Why Victoria’s Secret Is Buying AdoreMe

This morning Victoria’s SecretSCRT
announced that it’s buying direct-to-consumer lingerie brand AdoreMe for $400 million in cash plus additional payments. .

The vast majority of AdoreMe’s business is sold by subscription. Consumers sign up to receive garments every month at home and decide whether to keep them or send them back. It’s a channel of retail that has gotten some traction during the pandemic but it’s still not a selling mode that most retailers embrace.

Why A Retailer Would Be Interested In Subscription

At the recent Retail Brew summit, Tyler Williams, Director of Brand Experience at Zappos, talked about change. “Nature shows that it’s not always the fastest and strongest that survive,” he said, “it’s the most adaptable.”

What’s creating the need for adaptability right now is the explosion in marketing costs driven by recent technology changes at GoogleGOOG
and Facebook. When retailers get together these days, the cost of marketing is what they’re talking about.

One thing they’re not talking about is how they might save money on marketing by selling products on subscription.

Most retailers believe that thinking about subscription as a retail channel isn’t real or relevant. The belief is that it’s not a major retail channel, it’s how you sell publications and services.

That’s why flexible thinking is so important and why it’s so impressive that Victoria’s Secret is bucking the trend and embracing subscription as selling channel.

Ruth Bernstein, CEO of creative agency Yard NYC, said at the same Retail Brew conference, “brands are living organisms,” and their roadmap “should include any medium or platform.” A business isn’t defined by selling only in stores or direct-to-consumer or subscription, it has to evolve its thinking to adapt and grow.

It’s not just lingerie that’s suitable for subscription, most likely everything you have for breakfast at home is suitable for sale by subscription too. Almost every product in your bathroom is also. And almost every condiment in your home is as well. And many other things if you start to stretch your mind on it.

Jennifer Peters, DTC Manager of a vitamin and supplements company called Olly (now owned by UnileverUL
) talked at the conference about how subscription is not just a channel to sell. It’s a way to create a relationship, she said, with what she calls, “next level experience and service,” like extra samples for subscribers. “If you came to us, you care a lot about the brand so we need to care a lot about you,” she opined.

Most retailers don’t think about it this way but subscriptions can be used to acquire and retain customers, the biggest problem in retail right now. Peters of Olly says, “making customers feel special, will drive any KPI (key performance indicator) you have.”

And yet, there are virtually no retailers focused on capturing your toothpaste or breakfast oatmeal or ketchup subscription. Peters says, “if you’re selling consumables, subscriptions are critical.”

Subscription isn’t the answer to everything but it is one more channel that can be used to sell to consumers. If the features of subscription, like adjusting the frequency of delivery or even canceling, are easy enough to do, consumers will adapt.

The majority of products in the core of a supermarket, the stuff you see when you go up and down the aisles, are suitable for subscription. Long ago, retailers learned how to offer products in multiple channels like in-store and online.

That took time and it’s going to take time for them to think about how subscription can be used in their business as well. But it will happen because it has to.

John Aylward, Chief Marketing Officer at JC PenneyJCP
, pointed out that unlike traditional billboard and TV marketing, online marketing is measurable; you know precisely how many consumers are clicking on ads and buying. But that can be distracting from the ultimate goal, he pointed out. “You’re trying to drive a relationship, you’re not just trying to drive transactions, we want to bring customers back and serve them over time.”

Subscription is ideal for items purchased repeatedly and the possibilities are much broader than how retailers think about it now; lingerie is just a start, according to Aylward. “Everything across home and apparel has repeat purchases, especially for kids and baby,” Aylward said.

Thinking flexibly about subscription and integrating it into loyalty tools and the relationship with consumers is where the big opportunity is. The range of products is much broader than the way most retailers offer it now.

Not every retailer is capable of committing the time, patience, capital and leadership for this kind of adaptability. Those that are will take advantage of a retail channel that very few companies are maximizing.

Victoria’s Secret acquisition of AdoreMe is driven by the realization that subscription is an untapped channel with huge opportunity. We are going to see more acquisitions like it and expansion into subscription in the future.