. Birchbox, for example, had a notoriously difficult cancel process, and they eventually had to change it because of the backlash. Making it easy to leave actually builds trust. Luna: That's a good point. But what about the pricing? How do you decide what to charge for a subscription? Lucas: A lot of brands use the classic 'subscribe and save' approach — offer a 10 or 15 percent discount for subscribing. But that can be dangerous if you haven't built in enough margin. You need to make sure that the discount doesn't kill your unit economics. Luna: Right, but some brands don't offer a discount at all. Like, some coffee brands charge the same price for a subscription as for a one-time purchase. Why would anyone subscribe then? Lucas: Because of convenience. If you're a daily coffee drinker, you don't want to run out. You set it and forget it. The value isn't financial, it's time saved. So the discount isn't always necessary. But you need to communicate that value clearly. Luna: And that's where a lot of brands fall short — they don't explain why someone should subscribe. Lucas: Absolutely. The best subscription pages aren't just product pages with a toggle. They tell a story. 'Never run out of your favorite blades again.' 'Discover five new products every month, tailored to you.' They sell the outcome, not just the product. Luna: So what about the data side? How do you use data to improve your subscription over time? Lucas: The beauty of a subscription is you get data on every single order. You can see when people are most likely to cancel, what products they skip, how often they pause. That's gold. You can test different send times, different product assortments, different email campaigns. Luna: Can you give a concrete example? Lucas: Sure. A skincare brand we've talked about before — sorry, I can't name them — but they noticed that churn spiked after the third month. When they dug in, they found that people were getting products they'd indicated they didn't want in their profile. So they tweaked their quiz and their algorithm, and churn dropped by 15 percent. Luna: That's a great example of using your own data to improve retention. But what about the opposite — using data to acquire new subscribers? Lucas: That's where the smart brands are going. They use lookalike audiences based on their best subscribers — people who've been subscribed for over a year and have high lifetime value. Then they target ads specifically at those lookalikes. It's much more efficient than targeting all buyers. Luna: So the target isn't just 'people who like skincare' but 'people who are likely to stick around.' Lucas: Exactly. And that's why you need to track not just signups, but retention cohorts. If you're only looking at new subscribers, you might be optimizing for the wrong thing. You want subscribers who stay past that 90-day mark. Luna: Speaking of staying, what's the average lifetime of a DTC subscription? Is there a benchmark? Lucas: It varies a lot by category. For replenishment, the average is maybe 8 to 12 months. For curation, it can be shorter — maybe 4 to 6 months — because the novelty wears off. But the best brands in both categories have much longer lifetimes because they keep innovating. Luna: So the key is to keep the experience fresh. Lucas: Right. That's why some curation boxes offer limited edition items or let you swap products in your next box. It gives subscribers a reason to stay. For replenishment, it might be introducing new variants or offering a 'surprise' sample with each delivery. Luna: Okay, but let's talk about the elephant in the room: subscription fatigue. With so many subscriptions out there, how do you convince someone to add another one? Lucas: That's the million-dollar question. The answer is, you have to be genuinely better than the alternative. If your product is something they can easily buy on Amazon with one click, you need to offer something more — maybe a personalized experience, a community, or exclusive products. Luna: So it's not just about automating a purchase, it's about creating a relationship. Lucas: Exactly. And that's why some brands are moving to hybrid models. They let you buy one-time, but they also offer a subscription with extra perks. For example, a pet food brand might offer a subscription that includes free shipping and a free toy every month. The one-time purchase doesn't get those perks. Luna: That's smart. It gives people an incentive to subscribe without forcing them. Lucas: Exactly. And it helps you test the waters. You can start with a hybrid model, see who converts, and then decide if you want to push more heavily into a full subscription experience. Luna: So, for a brand that's thinking about launching a subscription, what's the first step they should take? Lucas: I'd say, look at your customer data. Who are your repeat buyers? What are they buying? If you see a pattern of people buying the same thing every month or two, that's a signal that a subscription could work. Also, talk to your customers. Ask them if they'd be interested in a subscription. Luna: And then, start small. Maybe test it with a small group of your most loyal customers before rolling it out to everyone. Lucas: Yeah, a soft launch is smart. That way you can iterate on the mechanics, the pricing, and the messaging without a huge risk. And you can gather feedback from people who are already fans. Luna: Alright, so we've covered the models, the pitfalls, and the data. What's the one thing you want listeners to take away from this episode? Lucas: I think it's that a subscription isn't just a revenue stream, it's a relationship. If you treat it as a way to understand and serve your customers better, it can transform your business. But if you treat it as just a way to lock in revenue, you'll end up with high churn and unhappy customers. Luna: That's a great note to end on. For those who want to keep supporting the show, you know the deal — buy me a coffee dot com slash fexingo. We'll be back next week with another angle on DTC marketing.