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On the heels of an unprecedented surge in ecommerce sales during the pandemic, growth has adjusted toward pre-pandemic levels due to a variety of economic and environmental factors. But the news isn’t all bad. In fact, it should be looked at more as a stabilizing period, with the Covid lockdown-inspired surge hopefully a once-in-a-lifetime aberration.
Subscription ecommerce sales in 2022 seemed to consistently trend downward but projections for 2023 and beyond are encouraging, with US subscription commerce sales expected to reach an all-time high of $38.2 billion this year1. Through deeper personalization, customer outreach and convenience, merchants have every opportunity to put their best foot forward and succeed from here on out.
While growing revenue will always be at the top of any business’ list of priorities, improving the customer experience is imperative to attain that goal in today’s retail landscape. Consumers want personalized experiences now more than ever, with prompt shipping, open lines of communication and most certainly, value. Bang for one’s buck shoots to the top of the list during times of economic uncertainty. With that in mind, customer trust and satisfaction has never been more important. Today’s modern billing platforms provide the flexibility and personalization a customer desires while also delivering data to merchants to help measure campaign success.
Throughout the year, we publish quarterly Subscription Commerce Conversion Index reports, in collaboration with PYMNTS.com. These indexes provide subscription merchants insight into changing consumer demands and the deep analysis of merchant features needed to sustain subscription success throughout the wide variety of economic and environmental factors that can change the course of business at any time.
In early 2022, inflationary pressure emerged as consumers’ largest concern, but things seemed to shift a bit by mid-year. Enjoyment topped convenience and cost to become the top driver of subscriber engagement in our July index, though that did not mean that cost-cutting urgency was gone for good. Just as we reported in September that 78% of consumers were currently using at least one subscription service, we also noted 60% admitting to cheating methods, proving that saving money, even through nefarious means, was still prevalent in consumer minds.
As the year began to wind down and the holidays approached, inflation concerns reared their ugly heads once more, with 60% of shoppers cutting back on nonessential purchases, including subscriptions. Once again, however, merchants could combat money-saving initiatives and sustain consumer loyalty by offering features like free shipping, coupons or subscribe-and-save deals. Free shipping, specifically, continues to stand out, with 89% of consumers surveyed considering that perk extremely important when deciding on a new subscription.
The use of customer first-party data allows merchants to target buyers with unique, relevant and timely offers, satisfying their need to grow their audience while simultaneously giving customers the personalization they desire. Our SVP of marketing, Thomas Marks, provided specific insights on customer retention amid the rising costs of inflation and supply chain issues.
With monthly expenditure on subscriptions decreasing by 46% from October 2021 to March 2022, our May Subscription Commerce Conversion Index sought to explain reasons for canceled subscriptions as well as what merchants can do to sustain subscriber engagement. Using that data, Thomas expounded on the value that merchants can offer to offset rising costs and remain competitive in the face of inflation influencing them to raise prices.
Subscription personalization should be a priority as it soared ahead of convenience as the most desirable subscription feature. Order customization, shipment frequency options, preferred payment methods and specialized offers are all key elements that consumers desire. With so many choices and offers front and center these days, specific features that make customers happy and provide convenience are paramount. To facilitate this consumer desire, merchants must offer, which is a trait more commonly possessed by smaller merchants than larger. Continuing to treat an existing customer like a new one, by consistently analyzing data and behavior to offer personalized promotions can not only raise average order value but also encourage long-term customer loyalty.
When the average consumer is focused on making every dollar count, there is no room for inconvenience. Even with shipping delays and supply chain issues at the forefront, merchants can enhance the likelihood of subscription retention by establishing themselves as a reliable outlet with the transparency of extended shipping estimates, use of dependable suppliers and satisfaction guarantees. More than 50% of subscribers are likely to purchase direct-to-consumer subscriptions to ensure timely delivery and high-quality, available products.
As consumers weigh the need for certain nonessentials amid rising costs, convenience and a positive user experience keep their interest in subscription services. From website friendliness to pleasant customer service interactions, there is plenty that merchants can do to keep consumers satisfied and loyal. 82% of subscribers cited the ability to use their preferred payment methods as a desired feature, while 81% pointed to convenience as an important reason to subscribe in the first place.
With 43% of existing retail subscribers uncertain about renewing their plans — leaving pausing or canceling subscriptions on the table — merchants must maintain product quality and offer top-level user experiences to position themselves for success in 2023 and beyond. Additionally, offsetting rising costs for consumers by providing the convenience, personalization, flexibility and reliability they seek will set successful merchants apart from the rest.
There is plenty of room for encouragement in the year ahead and again, it is entirely probable that post-pandemic numbers were more of a level-set than a downturn with cause for long-term concern. While year-over-year growth rates for both ecommerce and subscription sales were down from 20212 — and significantly so from the oddball year of 2020 — ecommerce sales are projected to grow to $6.51 trillion in 2023, up from $5.76 in 2022, with subscriptions pegged for $38.2 billion as opposed to $32.65 this year1. With that in mind, merchants should stay the course with best practices for consumer loyalty and keep ahead of the curve in terms of what they want in a subscription service: flexibility, convenience, quality, enjoyment and above all else, value.
1Source: eMarketer; Activate; Digital Commerce 360; Statista; Research and Markets, February 2022
2Source: eMarketer, March 2022
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We’ve compared subscriptions vs. one-time purchases for health and beauty ecommerce to help merchants like you understand the pros and cons of each model.
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Discover the past year’s subscription trends to inform your 2024 ecommerce strategy. Our research with PYMNTS.com covered consumer behavior for each quarter of 2023.
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Watch episode eight of The Ecommerce Minute to learn the metrics you should measure to ensure long-term success for your ecommerce business.
