The U.S. subscription e-commerce or box market continued its strong growth in 2018. Based on our analysis, the largest subscription e-commerce companies generated $7.5 billion in sales in 2018, up about 30 percent over the prior year. We estimate the total market size for subscription e-commerce services is about $12 billion to $15 billion.
Largest subscription e-commerce companies
To estimate market size, we analyzed Internet Retailer’s 2019 US Top 500 list of the largest e-commerce companies by sales, identifying the 16 that are primarily subscription-based. In total, these companies brought in $7.5 billion in revenue in 2018, up from $5.8 billion in 2017. (Exhibit 1.) Since 2014, the market has grown at a compound annual growth rate (CAGR) of nearly 60 percent.
Exhibit 1
HelloFresh passed Stitch Fix to become the largest subscription e-commerce company, with $1.4 billion in 2018 sales (up 119 percent from 2017). Stitch Fix fell to second place despite growing sales 26 percent to $1.2 billion. TechStyle Fashion Group, Blue Apron, and Dollar Shave Club rounded out the rest of the top five. (Exhibit 2.)
In addition, HelloFresh and Naked Wines had the highest sales growth from 2017 while Blue Apron was the only company on the list to see sales decline, with a drop of 24 percent from 2017.
Exhibit 2: Largest subscription e-commerce companies based on sales
Overall market size
We believe these figures, though helpful, are incomplete. Based on analysis of both published and private data, we estimate that additional sources of revenue not captured in Internet Retailer’s list to be approximately $5 billion to $8 billion. Examples of such sources include:
- Companies that offer subscriptions but where the revenue from subscriptions is difficult to break out from overall financials, including subscription services from large online and traditional retailers such as Amazon, Walmart, Target, Sephora, Nordstrom, Overstock, The Honest Company, and Boxed.
- Companies that are big enough to make the list but are not included, perhaps because they did not make their information available. For example, a recent report suggested that FabFitFun, which is not on the Internet Retailer US Top 500 list, generates more than $200 million in revenue a year.
- Companies that are too small individually to make the list but that collectively could generate significant revenue.
Taking into account this revenue in addition to the $7.5 billion identified by our analysis, we estimate the total market size of the subscription e-commerce market to be about $12 billion to $15 billion.
We believe the market is poised for continued growth.
- As our prior research suggested, just over half of online shoppers are aware of even one of the leading subscription e-commerce companies [see Thinking Inside the Box]. As awareness grows, we would expect more consumers to try and eventually subscribe to these services.
- In addition to the startups that highlight our list, an increasing number of larger brands have announced new subscription e-commerce services in 2019 including Nike, Macy’s, Bloomingdale’s, Urban Outfitter, and Banana Republic. Amazon also is continuing to expand its subscription offerings in apparel. We believe these new services will drive increased sales as well as raise overall awareness for the category.
- Lastly, although funding is down from the its peak in 2015, VCs continue to invest in subscription e-commerce startups. Over the past three years, for example, such companies have raised close to $2.5 billion in VC funding, including nearly $400 million through August 2019.
Fuel will continue to regularly update our market sizing estimates as new data comes in, especially given the rapid growth we continue to see in the subscription e-commerce market.