This unique business model is taking over retail - and customers are saying they hate it
Look no further than Netflix, Amazon Prime, Dollar Shave Club, and Carnivore Club. It seems easy - sign up and you have a product each month, for a fixed price.
But at the same time, many subscription-based retailers have come under fire for not having clear disclosures about their billing practices.
And some companies, despite being seemingly transparent about the fact that they're subscription-based, make it exceedingly difficult for customers to cancel their memberships.
In the fall, JustFab (which houses Kate Hudson's athleisure line, Fabletics) found itself enmeshed in a scandal after customers called it a scam; they claimed the fine print was exceedingly difficult to discern. Buzzfeed reported that consumers didn't realize they were being signed up for a 'membership,' and moreover, after finding unwanted charges on their credit cards, they said they had to call customer service to put an end to their billing cycle. The company has amassed over one thousands complaints with the Better Business Bureau.
In late October, however, Bloomberg reported that the company would be audited. Bloomberg also reported that JustFab was looking into changing its policies; it was going to consider offering members the ability to unsubscribe online. Not being able to cancel memberships online was a huge issue with the company that Buzzfeed outlined in an initial report regarding the scandal.
Still, some experts think that JustFab uses this model to optimize success, even if it's misleading.
"It's a model that allows [JustFab] to make more money ... Unfortunately, misleading marketing works. And that's what this company is, in some part, using to be so successful," Bonnie Patten, executive director of Truth in Advertising, said to Bloomberg.
Hot lingerie startup Adore Me has also received heat for its billing policies; it currently has an F rating with the Better Business Bureau.
The company claims it makes it clear to consumers that they're signing up for a "VIP Membership."
Adore Me lets customers skip a billing cycle, but they have to make sure they select to "shop" or "skip" by the fifth of month. Should members fail to do either, their credit cards get charged, and in turn, they get store credit to use at any time. Adore Me recently added a policy wherein members can get an automatic refund for the most recent month's charged, without having to deal with customer service.
Upon cancellation -which is, according to reviews on the Better Business Bureau, an arduous process - members lose their credits. (One commenter on The Lingerie Addict said she was able to cancel her VIP membership but had $200 in credit, all of which disappeared one the cancellation when through.)
Adore Me's CEO, Morgan Hermand-Waiche, maintains that the retailer is completely transparent and discloses everything, through consistent emails, SMS messages, push notifications, and a pamphlet that members receive with their first package.
It seems that Adore Me - and other criticized subscription companies - aren't out to dupe consumers. But the hoops through which shoppers have to jump through to get out prove that there are some improvements that can undoubtedly be made.
Business Insider / Matthew Lynley
That's not to say that subscriptions are entirely faulty.
At the end of 2013, Entrepreneur suggested that subscription-service model was a hot ecommerce trend for the following year.
And there has been no shortage of boxes for consumers to choose from - from grooming boxes to boxes with artisanal beer to boxes for dogs to boxes of makeup samples.
But the core product that many of these boxes sell is exactly that - the box and the subscription - rather than selling the product first and the membership second.
And Gregory Lowe II, CEO of Fitbox - an up-and-coming athleisure subscription box that aims to challenge Fabletics - says that there's another perk: getting to know customers. "We can dive into what our customer wants a little bit more," he said to Business Insider. "We can get to know our customer on a personal level because they're with us month afte rmonth after month." (He did, however, say that a big problem in the space is that some people get the first box for a discount, and then never go forward after that.)
Still, Adore Me's CEO Morgan Hermand-Waiche chalks up the complaints - which he told Business Insider pale in comparison to positive reviews - to the fact that some people don't know how subscription services operate.
"I think that the membership and subscription shipping concepts are extremely innovative and disruptive, and used by companies such as Amazon, Dollar Shave Club, Birchbox, and Adore Me," Hermand-Waiche wrote to Business Insider. "But sometime there are shoppers who aren't familiar with subscription-based services and memberships and as a result are unsatisfied with their experience."
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