Subscription Boxes: Artificial Intelligence Meets E-Commerce

A good blend of Artificial Intelligence and e-commerce, anyone? Well yes, Subscription Boxes are here to stay! Take a quick read on the newest trend, thanks to Artificial Intelligence and e-commerce..

Who doesn’t love surprises? Imagine a box being delivered to you at your doorsteps, which just takes care of your monthly, weekly or quarterly needs, in a way that’s fresh, unique and totally customized. Isn’t this thrilling? This is the latest disruptor in the start-up segment – The Subscription-based model. Gone are the days when subscription service was only meant for magazine or newspaper. Today, things like children’s activity tools, grocery items, daily essentials like milk, medicines, grooming essentials, ready food all are available on subscription basis.

In India, start-ups like Let’s Shave, My Envy Box, FlintoBox, Einstein Box etc. have opened shops and are receiving encouraging response.

The box below shows details of the various spaces in which Subscription box model is operating in IndiaSubscription boxes The newest offering from e-commerce industry categories


How exactly does a Subscription-based model work?

Subscription based model earns recurring revenue by selling goods/services to people in preferred periods. Some prefer it monthly, some weekly while some might prefer to do it quarterly. The model works by collecting fixed amount from customers multiple times for prolonged periods.  Here the focus is more on customer retention than customer acquisition.

Many start-ups today want to opt for this model because predictability in revenues help them to deal with the initial volatile years, quite well. The delivery model is need-based and works through a three-pronged approach: Predictable demand, Inventory Scheduling and Delivery Planning.

The pivotal success factor- Predictability

So what is the most important factor responsible for the success of the Subscription boxes? Recurring revenues. And this can only be possible if there are less cancellations or the churn rate is role. Here data analytics plays a big role.  If the company is able to predict the revenues well in hand, or if it can forecast the purchase pattern even better than what the customer is able to explain, it has more chances of holding on the existing clientele. Data analytics should be able to help the box companies to be aware of the changing customer demands based on their evolving tastes and preferences.

How Artificial Intelligence will help?

The Artificial Intelligence based software which most of these companies deploy possesses a Preference generation mechanism. Most of the customers before placing an order are asked to fill in a form which comprises their tastes and preferences. The software is designed to enhance the predictability of recurring purchases by a customer.

Not only this, the algorithms can also predict the best match out of the products for customers based on their preferences. Apart from the regular items in the Subscription box, customers also have an option of Curated Boxes once in a while. Through this, the box company can suggest certain other products/brands based on the customer preferences which they will otherwise not have the time to shop for.

Other AI algorithms are meant to track the customer’s satisfaction over a period of time and understand the possibility of them renewing their subscription or dropping out of it. The best part about these algorithms is that they get smarter with each development. Every purchase, renewal or cancellation are mapped into the system and the patterns help them to make more accurate predictions with time.

Subscription box model is here to stay

As e-commerce sites are making a conscious transition from product-based model to customer specific model, more and more companies are switching to subscription models. Experts predict that from the existing B2C model, Subscription boxes can also extend to the B2B model.  It is quite possible that anything right from financial services, industrial equipments, raw material supply for hotel industry or garment industry or research services can be sold as a subscription box model.

Secondly, buyers have very limited time at their disposal each day and they are looking for options wherein they can automate their recurrent purchases. Savings and Convenience is the essence today.

So, we can say that though in the nascent stage, subscription boxes will be continue in the growth trajectory. These small boxes will contain stories of big growth in the future.