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Sign Up for Disruption: Winning in the Subscription Economy

BY CSA STAFF

Just a few years ago, consumers typically associated subscription services with utilities and print media. Yet the rapid rise of digital technologies has led to an explosion in the number of services available, which cater to almost every aspect of consumers’ lives – from Spotify and Netflix to Birchbox and Blue Apron.

Today, you can even purchase haute couture as a service. Rent the Runway (RTR) lets consumers hire key pieces of designer clothing and trade them in for others when they feel like a change. RTR taps into consumers’ desire for convenience, curation and fun. In a similar way, California-based Golden Tote sends subscribers a monthly grab-bag of the latest fashion, hand-picked by stylists based on the user’s “style profile”.

RTR and Golden Tote are just the latest examples of how subscription services are revolutionizing retail. With the number of “subscription box” sites jumping 3,000% between 2013 and 2016, it’s clear the subscription economy has reached a tipping point.

It’s easy to see why this business model makes sense for established retailers as well as start-ups. In addition to creating new revenue streams, chains can use subscription services to secure new consumer data. The insights gleaned from this data increase the lifetime value of each customer through cross-selling, targeted advertising, tailored offers and discounts.

A subscription service can also be an effective way of promoting new products – Sephora’s “Play!” box sends consumers deluxe sample-size cosmetics each month, plus a card offering a free in-store consultation on how to use each item.

So how can established retail chains respond to this seismic change – and become the disruptors, not the disrupted?

One option is to acquire or partner with existing subscription services. Leading retailers have much to gain from claiming their own share of the subscription economy. And yet, to be successful, there are some key principles that they need to get right first.

Staying timely and reliable

Whatever the product, subscription services need to be consistent and reliable. The reason consumers are loyal to Graze isn’t just because of the selection of snacks on offer – it’s also because they are confident that Graze will deliver their box on time, every week. This means subscribers can “tick the item off their thinking list”.

Innovating the unexpected

For essential commodities like snacks, dogfood or diapers, reliability and convenience drive loyalty. But for non-essential, higher-end items, consumers expect a positive experience beyond the core product. Leading retailers will focus on innovating new ways to delight and inspire subscribers.

For fashion brands such as RTR and Golden Tote, this means curating the best the catwalk has to offer. A key component here is personalization, with consumers seeking products, services and content tailored to their individual preferences.

Owning the new customer experience

Leading retailers understand that, when they provide a subscription service, the supply chain becomes the customer experience. They can no longer rely on in-store displays and talented sales staff to wow customers and reinforce their brand. Instead they provide a seamless digital journey, from the point of sign-up to receipt of goods. A single clunky online experience will cause many customers to lose confidence in the retailer – and make them less likely to subscribe.

Customer-focused, technology driven

For many retailers, moving to a subscription model sounds like a daunting leap into the unknown. The true benefit is getting closer to consumers. Whether the product offerings are low-touch essentials like cleaning products or razor blades or higher end, more emotionally-charged items such as an evening gown or a designer bag, they both rely on accurate consumer information.

The ability to provide reliability, accurate product delivery, along with a great consumer experience calls for reinforced abilities in innovation, digitalization, and the ability to harness consumer data successfully. By putting technology at the heart of their strategy, and inventing new ways to delight and inspire their customers, they can become major players in this growing economy – inspiring fandom at home as well as footfall in the store.


Jill Standish is senior managing director of retail at Accenture.

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Ping pong club rounds out leasing at Philadelphia center

BY Al Urbanski

Spin, an entertainment concept that had its genesis in “Naked Ping Pong” parties in New York’s Tribeca neighborhood, has taken the ground floor space to close out leasing at a new retail venue in Philadelphia.

The glass-fronted, 55,000-sq.-ft. center in Rittenhouse Square, owned by an affiliate of Midwood Investment & Development, is co-anchored by The Cheesecake Factory and Verizon. Also inhabiting the three-story building is &Pizza and WeWork, a collaborative work space.

Philadelphia is the sixth location for Spin, which first opened in New York in 2009. The concept mixes food and beverage with ping pong, and is known for live events such as art shows, ballet battles, and, naturally, ping pong tournaments.

Spin’s other locations are in Chicago, Los Angeles, San Francisco, and Toronto.

Leasing was handled by MSC Retail, which bills itself as an aggregation of artists, dealmakers, restaurateurs, and retail minds “whole lot of other trendsetters.”


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Holiday spending surpasses expectations

BY Deena M. Amato-McCoy

Initial reports about holiday spending bode well for retailers.

Consumers spent 16% more on holiday purchases this year than in 2015, according to the International Council of Shopping Centers Post-Holiday Shopping Survey.

The report finds that consumers spent an average of $711 on gifts and other holiday-related items this holiday season. This represents a 16% increase over 2015’s post-holiday survey results ($611) and is 4% ($27) above holiday shoppers’ intentions as measured in ICSC’s Holiday Shopping Intentions Survey in October.

In total, consumers spent an average of $897 on gifts and related items, dining, movies and other entertainment experiences at malls and shopping centers this holiday season.

Gen X spent the most, averaging $1,000, followed by Baby Boomers ($875) and Millennials ($867). Experiences accounted for 20% of total consumer holiday expenditure, with Millennials topping this spending category at $220, data showed.

“Consumer confidence continued to improve into December, and we saw this optimism reflected in the holiday spending numbers,” said Tom McGee, president and CEO of ICSC. “The strong holiday shopping sea-son suggests a positive environment for retail sales overall.”

More than half (51%) of all holiday shoppers waited until the days lead-ing up to Christmas to complete their shopping, reinforcing the need for retailers to keep pace with technology as it continues to change purchas-ing habits and give consumers more options. Almost 70% of total holi-day related expenditures occurred in stores with both a physical and an online presence. The physical store proved paramount to the shopping experience again this year, with 91% of holiday shoppers spending at physical stores, the exact same percentage as 2015, the report said.

Omnichannel retailers also stepped up their buy online, pick-up in-store services. Among shoppers using this service, 61% made an additional purchase in-person (75% of Millennials, specifically).

In fact, 81% of Millennials visited a shopping center this holiday season, more than any other generation, including Baby Boomers (62%) and Gen X (73%). While Millennials rely on technology and mobile as part of the shopping experience, either research or purchasing, 77% said it is im-portant to buy online from stores that have a physical presence, data re-vealed.

Millennials also used a mobile device while shopping in-stores (86%), and 96% made a purchase from those retailers. Of those who used a de-vice in a store:

• 52% compared prices

• 40% checked availability/inventory

• 37% got digital discounts or coupons

• 33% read reviews/ratings

“The convergence of physical and digital continues to be important as consumers have come to expect an integrated experience allowing them to buy products through a variety of channels,” said McGee. “The survey data proves that omnichannel retailers are the real winners this season as they offer purchasing options that satisfy the shopping behaviors of all generations.”

Among the 70% of consumers that visited shopping centers this holiday season, 73% shopped, 45% dined at a restaurant or other eating estab-lishment, and 26% saw a movie. Among shoppers, the most purchased categories were gift cards (63%), apparel and footwear (50%), and toys and games (44%), the study said.

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