why is subscription ecommerce so hot right now?


June 21, 2024

Online retailers are growing to love the subscription ecommerce business model for good reason! Subscriptions help merchants enjoy strong customer relationships and long-term success.

Subscription ecommerce package

Ecommerce was a revelation when people first shopped using computers and phones instead of stepping into a store. But now, with one single transaction, ecommerce consumers can sit back and enjoy their favorite products showing up at their doorstep, often for a discounted price.

The multi-billion-dollar ecommerce subscription economy has exploded because of how it benefits both consumers and online retailers. What began with product boxes has evolved into a sales model used by companies across sectors.

Today, monthly subscription services like Spotify let users stream music and even podcasts. Subscription box brands like Trunk Club or Dollar Shave Club were early pioneers, and have experienced incredible growth for years. 

Netflix’s subscription service for streaming video content put Blockbuster Video out of business years ago, and may supplant movie theaters too. Every news outlet has a website readers can access via subscription. Even the iconic Microsoft Word software is now available to subscribers for a monthly rate.

According to our April 2023 Subscription Commerce Readiness Report, the average subscriber holds 2.9 retail subscriptions. It seems like any product can be sold on a subscription basis. But whatever the product, subscription model online retailers need to distinguish themselves from their competitors by focusing on branding and providing an exceptional customer experience. 

Let’s look at some of the advantages of the subscription model, and at how all-in-one ecommerce platforms provide enterprise-level intelligence, revenue maximization tools and robust, yet agile, security.

subscription businesses are steadier

Volatility in business is exciting when sales suddenly take off, but having a consistent and reliable stream of revenue reduces risk. Stability is one of the prime virtues of an online subscription model — by definition, consumers pledge their long-term support in exchange for discounts and the unparalleled convenience of having products pre-scheduled to show up at their location.

Under the subscription model, it’s easier to anticipate supply and demand, which in turn helps online retailers plan inventory and shipping, as well as accurately predict their cash flow.

Plus, you only need to pay to acquire a customer once to enjoy months of repeat purchases. This is a key factor in ecommerce because on average, acquiring a new customer is 5–25% more expensive than retaining an existing one.

Ecommerce can be dynamic at times, and every business has its ups and downs. The subscription model gives online retailers a much sought after stable stream of revenue.

subscribers have a lot of cash

The average subscription customer tends to be a higher earner than typical online shoppers. Those who purchase subscription boxes likely have a college degree and earn more than $100,000 annually.

These consumers are not averse to being upsold. From a marketing perspective, once an online retailer has acquired their email address, sending them product information has higher odds of translating into sales.

preventing subscription churn is the key

Subscription businesses strive to obtain long-term customers, so retaining old ones must be a priority. Subscription model online retailers can’t afford to take their customers for granted — they need to continually and constantly ensure their existing customers are satisfied.

When done properly, recurring revenue models lead to long-term sales that also strengthen customer relationships. This dynamic creates compounding growth, as customers become more valuable to brands the longer the relationship continues.

That’s why online subscription companies must focus extra hard on retaining consumers. While pleasing customers is a fundamental part of every business, delivering exceptional customer service helps subscription retailers stand out in a crowded field.

Aside from offering consumers top-notch customer service, successful subscription ecommerce brands focus on having entertaining marketing. Today’s online consumers have higher expectations than ever, and these need to be exceeded rather than just simply met. 

Surpassing consumer expectations means delivering nuanced and personalized attention to each shopper along multiple points of their customer journey. Doing this for every individual consumer is challenging, especially as the business grows.

Online retailers can only truly scale up their business when they have streamlined, automated tools to accurately identify and segment each consumer, maximize revenue, and ensure that transactions and all sensitive data are secure.

All-in-one ecommerce platforms are designed to be a one-stop shop for enterprise-level online retailers, with tools as powerful as they are easy to use. 

advanced reporting

Online retailers need a full and comprehensive understanding of each consumer, because today’s shoppers expect online experiences to cater to their shopping habits and personality. The best ecommerce platforms produce reports and analytics that immediately put actionable intelligence into the hands of executives.

advanced subscription reporting

automated personalization

Booming online subscription businesses don’t have enough time or operational capacity to individually give each customer the personalized treatment they’d like to lavish on them, yet this form of ecommerce depends on delivering exceptional customer service.

The solution is to automate this process as much and as intelligently as possible. The top ecommerce platforms glean each consumer’s digital footprint to form a comprehensive picture of who they are and how they shop. 

Once this knowledge is acquired, the AI uses it to deliver a personalized online shopping experience. 

Here are some of the online behaviors the best ecommerce platforms can scrape from the internet:

  • Engagement level
  • Customer journey stage
  • Purchasing behavior
  • User interests
  • Customer satisfaction
  • Frequently searched items

Once the AI possesses this information, it processes it and sorts each consumer into a bucket according to their prospective lifetime value. This lets online retailers allocate their resources efficiently, so they don’t waste too much time or energy chasing low-value customers. It also enables them to identify and pursue high-value customers effectively.

The AI can tell between a first-time customer and a repeat customer, and can make use of this information the way a sales associate would. 

Once the sophisticated AI finds and identifies a loyal customer, it uses the platform’s data to figure out how to deliver just the right custom push at just the right time to close the sale. For example, if a customer closes a window often enough before the sale is complete, the platform could conclude that they find the shipping costs prohibitively expensive, and then waive them automatically. 

