The opposing trajectories of The Honest Company and Fab are a pretty good representation of the overarching climate when it comes to subscription service businesses versus flash sale sites.
The Honest Company, a monthly subscription service co-founded by actress Jessica Alba that sells non-toxic consumer goods and just raised funding at a $1 billion valuation, is reportedly gearing up for an IPO. In contrast Fab, a flash sales site that tried to unsuccessful pivot to an ecommerce site, was recently sold for a fraction of its former valuation.
It's not just The Honest Company. Subscription service businesses, which include other big names such as Birchbox and the Dollar Shave Club, are having a moment. In 2014, they raised more than $350 million in venture capital, an almost 100 percent increase from the year before, according to CB Insights.
Meanwhile, flash sale businesses, including once big players such as Gilt and Zulily, have largely fizzled.
To analyze why subscription services are booming while the flash sales model is largely bust, the folks at Retention Science, a customer-retention marketing company, analyzed over 10 million orders completed by more than 2.5 million unique customers to see how each type of business fares in various areas of customer retention and engagement.
One key metric that jumped out: When it comes to the average number of orders per customer in a year-long period, subscription service companies, with an average of more than seven orders per customer, smoked their flash sale counterparts, which had an average of just over one item per customer.
For a timeline illustrating the opposing trajectories of subscription service versus flash sale sites, check out Retention Science's infographic below.
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