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New of-the-month clubs: Worth it?

Startups have moved beyond wine and fruit baskets, but costs often still run high.

By MSN Money Partner May 25, 2012 2:00PM

This post comes from Kelli B. Grant at partner site SmartSpending.


Some send a pair of shoes each month. Others deliver gourmet marshmallows, bacon or baby food. And then there are the personal grooming clubs, which send a month's worth of moisturizer and other skincare products.


Image: Creditcard Computer (© Stockbyte/SuperStock)So-called of-the-month clubs have moved beyond wine, books and fruit baskets. In recent months, a slew of new businesses have popped up, offering a broader range of goodies. Some of the new entrants are experimenting with offbeat categories: beauty e-tailer Birchbox began offering monthly shipments of men's grooming products in May, and earlier this spring, For the Makers launched with boxes of craft supplies.


Others new clubs allow members choose an item each month from a rotating boutique of goods tailored to their tastes. For example, BeachMint started three such subscription sites last year offering celebrity-picked T-shirts, shoes and skincare. Two more are in the works for this summer.


Demand for the new offerings is being driven by Americans' increasingly busy schedules, says behavior psychologist Matt Wallaert. "People may not have time to go to, say, the wine store and look around," he says. "They just want some instant short-term happiness to show up, and that's what of-the-month does." (Post continues below video.)

For businesses, that kind of thinking can represent steady sales. The average wine-club member, for example, subscribes for 23 months and generates $500 in revenue a year, according to research firm VinterActive.


Hooking a long-term customer cuts the need for ongoing ads, and club profit margins can top 50% even if the business covers shipping costs, says Randy Allen, an associate dean at Cornell University's Johnson Graduate School of Management.


Critics, however, say of-the-month clubs often encourage consumers to overspend. After all, $25 a month for vinyl records or $10 for skincare samples adds up to hundreds a year, which may be more than a consumer can afford.


And prices can often be higher than those you'd see locally, particularly on items like wine or ice cream that have special shipping requirements. "Ask yourself, 'If I went and bought that elsewhere, what would that cost me?'" Allen says.


Quitting the club represents another potential pitfall, says Wallaert. Many clubs will continue to charge users until they actively cancel, rather than setting a particular duration for membership. But they usually also allow users to cancel at any time -- although there's often a cut-off for doing so to avoid the next month's shipment.

That said, some fans say the wider selection of club categories could be a boon for consumers who don't have the time to research and shop. And a club's good taste may be worth any extra fees above the retail prices.


Emily Books, which launched its e-book club in October, sends subscribers a monthly indie title, which might be an out-of-print release or a good read from a smaller publisher. "There are all these amazing books that deserve so much more attention than they get," says co-founder Emily Gould. "I'm reading a lot of books so other people don't have to."


More from SmartSpending and MSN Money:

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