Sizing Up The Subscription E-Commerce Market

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Sizing Up The Subscription E-Commerce Market

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Fuel by McKinsey has been regularly analyzing the size of the subscription e-commerce market to better understand the trends and opportunities facing companies in the space. Since we last analyzed the numbers, the market has continued its rapid growth and now totals an estimated $10 billion (or more).

The subscription e-commerce market continued its strong growth in 2017.  Based on our analysis, the largest subscription e-commerce companies generated $5.6 billion in sales in 2017, up 36% from $4.1 billion in 2016.  We estimate the total market size for subscription e-commerce services is about $10 billion ($20 billion or more if we include Amazon Prime).

Largest subscription e-commerce companies

To estimate market size, we analyzed the Internet Retailer’s 2018 Top 500 list of largest e-commerce companies by sales.  From that list, we identified the companies that generate most or all of their revenue from subscription services.

Based on this analysis, sixteen subscription e-commerce companies made Internet Retailer’s 2018 Top 500 list.  In total, these companies generated $5.6 billion in revenue in 2017, up from $4.1 billion in 2016.  Since 2013, the market has grown at a CAGR of 74%.

Internet Retailer 2018 Top 500 Online Database; McKinsey analysis

Stitch Fix is the largest subscription e-commerce company, with nearly $1 billion in 2017 sales, passing Blue Apron which was the largest company in 2016.  The rest of the top five includes Blue Apron, TechStyle Fashion Group, Hello Fresh and Dollar Shave Club.

Although Blue Apron has seen its growth slow sharply (from 133% in 2016 to just under 11% in 2017), the meal kit category remains vibrant, with Hello Fresh, Home Chef, and Sun Basket all nearly doubling revenue year over year.

Internet Retail

We have made significant adjustments to our prior estimate of market size.  For example, we previously estimated 2016 revenue for the largest subscription e-commerce companies at $2.5 billion vs. the current estimate of $4.1 billion. The figures for 2013-2015 have also shifted, although to a smaller degree. There are two primary reasons for the changes:

  • Internet Retailer significantly increased its sales estimates for several companies on the list, in particular Stitch Fix and Blue Apron, which both went public last year (these updates accounted for ~70 percent of the variance).
  • Several new subscription e-commerce companies were added to the Internet Retailer Top 500 list this year including Hello Fresh, Loot Crate, and Sun Basket while several companies fell off (these updates accounted for the remaining ~30% of the variance).

“Considering this revenue in addition to the $5.6 billion identified by Internet Retailer analysis – our estimate for the total market size of the subscription e-commerce market is $10 billion+. ”

Overall market size

Based on analysis of both published and private data, we believe that additional sources of revenue not captured in Internet Retailer’s list to be approximately $5 billion. For example, companies not included in Internet Retailer’s Top 500 include:

  • Companies that offer subscriptions but where the revenue from subscriptions is difficult to break out from overall financials (e.g., Amazon Subscribe & Save, Overstock.com, Boxed Wholesale).
  • Companies that are not big enough to make the Internet Retailer Top 500 list.
  • Companies that are big enough, but do not share information with Internet Retailer so are not included on the Top 500 list.

Considering this revenue in addition to the $5.6 billion identified by Internet Retailer analysis —  our estimate for the total market size of the subscription e-commerce market is $10 billion.

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This estimate does not include sales of Amazon Prime memberships, which Forbes estimates at $10 billion in 2017 growing to $18 billion in 2020. With Prime, the overall subscription e-commerce market is more than $20 billion.

The Fuel team 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.

About the Authors

Ken Fenyo Headshot

Ken Fenyo

West Coast Markets Lead

Ken leads our Consumer Markets team developing client relationships and benchmarking tools.

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