Subscription ecommerce relies on being able to scale up personalization with smart automation as a vital way to extend lifetime value, boost customer conversions, and reduce churn.

ecommerce dashboards galore

Top ecommerce platforms give executives over 20 individual dashboards with in-depth views into the areas that really matter for online subscription retailers, such as:

  • Cancellations
  • Cycle analysis 
  • Recurring rate
  • Returns
  • Refunds
  • Declines

The best platforms have comprehensive data arranged so that getting detailed information quickly is easy. Advanced filtering based on traffic sources, verticals, channels, campaigns and custom smart tags lets decision-makers get whatever data they need from every dashboard at a glance.

Exporting the data from an ecommerce platform to a .CSV file for further analysis or for custom reporting is also simple and can be done quickly.

revenue maximization

Subscription revenue maximization

Allowing consumers to have flexible and stress-free control over payments is another very important dimension of exceptional customer service in an online subscription model. 

The best ecommerce platforms empower consumers by giving them full and easy control over payments, while also giving online retailers automated tools that maximize revenue in ways consumers genuinely appreciate.

pain-free subscription billing experience

Sales increase when consumers feel comfortable at all stages of the transaction process. Online retailers are wise to make it easy for consumers to pause subscriptions briefly, or even for an extended period. 

This prevents the consumer from vanishing completely, even if their payments are suspended. People are sensitive about their finances, and companies that go out of their way to make every element of the payment process comfortable will enjoy greater loyalty. 

The best ecommerce platforms also make it easy for retailers to quickly configure discounts or promotions for select customers as needed.

intelligent dunning

Leading ecommerce platforms automatically send appropriate messages to collect money owed from consumers at times the messages are most likely to be successful. This is also called Smart Dunning. There’s a built-in understanding of how to optimally space out the intervals between requests, and specifically what day and time are most effective.

upselling and cross-selling

In ecommerce, the platform’s automation shows customers the products they didn’t know they needed the way a trained sales associate would in a brick-and-mortar store. Whether these products are loosely related to the ones they’re searching for (“cross-selling”) or it’s an upgraded version of them (“upselling”), automation drives subscription sales in powerful ways. 

The point is not just to have a website with cross-selling and upselling capabilities, but to have superior AI to get the best results possible. Forrester Research claims that cross-selling and upselling account for at least 30% of all revenue in ecommerce. 

Account Updater

Providing a smooth billing experience in subscription ecommerce means making shopping effortless. The platform ensures credit card payment data is always accurate before each billing cycle.

The Account Updater tool prevents 4% of credit cards from failing due to expiry and successfully rebills on average 80% of such cards. It also pre-emptively reduces consumer frustration that could otherwise potentially push them to cancel the sale. 

This feature is a major way to strengthen customer relationships and reduce churn.

address confirmation

Ecommerce consumers expect products to arrive quickly, and they have a low tolerance for delays. The top platforms confirm that products are sent to the correct location before they’re delivered. 

This keeps customers happy and online reviews positive. It also eliminates extra fees associated with shipping errors, like extra packaging, stamps and labor costs.

security meant for subscription

World-class security is a basic requirement to safeguard transactions and all data, but a good defense is also a good offense. Smart and subtle security fights fraud and grows revenue in a way which allows ecommerce retailers to scale up confidently.

Enterprise-level ecommerce retailers need to comply with the highest security standard the major credit card companies can demand — PCI DSS Level 1. The security should optimally blend personally managed anti-fraud protection by an experienced expert and smart automation.

The best platforms improve their algorithm as more data passes through its system, so suspicious transactions are declined in advance more accurately as time goes on.

chargeback defense

Access to representment specialists who already know how your business operates is an invaluable tool when it comes to fighting chargebacks. Top platforms have their own representment specialists who know when and how to fight chargebacks, in addition to partnerships with other leading anti-fraud experts like Kount.

The Automated Alerts feature found on industry leading platforms catches 25–30% of chargebacks. Seeing as half of all cardholders who file an illegitimate chargeback do so again within three months, this is a crucial way online subscription retailers prevent credit card processors from transferring their revenue into an escrow account.

Security that improves MIDS and grants peace of mind lets online retailers grow their subscription business comfortably.

agile and nuanced protection

During the transaction process, consumers need to be verified and authenticated in milliseconds, too quickly for them to even notice the process. Subscription model online retailers also need to be able to adjust security settings for each product and campaign manually.

This prevents overly strong security from accidentally rejecting legitimate customers. Agile security prevents real customers from getting blocked. 

Some degree of fraud is a statistical inevitability in ecommerce, but smart and nuanced security lets online retailers know which customers to welcome and which ones to reject. Enterprise-level ecommerce platforms do the work to keep companies secure, so businesses can focus their energy on expanding sales. 

The subscription model has grown from the early days of product boxes to encompass a cross section of industries and products. Online retailers enjoy having such an ongoing relationship with customers who are likely to recommend the services to friends because of the exceptional convenience, service, and often preferential prices the subscription model affords. 

The key for retailers is to identify and meet the increasingly high demands of ecommerce consumers as efficiently and effectively as possible. To do all this securely at an enterprise level, subscription companies need the support of an all-in-one ecommerce platform.

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