E-commerce keeps growing as consumers enjoy the convenience of shopping online and receiving packages at their door. One segment driving that growth is subscription-based online merchants marketing consumer goods ranging from household items to specialized products.
Subscription businesses grew nine times faster than revenues in companies comprising the Standard & Poor’s 500 index and four times faster than U.S. retail sales for 15 consecutive quarters from 2012 through the third quarter of 2016, according to Zuora, a firm that tracks the business — bolstering logistics companies along the way.
Logistics firms are drawn to subscriptions because the business offers simplified planning and staffing on the fulfillment side, generates predictable monthly revenue and doesn’t increase inventory as products typically are packed and shipped shortly after arrival, said Satish Jindel, president of SJ Consulting Group in Sewickley, Penn.
“It’s a great business because it’s predictable, repetitive and easy to handle,” Jindel said.
The subscription business brought headlines when Dollar Shave Club was purchased by Unilever for $1 billion in 2016. Dollar Shave built a mailing list of 3 million customers with promotional $1-a-month campaigns for its razors and generated 2015 sales of $152 million.
Netflix used the e-commerce subscription model as it distributed DVDs via mail and toppled brick-and-mortar Blockbuster video stores, Jindel said.
“Subscriptions are a booming area now. It’s a convenience thing and people buy it as a gift,” said Bill Young, senior vice president of St. Louis-based Materialogic, a warehouse and distribution service provider.
“The challenge for fulfillment centers is to coordinate the mailing with the client. It could be a single piece or a multiple pieces or multiple components,” Young said.
The largest group of e-commerce subscribers are 25 to 44 years old, have incomes from $50,000 to $100,000 and live in urban environments, according to The State of the Subscription Economy, 2018 by McKinsey & Co.
Logistics firms are jockeying for this rising business.
RLS Logistics, headquartered in Newfield, NJ, has been handling temperature-controlled direct to consumer fulfillment for over 20 years. RLS consistently is named as a top 3PL through Food Logistics magazine. The company has recently expanded its temperature-controlled direct to consumer platform to Salt Lake City, UT. With this new location, they are able to service most of the US Population within 2-day ground shipping. Direct to consumer e-commerce represents the fastest growing business unit at the company. “We continue to invest in this fast-growing business unit with new technology and expansion plans”, said John Gaudet, Vice President Business Development.
Our customers have been entrusting us to manage their complicated temperature-controlled supply chain for over 50 years. Our flexibility and custom-tailored solutions allow us to be a valued partner to our customers. Whether it is fully integrated or a stand-alone solution, our dedicated team is ready to meet your needs today.
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