a hard-to-cancel … · · 2016-09-06birchbox! “1.!loginto!your ... microsoft word - love-hate...

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September 23, 2015

DEBORAH WEINSWIG, EXECUTIVE DIRECTOR–HEAD OF GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2015 The Fung Group. All rights reserved.

A Hard-to-Cancel Convenience:

Our Love-Hate Relationship with

the Subscription Economy

D E B O R A H W E I N S W I G E x e c u t i v e D i r e c t o r –

H e a d o f G l o b a l R e t a i l & T e c h n o l o g y F u n g B u s i n e s s I n t e l l i g e n c e C e n t r e

d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m U S : 6 4 6 . 8 3 9 . 7 0 1 7

H K : 8 5 2 . 6 1 1 9 . 1 7 7 9 C H N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

• The benefits of subscription services are often praised but such convenience often comes with a higher price.

• Often, these firms’ cancellation processes are arduous, and are designed to prolong customers’ subscription periods.

• Cancellation is an important part of the customer experience and many consumers might shy away from subscription services

• Those that provide an easy click-‐and-‐cancel option on their websites also happen to be the leading companies in their respective service areas

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September 23, 2015


A Hard-to-Cancel Convenience: Our Love-Hate Relationship with the Subscription Economy

The benefits of subscription services are often praised: consumers like subscriptions because they can use them to avoid the drudgery of shopping for everyday items or enjoy a nice surprise in the form of a carefully curated package of goodies. Also, the value of a subscription box often exceeds the small fee consumers pay for it, which creates a sense of achievement from saving money. From a business perspective, the subscription model allows companies to amortize the cost of customer acquisition through recurring sales, while at the same time providing better service to existing customers.

Figure 1: Estimated Retailers’ Customer Acquisition Costs

Source: OrderGroove

But such convenience often comes with a higher price than consumers anticipate, as many subscription services are not easy to cancel. FBIC Global Retail & Technology recently examined the cancellation policies and customer experiences of 23 subscription companies from 15 categories, including women’s apparel, beauty and personal care, pets, and men’s grooming. We found several common cancellation practices that work in the companies’ favor, as they help the companies retain business.

Often, these firms’ cancellation processes are arduous, and are designed to make subscribers who want to cancel their service change their mind or at least prolong their subscription periods. Cancellation is an important part of the customer experience and many consumers might shy away from subscription services if they know that they might be greatly inconvenienced should they wish to cancel their service. Here are three common approaches that subscription businesses have adopted in order to help them retain customers:

$76

$304

-‐$32.00 -‐$32.00 -‐$50

$0

$50

$100

$150

$200

$250

$300

$350

No subscripeon program Subscripeon program

Acquisieon Cost

Revenue

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1) Providing customers with no way to cancel or with no cancellation policy information on their website

The most stringent cancellation policy is not allowing cancellation at all. Some of the companies we looked at make it impossible for a customer to cancel the service or even look for ways to cancel it, as the companies provide no relevant information on their websites. One company that allows no cancellations is Cultured Owl, which provides unique educational kits about different cultures for kids. The company states on its website that customers need to purchase subscriptions that cover extended periods and that they cannot cancel after making payments.

Fashion styling subscription Wantable does not display any information about cancellation on its website. When FBIC inquired about cancellation by email, Wantable’s customer service department declined to provide further details, saying that the FBIC email address was not in the company’s customer database.

Eco product subscription company Conscious Box also had no visible cancellation policy on its website, but when we asked the company about its policy, Conscious Box provided an option to cancel via email.

2) Customers have to make a phone call or email in order to cancel a subscription

Cancelling a subscription to women’s styling service Le Tote’s is a long journey. Le Tote subscribers have to make a phone call during US West Coast business hours to cancel. After answering questions about the reason for cancellation over the phone, customers then have to answer the same questions in a follow-‐up email the company sends. Le Tote competitor DailyLook requires customers to send a cancellation request by email. Crafts and hobby subscription company Kiwi Crate and beauty company Julep Maven both list phone numbers on their websites and require that customers call them in order to cancel their subscriptions.

3) Customers must follow a specific billing cycle date in order to cancel or extend their billing period

Both Dollar Shave Club (a men’s grooming subscription) and BarkBox (a pet care subscription) state that the first of every month is the cutoff date for cancellation. If cancellation is made past the first day of a given month, the subscriber will be charged for another month. Other companies use different dates: Kiwi Crate’s cutoff date is the 4th of every month, while Julep Maven’s is the 24th. Beauty company Ipsy states that cancellation takes effect on the customer’s next billing cycle, which is already extended by one extra billing period for the company. All of the cancellation steps for Le Tote have to be done three days before the customer’s next billing cycle starts, and the company has to receive the customer’s previous box of clothing three days before the billing cycle start date, too (customers return any items they do not wish to purchase to Le Tote each month).

