The luxury ecommerce industry is experiencing unprecedented growth, but at the same time, luxury brands are facing new challenges. The competition for market share has never been more fierce, and the demand for innovation has never been higher.
Many high-end brands are therefore experimenting with new methods of providing value to their customers outside of the traditional ecommerce format. For example, Ferragamo offers a monthly membership model, Ralph Lauren rents out clothes, and Hermes has launched a tie club.
These companies have found success by giving customers access to exclusive content, discounts on future purchases, or free gifts as incentives for joining member clubs with monthly membership fees.
By enticing customers to sign up for monthly or annual plans, luxury brands are not only able to build sustainable revenue streams, but also increase customer loyalty. They can also create their own “brand universes,” providing their members with a sense of belonging to an exclusive club.
Related Reading: Immersive Omnichannel Experiences in Luxury Ecommerce
4 BENEFITS OF SUBSCRIPTION MODELS IN LUXURY ECOMMERCE
There are many benefits of offering a subscription model, especially for luxury brands. Let’s look at them in detail:
A WIDER CUSTOMER BASE
By amortizing purchases or experiences into monthly payments, luxury brands can reach a new and different audience. Customers who previously could not afford luxury goods at premium prices, such as a Chanel purse at $4800, or a pair of Gucci sneakers at $1200, are now able to access these items at a much more manageable cost. This means that millennials on a budget can suddenly fulfill their dreams of a luxury lifestyle without having to break the bank.
CUSTOMER DATA
One of the benefits, when brands offer their products and services through strategic and well-crafted subscription models, is that they get direct access to valuable customer data. This allows companies to gain a deeper understanding of client preferences. These insights give retailers better abilities to create personalized experiences and can be used to inform business plans or marketing strategies to build brand affinity and loyalty.
Related Reading: First-Party Data Strategy—2021 Trends
RECURRING REVENUE
One of the main advantages of subscription models is the ability to drive predictable MRR (Monthly Recurring Revenue). Knowing what monthly revenue to expect enables businesses to streamline everything from sales to inventory planning and understand how much they can reinvest.
By turning one-time shoppers into repeat (and sometimes lifelong) customers, brands can quickly accelerate their growth. When done well, subscription offers are very effective, as the convenience of receiving curated luxury products at one’s doorstep is easy to become accustomed to.
BUILT-IN VIRALITY
When a customer subscribing to products from a luxury brand is pleased with the service, chances are high they will share this sentiment with other people. Brands can incentivize their customers to spread the word by offering them give-away subscriptions or perks for sharing their offers on social media.
Many luxury consumers consider the brands they buy from part of their personal brands and will happily showcase their affinity. When done well, a subscription can create the kind of “VIP” experience that luxury brands are always aiming for, but that is sometimes difficult to build in a digital context.
Related Reading: Redefining Digital Luxury Experiences in Ecommerce
LOWER CUSTOMER ACQUISITION COSTS
Luxury businesses with a pay-per-product pricing model need to continuously invest heavily in marketing and sales to attract new customers. A CAC (Customer Acquisition Cost) that runs amok is a common source of failure for online businesses, and subscription models are a great way to avoid that. With customers making regular payments and purchases, the customer lifetime value can be dramatically increased.
PERSONALIZED SUBSCRIPTIONS—A NEW WAY OF ENJOYING LUXURY
In the past, luxury brands created a sense of exclusivity through high costs, low quantities, “VIP” access, and personalized experiences. In a digital context, there is a constant need to innovate and come up with new ways of creating demand and desire.
As virtual experiences replace the flagship boutiques, subscription models represent one of the possible avenues for luxury brands to promote their unique offerings. Let’s have a look at five successful subscription models, illustrating five different takes on this concept.
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5 WINNING EXAMPLES OF HIGH-END SUBSCRIPTION SERVICES
THE LAUREN LOOK
Ralph Lauren was one of the first luxury fashion brands to venture into the fashion rental market, providing access to a Ralph Lauren wardrobe without the financial commitment of owning it. ‘The Lauren Look’ is an offer not only for consumers whose stylish aspirations exceed their means, but also for those who could afford to pay but prefer the convenience of being able to swap their outdated garms for the latest season’s.
WATCH GANG
With monthly subscriptions ranging from $29 to $1,000, Watch Gang allows horophiles to discover and add new brands to their watch collections. This subscription service delivers a new timepiece to their customers’ door every month, and sometimes those watches are worth up to five times the membership fee.
ROBB VICES
This luxurious lifestyle brand offers monthly surprise boxes for gentlemen with a flair for the extravagant. The Robb Vices boxes have themes like ‘Italian Design’ or ‘Melted Romance,’ and the content ranges from fine wines and spirits to gadgets and gourmet foods. A 12-month subscription starts at $99.95 per month, and for smokers, the brand also offers subscriptions for Cigar Boxes.
Related Reading: Alcohol Ecommerce – 2021 Trends, Strategies, and Markets
HERMES TIE SOCIETY
There’s no such thing as too many ties, right? With Hermes’ subscription service, The Tie Society, customers get to enjoy meticulously matched new neckwear every month. This is a perfect example of how brands can use subscription services to create a personalized experience.
To join the club, aspiring members are asked to fill out a questionnaire to provide insights into their preferences, style, and favored patterns. The specialists at Hermes’ will then create a custom selection for each member. And not anyone can become a member. To sign up, you need to visit one of the brand’s flagship stores—a creative way to build a phygital experience and maintain that coveted air of exclusivity.
Related Reading: What is a Phygital Experience? 6 Real-World Examples
THE OPULENT BOX
The Opulent Box is a subscription service for luxury jewelry. As a subscriber, you receive custom-selected designer jewelry pieces four times per year from brands like Chanel, Bulgari, Louis Vuitton, and Cartier. Membership starts with a survey to get to know your taste in jewelry, and each box includes appraisals, certificates of authenticity, and luxurious surprises. The price? $25,000 per quarter.
WHILE THE POTENTIAL IS HUGE, CHURN IS HIGH
Research from McKinsey shows that 15% of online consumers have signed up for at least one subscription to receive products of some kind on a recurring basis, the most common model being through monthly boxes.
These boxes often target a younger, more affluent demographic, as a convenient, personalized, and lower-priced way of accessing what they want or need. Ecommerce subscribers, compared with the general US population, are more likely to be between 25 and 44 years old. Subscriptions also seem to appeal particularly to women, who make up 60% of ecommerce subscribers.
And yes, subscription models hold a lot of promise for luxury brands. However, and this is the caveat: churn rates are also very high. Luxury customers expect VIP treatment, and consumers have minimal patience for error or disappointment. This means they will quickly cancel any service that doesn’t deliver excellent end-to-end experiences.
HOW VAIMO CAN HELP
The ecommerce landscape is brimming with opportunities for luxury brands, but succeeding with luxury subscription models comes with its own set of challenges. For brands that are willing to innovate and experiment with new business models and marketing methods, the possibilities are almost endless. Partnering with the right technology experts will help you navigate this new and exciting terrain, so you can reap the benefits while avoiding common pitfalls.
At Vaimo, we are experts at all things ecommerce. We can help you build and finetune your subscription model, implement the technical changes required, and design an outstanding customer journey. Get in touch with our team of experts to explore how we can help you take the next step towards an outstanding digital luxury experience.
