If you read personal finance pieces, you’ve discovered the damage automatic drafts can do to your family’s bottom line. The average family thinks they spend less than $80 a month on recurring monthly expenses, according to research by West Monroe. But the same study showed the average monthly spending on recurring costs is $238 (not including utilities, internet, or phone).
Subscription boxes aren’t the only thing on that list, but they’ve become a larger portion since their popularity began to spike a decade ago. Subscription boxes can be fun. They’re just like getting a birthday present in the mail every month. But before you decide to keep paying hundreds or even thousands each year, consider these subscription box secrets.
1. Their Costs Are Even Lower Than You Think
The best subscription box services bring you useful quality items for less than you would pay a la carte. They accomplish this by making deep cuts into how much those items cost the service, such as:
- Bulk discounts from buying for a subscriber list in the thousands
- Promotional discounts to include an item for publicity reasons
- Buying surplus stock
- Discounts for carrying only goods from a specific supplier, whether or not they’re the best match for the customer
Plus, many subscription boxes pressure businesses to give them merchandise for free, increasing their bottom line.
2. They’re Advertising to Your Kids
The fastest-growing market niches for subscription boxes are lifestyle, food, beauty, pets, and kids — and kids are the fastest-growing market of them all.
Some of the products in kids subscription boxes are great. They help children explore STEM and spur their creativity. But others simply cater to the same base consumerism as adult subscription boxes.
Subscription boxes aimed at children are marketed toward adults, but their ultimate aim is more profound and arguably darker. If they can get a 9-year-old accustomed to receiving a monthly subscription, they’ve got that eventual adult hooked for life. It’s not the same as marketing cigarettes to children, but it’s not entirely different, either.
3. You Should Read the Fine Print
Some subscription boxes rely on you forgetting about the monthly payment to keep you on the hook for as long as possible. But others aren’t content with that alone. They make it difficult to cancel and only allow cancelation through a phone call to an understaffed call center with a bonus structure tied to talk you out of it.
Before signing up for any subscription service, read the fine print about the cancellation policy. Also, check with the Better Business Bureau and online review sites to find out how easy it is to stop the service.
4. They Bully Small Businesses
Loss leaders are part of marketing for most small businesses. You offer something for free — or at a discount near or below your cost — to get people interested in what you sell. Once that’s gotten their attention, you make your money on the next things they buy from you. It’s standard practice.
Some subscription boxes use this idea to prey on hopeful businesses, promising to distribute a sample of their wares to tens of thousands — or even millions — of subscribers. Sometimes this gets the brand sufficient attention to overcome the loss of income from those free samples. Much of the time, it doesn’t, and the loss either hurts or entirely bankrupts the company.
Subscription companies understand they’re using their scale to entice and coerce emerging businesses into donating products.
5. Customer Service Isn’t a Priority
Although individual subscription businesses and the industry as a whole are immensely profitable, their per-unit profits tend to be thin. That means they’re incentivized to get as many new customers as possible. It becomes more important to them than customer service for actual customers. You can see this at work by examining the websites for your three favorite boxes.
The chances are excellent they’ll have pages of content about how great their offerings are and how happy you’ll be if you sign up. However, there will be just one or two small pages dedicated to customer service, complaints, and replacements — and maybe nothing at all about how to cancel.
6. Quantity Is Better Than Quality
The box services know they only need to make you happy with one item in each box, or even in every several boxes. They succeed by sending you a spread of several mediocre things, one of which might spark some kind of sentimental delight, rather than just one or two high-quality items.
Likewise, they know you’ll perceive value based on the number of things you get in each box rather than their relative worth. Besides, quality is costly and harder to arrange discounts for than bulk purchasing lesser goods.
The industry is incentivized to send you clutter just barely good enough that you don’t cancel your subscription, rather than putting resources toward truly matching your tastes or delivering a small collection of exceptional items.
7. Bait and Switch Is Extremely Common
A recent Alleywatch report on the subscription box company ELLIE showed the service promised brand-name gear from companies like Nike, Lululemon, and Under Armour for the enticingly low price of $39.99 a month. Since that’s not far above the price tag for a single item of fitness wear from those labels, it seemed like a stellar deal.
However, customers soon learned the company didn’t deliver gear from Nike, Lululemon, or Under Armour. Instead, they provided clothing from their house brand of fitness wear.
A milder, more standard version of this starts with a few high-quality delivery boxes, slowly reducing the quality (and cost to the service) over the next few deliveries. Although it’s not out-and-out fraud, it still delivers you less value than you signed up for, just when you stop noticing the payment.
8. They Lean Heavily on Psychology
The business model for subscription boxes relies on addiction psychology, among other hacks, to manipulate the human brain. Some of the most critical include:
- Operant Conditioning. Your brain feeds you feel-good chemicals in response to getting a gift you expected. Like Pavlov, subscription boxes are training you to respond.
- Behavioral Consistency. You’re more likely to do something again after you’ve done it once. That’s why subscription boxes market aggressively to people who already have one subscription.
- Confirmation Bias. You tend to see only facts that concur with your existing point of view. This is why bait-and-switch techniques work after you’re happy with your first few boxes.
- The Psychology of Friendship. You feel like you’re receiving the boxes as gifts from a friend, who you don’t want to disappoint by canceling.
Add to these more specialized psychological tricks like gambling addiction, triggered by seeing whether or not this month’s box hit your jackpot, and fear of missing out to keep people subscribed. It’s a veritable Jedi mind trick of consumerism, brought to your door every month.
9. They’re Not as Cute As You Think
Most of the subscription box services out there feel like small operations, delivering boutique collections of cool stuff to like-minded people who are part of an elite, cozy customer core. The reality is different.
The industry is enormous. According to Forbes, in April 2018, there were 41.7 million visits to subscription websites industry-wide. The large companies generated over $2.6 billion in 2016, with the industry expanding substantially since that year. Startups are less likely to be a handful of passionate people in a garage and than niche-research startups backed by several million dollars of venture capital.
10. They’re Terrible for the Environment
Subscription boxes add clutter to your home, but their impact on the environment is even worse. Some services ship their wares in recycled cardboard, but the box is filled with plastic wrap and other packing materials.
Shipping each item to the fulfillment center and then sending the package to your door also creates an environmental impact. All of this to give you things you didn’t know you wanted before they arrived and wouldn’t miss if they never had.
Sadly, this is even true for the subscription boxes marketed for greener living.
Final Thought: They’re Older Than You Think
Subscription services are far older than you may realize. Most people tend to look at the internet-driven, niche market boxes of the past decade when they think of them. But the first subscription box service, Harry Scherman’s Book of the Month Club, hit the world in 1926.
The model — and the burden to our pocketbooks for unnecessary, unconscious spending — has been with us a long while. Isn’t it time you did something about how it impacts your finances?
Anthony Frazer is a father of four in Virginia. He has whittled down his family’s subscription-box list from eight items to five and has discovered it’s a constant battle.