The Operational Impacts of Personalizing Subscription Ecommerce

What do subscription commerce customers really want? An excellent personalized experience is paramount for 28% of subscribers of curated boxes, according to a report by McKinsey & Company.

There’s no doubt that subscribers want to feel special. Subscription commerce companies can satisfy their desire by personalizing offerings in a few different ways:

  • With the most common curated model, companies identify subscribers’ personal tastes through a quiz or survey and then use an algorithm to select items based on their preferences. More sophisticated companies also incorporate subscriber feedback such as rating for items from previous orders.
  • Some companies allow subscribers to pick certain items for their shipment. For example, they may have a certain number of standard items, but let subscribers select one additional item from a list of choices.
  • Another option is to allow subscribers to add items to their existing subscription order (i.e., full-size versions of samples they’ve tried previously) for an additional cost. Savvy subscription commerce companies are getting more sophisticated and may time promotions to coincide with regularly scheduled shipments to save on shipping costs.
  • Marketing materials also help customize orders. In this scenario, some companies prepare a group of orders to include a custom insert which appears personalized to subscribers. Truly personalized inserts such as handwritten gift messages, while relatively common for smaller companies, quickly become cost prohibitive for companies sending out millions of orders every month.

How Customization Impacts Fulfillment Operations

What do each of these personalization models have in common? They add to the complexity of order fulfillment operations. Let’s take a closer look at a few common considerations:

Skilled, Scalable Labor

When you have a large number of orders for a certain kit configuration, they can be grouped together and handled in mass, while appearing personalized to the customer.

When operations call for greater customization, things get more complicated. If subscribers have the option to add an item to a kit, for example, you need to determine whether it’s more efficient to have the picker go to the items or bring them to the picker, where all the necessary items are within arm’s reach. (Hint: It likely depends on the number of SKUs they need to pick.)

In either case, workers are now selecting the contents of the kit from multiple choices. This ecommerce-style pick-pack goes more slowly, requiring more skilled decision making. Opportunity for error increases with more options.

It can be helpful to approach personalized orders strategically. When orders require additions to a subscription, consider kitting the common items in advance and then adding the specialty item at the last possible minute. Many companies find that postponement strategies like this allow more time for customization and enables them to be more responsive.

Adequate Technology

Technology plays a critical role in subscription customization. A CRM system can help with things like tracking customer data, preferences (from quiz info and feedback ratings) and past orders.

An order management system (OMS) is another essential for companies seeking to offer personalization. It streamlines fulfillment execution, helping to determine inventory allocation, routing, tracking orders and more.

When customizing orders, one common issue is that the same inventory may be used for multiple channels, i.e. subscription, retail, ecommerce, etc. If you want to set aside 100 units for each channel, for example, a traditional WMS does not have this capability. However, an OMS can reserve those units and release orders to the fulfillment center only as available.

As a rule, the best approach is to start by looking at the most cost-effective technology option that can achieve your desired level of quality. Start with RF picking and barcode scanning and work toward more automated solutions with greater complexity until you find the right cost/benefit balance. Unless you’re running 24/7, it’s typically difficult to justify the cost of highly automated technology solutions.

Since batch subscription models operate at peak levels for just a few days each month, they can be poor candidates for a major technology investment. If you have a great deal of high-volume customization, it may be wise to consider shifting to an anniversary model to spread the volume out.

Cost-Effective Shipping

Greater personalization also poses challenges with shipping. Order options may vary in size and shape, making it difficult to maintain consistent packaging. Where possible, you could pre-kit to a standard-size shipping container to help control costs.

If package weights and dimensions vary, an effective OMS can establish an automatic logic for shipping costs, so if a shipment is over a certain weight, it will be shipped via a different carrier or service. Shop for carriers and service levels based on your price point to avoid the impact of carrier rate increases.

When establishing your subscription strategy, ask yourself if the current order revenue can cover the cost. For example, if you give subscribers the option to add additional items to their order, you could find a way to market the option to either bring in new revenue or help decrease your churn rate which, in turn, increases customer lifetime value (LTV).

Keeping these considerations in mind as you approach subscription commerce fulfillment will help you find a solution that delights each subscriber. Personally.

Nicole Lee is director of fulfillment at Saddle Creek Logistics

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