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Figure 2. Companies with Hard-‐to-‐Cancel Subscriptions

Category Company

Cancellation Requirement Impossible to

Cancel/ No Information on Website Must Call Must Email

Must Follow Conditional

Steps

Women’s Clothing

Le Tote ✔ And ✔ And ✔ DailyLook ✔

Wantable ✔

Men’s Clothing Manpacks ✔

Art and Culture Cultured Owl ✔

Beauty Julep Maven ✔

Crafts and Hobbies Kiwi Crate ✔

Household Products The Honest Company ✔ Or ✔

Jewelry Rocksbox ✔ Source: Company websites/FBIC Global Retail & Technology

A Few Companies Allow Cancellation Without a Hassle Some of the companies in each category we looked at have cancellation procedures that can easily be followed. Those that provide an easy click-‐and-‐cancel option on their websites also happen to be the leading companies in their respective service areas. Stitch Fix has received both the most funding and the most positive reviews among its peers, while Birchbox has the most subscribers of all the beauty subscription companies. Part of the success of these businesses can be attributed to their offering a seamless cancellation experience.

Figure 3. Companies with Easy-‐to-‐Cancel Subscriptions

Category Company Detailed Cancellation Information Provided by the Company

Women’s Clothing Stitch Fix

“To cancel your subscription, click on “Manage Automatic Fixes” on your homepage. When you cancel your automatic shipments, you can also select to cancel your upcoming shipment. If you don’t cancel your next shipment, it will still arrive on the requested date.”

Shop It to Me “To unsubscribe, click here. We’re sorry to lose you!”

Baby Citrus Lane

“We hope you never leave us, but if you do decide to cancel, you can do so through your account page. Go to My Account, view your Subscriptions, and then click ‘Edit Subscription’. Under the Subscription Details section, you’ll have the option to cancel or pause your renewing subscription. (If you have multiple children receiving subscription boxes, you will need to cancel each subscription separately).”

Beauty

Birchbox

“1. Log into your account on Birchbox.com. Click on your name in the top right-‐hand corner.

2. Click ‘Account Settings’ on the dropdown menu.

3. Click the red ‘Cancel Subscription’ link beneath the ‘Subscriptions’ heading.

4. You’ll receive an email confirming your cancellation shortly after.”

Ipsy “Cancellation Policy for Monthly Subscription Renewals: You may cancel your Monthly Subscription at any time by logging into your account and following the cancellation procedures described there.”

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Category Company Detailed Cancellation Information Provided by the Company

“Cool” Products Quarterly “Sign in to your account in the top right corner of our site, then click on your name to view your account. You’ll see a list of your current subscriptions. Click the ‘cancel’ link next to the ‘Next billing date’ text.”

Fitness and Health GoodMouth

“You can cancel your subscription at any time without any fee, penalty, or hassle. You can cancel online by logging into your account or calling us at 855-‐312-‐3232.”

Trunk Club “Log into your account and click ‘Cancel account’ on My Profile > Edit Profile > Billing.”

Food and Drink Graze “Just go to your orders page, which can be found in your account menu in the top right hand corner of each page on the site.”

Men’s Grooming Dollar Shave Club “You can cancel your account at any time by logging into your account, clicking Membership settings, and choosing Cancel My Account.”

Miscellaneous Mystery Tackle Box

“If you decide you no longer want to receive a Mystery Tackle Box each month you can easily cancel by logging into your account. From there you will see all your active subscriptions. Select the ‘Manage This Subscription’ option and on the next page you will see a ‘cancel this subscription’ link. Click this link and confirm to cancel your subscription.”

Pets BarkBox

“1. Log into your BarkBox account

2. Click on the ‘Subscription’ tab

3. Click on the gear icon underneath the picture of the dog

4. Here you will find the option to cancel the renewal of your subscription”

Source: Company websites/FBIC Global Retail & Technology

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September 23, 2015


Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: +852 6119 1779 [email protected] Filippo Battaini [email protected]

Marie Driscoll, CFA [email protected]

John Harmon, CFA [email protected]

Aragorn Ho [email protected]

John Mercer [email protected]

Shoshana Pollack [email protected]

Kiril Popov [email protected]

Jing Wang [email protected]

Steven Winnick [email protected]

HONG KONG: 10th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 2470 NEW YORK: 1359 Broadway, 9th Floor New York, NY 10018 Tel: 646 839 7017 LONDON: 242-‐246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 FBICGROUP.COM

a hard-to-cancel … · · 2016-09-06birchbox! “1.!loginto!your ... microsoft word - love-hate...

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