With more than $24-billion in annual sales, global brand recognition, and blockbuster endorsement deals with the likes of soccer legend Lionel Messi, Adidas AG is a fitness behemoth. But in one of its newest projects, the company is thinking small.
In January, Adidas shipped its first products under the new brand Avenue A, a quarterly subscription service that sends products to a small membership base of female runners. As opposed to an e-commerce store with a vast range of available products, the entire point of the service is to "curate" a selection personalized to the taste, size and feedback of each of its roughly 1,500 subscribers.
"There was no big ad play around it. It was a digital-first launch to a very select group," said Mark Goodman, chief executive officer of Montreal-based agency Mirum, which was tapped to develop the brand strategy for Avenue A. That's because the service was not just envisioned as a new retail channel. It's a marketing tool for Adidas.
The company wants to get to know these customers better – and to encourage them to share what they receive in the mail-order boxes with their friends and family on social media.
These types of subscription services have been growing quickly, driven by tech startups such as ShoeDazzle and Dollar Shave Club. According to research firm Hitwise, visits to online subscription retailers grew to 21.4 million in the United States in January, up from 722,000 in the same month three years earlier. But they are still rare among bigger brands. Adidas and Starbucks Corp. – which launched a monthly coffee delivery service in the U.S. last year – are two exceptions.
Most of these services automatically send products to members at regular intervals, allowing them to return, for free, whatever they don't like. It's a different approach to retail, but it also offers some of the same perks of a loyalty program: Customers get recommendations for products based on their personal profiles – and sometimes better prices – while the companies get a wealth of data that helps them sell more effectively to those people.
"It helps us have a better conversation with our consumer and learn more about her," said Laura Gibson, who works with Adidas-owned Reebok CCM Hockey in Montreal, and helped develop Avenue A. The company has had requests to bring the service to Canada.
While the online retail subscription business has attracted excitement and venture capital funding, there are questions about its sustainability, particularly for products such as clothing and shoes, as opposed to consumables such as coffee, snacks or beauty products.
"Consumers want choice. Why would you want to lock your disposable income into a particular merchant?" said Sucharita Mulpuru-Kodali, vice-president and principal analyst at Forrester Research.
Even when customers don't buy regularly, though, these services use what they know about members to act as marketing tools.
JustFab Inc., for example, a lifestyle company based in El Segundo, Calif., was approached by Sports Illustrated and Shape to offer free subscriptions to members who showed interest in fitness.
JustFab is also able to market itself more regularly, and more cheaply, to its more than four million subscribers. Most customers actually buy only three or four times a year, but visit the website 25 to 30 times a year to review their monthly selections and choose whether to opt out of that month's purchase. (If they do not opt out by the deadline, they are charged a fixed amount which goes into their account as credit.) In exchange for that time they spend, the company offers fashions at cheaper prices and uses their data to customize their offers.
"Some of the biggest costs to a fashion company are creating products that people don't want, and advertising to reacquire a customer," JustFab corporate marketing officer Shawn Gold said. "The membership model changes that … it's a lot more about data than it's ever been."
As with Avenue A, a growing number of subscription services are focused on fitness. JustFab launched the Fabletics brand with actress Kate Hudson in 2013, and is targeting $225-million (U.S.) in sales this year. As "athleisure" has become a rising fashion category, driven partly by the success of Canadian brand Lululemon Athletica Inc., it has also given rise to hordes of women self-conscious about wearing the same thing, and on the hunt for new and different looks.
"It's an easy sell to new brands," said Jalem Getz, president of Milwaukee, Wisc.-based Wantable, which offers different categories of subscriptions. Its fitness box has included brands such as Dona Jo Footwear, Glyder Apparel and Just Live Inc. Even customers who choose to send clothing back have seen a product firsthand, and tried it on. That makes them more aware of brands they may never have heard of before.
"Here's an opportunity to be matched with customers who like a certain cut, or fit, or colour," Mr. Getz said. "When we send her your product, it's not just going to be a random thing. It will be sent to customers who are most likely to fall in love with your product, and who are most likely to be brand ambassadors."
"I tell companies, this is your target market," said Bianca Jade, New York-based founder of the fashion and fitness website MizzFit.com, which she started in 2009 after losing a job in advertising during the economic downturn. Her subscription box of exercise equipment, beauty products and other fitness items – in partnership with subscription service Quarterly – launched in 2013 and still has a small membership base of roughly 1,000 subscribers in the U.S. But they are a highly targeted group of people who tend to have higher disposable incomes, a keen interest in health products, and an openness to new products and trends.
"It's very niche," Ms. Jade said. "We're seeing a downfall of the big corporate entities, and the emergence of small brands. These smaller companies are aligning themselves with people like me, that are staples in the industry, that can promote and market them."
"People want something targeted and focused, and made for them, said Felicia Sale, fashion and brand director at New York-based SweatStyle, a quarterly subscription service that sends workout clothing – chosen from a number of different brands – based on profiles of its roughly 1,500 customers, which become more complex as the company tracks which items subscribers choose to keep and pay for, and which they return. (The cost of each box, which is U.S.-only for now, can range from $250 to $350 depending on how many items they keep.)
New York-based fitness apparel brand Lukka Lux saw an immediate spike in traffic to its website after it placed its products in a Wantable box for the first time last October – including traffic it knew was directly tied to the placement, for example from customers in the Midwest where it does not have much of a retail or advertising presence. "For us being a newer brand, and not having a $10-million budget to do a social-media explosion, we thought it would be a great fit to get it into the hands of customers," said Lukka Lux president Michael Sabino.
Wantable has been an especially effective vehicle for marketing to women over 50, who are sometimes more self-conscious about trying out more fashion-forward looks in a store's change room, but may just be converted if she can try things on in the privacy of her home.
"You can't do that with advertising. Getting it on the person is so key for us."