The Potential of “Discovery Commerce”
“Discovery commerce” is a term that is starting to make its way into the lexicon. It’s a new option for a consumer to purchase a subscription to a set of products they can try. In other words, people are spending dollars to discover something new.
The models that seem to have the greatest long-term sustainability are those where the product being provided falls under the heading of “a curated set.” Birchbox is a classic example. It’s all about beauty. As a subscriber, you get four to five product samples each month of new or interesting beauty products that have been carefully selected for you. This is a really good end-benefit for the subscriber. The Birchbox site is well-designed and has an e-commerce engine, so when you like something you’ve tried, it’s very easy for you to return to Birchbox and make a purchase. In fact, there is a reward program if you so do.
Offering trial-size options for a consumer to test is a way to raise the return on investment for a brand. But one thing I fear is an issue that I have been grappling with in the sampling world for years: product samples of any kind are not an inexhaustible resource. How do you scale things like this? They work very well on a smaller scale, but if you attempt a larger scale you can run into conflicts with the brand’s marketing strategies. I’m fascinated to see where this is going, because this is a great idea, but I think getting into a constant inventory flow of product samples in order to populate these new discovery commerce opportunities presents a new challenge.
In the world of consumer packaged goods today, approximately 5% of promotional spending is devoted to product sampling of all types. Companies are being formed (and funded) with models in which profits come from the samples themselves and from access to the subscribers. In fact, all sorts of different models are being created, but there’s a limited set of sampling opportunities available because of the manufacturing realities. Samples are not always simple to create, there’s a very real cost for these goods, and many large-scale companies frequently encounter shipping concerns.
So let’s be intelligent about this. Since April, what I’ve been saying to the consumer packaged goods world in our executive-level conversation is this: Because there are so many new and interesting models of distribution that you’re going to want to experiment with, align with or tap into, when making manufacturing plans and marketing plans you should really consider expending more resources to create more samples. You’ll want to have them available in August or September of 2013, when you don’t want to find yourself missing out on some major opportunities. You need to really consider increasing your sampling inventory because you’re going to find all sorts of new arenas, areas, options where you can place them.
Discovery commerce is a burgeoning area, so we’ve yet to see if it achieves long-term success and sustainability. But clearly, people like the idea because they’re plunking down hard-earned cash, in this economy, to be a subscriber. Here’s to the continuing innovation in this type of business model.