The Box Subscription Model has evolved from a shy segment of eCommerce into its own industry. A recent article by CNBC found that according to My Subscription Addiction, a website that serves as a platform for reviews on box models, there were around 200 of such service providers three ago and that number is currently ten times greater. Additionally, a recent study found that visits to subscription box sites grew nearly 3,000 percent to a whopping 21.4 million over the last few years.

What explains such an exponential growth? The industry players have been able to capitalize on personalization, convenience and overall unique experience that consumers are constantly craving. Consumers experience a great deal of joy upon having someone pick an item (or well-curated box of items) based on their specific tastes and personality. The feeling of being “pampered” is perhaps just not as great as the thrill of the surprise… (“What did they get me this time?”) In short, it is a kin to living Christmas morning again and again… Can you imagine that feeling after a long day of work?

From a convenience perspective, as explained by Nicole Laporte in Fast Company, “Online stores such as Amazon and Zappos are known for offering a vast array of products... To combat that choice fatigue, a wave of new companies are creating cleaner, simpler product-purchasing experiences by eliminating the selection process altogether.” With so many options in brick-and-mortar and eCommerce, people appear to feel relieved to leave the burden of “responsibility” in someone else’s hands.

At this point, there is an overwhelming variety of offers within this model: from apparel, intimates or beauty to gastronomy, toys for kids or treats for your pets. While some concepts have been a “flash in the pan,” an early player has garnered quite a bit of attention.  Stitch Fix, the San Francisco-based personal styling service, is perhaps the first brand that comes to mind when it comes to the box subscription model.

The business came to the market with a mix of talented data analysts and fashion stylists to send their customers boxes of five handpicked items. They require a $20 styling fee attached to every box and each item is priced on average at $65. The data is gathered through various sources - questionnaire responses, email correspondence, reviews, social media posts and purchasing behavior. In Business of Fashion’s recent interview with Stitch Fix’s Founder and CEO, Katrina Lakes concluded, “we have so much control. We understand so much about our product and our customers. When we say that something is going to have a 50 percent chance of being kept, it is [actually] a 50 percent chance. And that’s really about the accuracy and relevancy of the data.”

Looking into their massive growth coupled with the ability to offer unparalleled levels of convenience and personalization (an attribute increasingly important to consumers), one might assume that this industry is unstoppable. Naturally, there are many risks and challenges within the business model.

Keeping in mind that most times boxes contain different items that were curated from different vendors, coordinating the distribution of a broad assortment could be challenging (to say the least). Here, businesses must rely on phenomenal logistics and supply-chain management in order to maintain effectiveness, given the low margins. “You must manage lots of moving parts, from sourcing uniquely appealing products to packaging them together and shipping on time for a growing customer base with diverse tastes and preferences” – explains Sharmila C. Chatterjee in a commentary piece on Fortune.com.

That hardship is certainly extended when selecting unique, appealing merchandise to fill boxes on a regular basis. In this scenario, it’s mandatory to be able to recognize varied consumer style, preference and overall buying behavior upon gathering and analyzing data.

What’s to add, the model seems to be exceptionally daunting for players in the fashion industry – as pointed out in a recent article from Business of Fashion, “unlike beauty or accessories subscription boxes — or subscription streaming services like Netflix and Spotify — fashion companies trying to tap this business model face a unique set of challenges, related to sizing, personal taste and product accumulation.” To make matters worse, fashion companies have to deal with returns, which deepens costs and shortens marginal profit. As a result, companies such as CakeStyle, Wardrobe Wake Up and Swag of the Month have shuttered their subscription sites in the recent years.

When facing the competition of subscription box companies, businesses in Retail and eCommerce need to take into consideration that one of the main capabilities of this model is strong data analytics. The more they grow, the more customers they obtain, the more data they gather and the more information they are able to assess - not only enabling them to respond to changes in consumer behavior and preferences rapidly, but also to offer a unique personalized experience. Taking into consideration that the majority of today’s market share is occupied by data-oriented businesses, establishing and maintaining a laser focus on the goldmine of data generated by your consumers will render a serious source of competitive advantage that should not be overlooked.

Retail is changing at record pace and many new business models are now being established. However, the common denominator across the spectrum to gain a competitive advantage is the agility rendered from powerful data analytics. Interested in the new reality of retail? In 30 seconds discover exactly how many hours your merchandising team can save each week with connected, actionable data here.