Offering subscription options is an increasingly popular way for ecommerce businesses to operate and thrive in a competitive market. Thirty-one percent of consumers are using at least one retail subscription service. Subscription models in ecommerce have enhanced customer retention and loyalty for a wide range of online businesses, making it easier for companies to forecast their income and invest in long-term growth.
Shifting to a subscription model offers a more reliable source of recurring revenue for growing ecommerce businesses. This financial security can be beneficial for companies with seasonal fluctuations in sales. Subscriptions can also help build customer loyalty and brand awareness, since subscribers are more likely to stick with a brand compared to those who make one-time purchases. In addition, a subscription model in ecommerce can help businesses save on marketing and advertising costs by providing a steady stream of customers — which is especially valuable in the face of rising customer acquisition costs.
The bottom line is the world is trending towards a subscription economy, making it challenging to stand out among a competitive ecommerce industry. By implementing subscriptions into their sales model and continuously delivering value to their customers, ecommerce businesses can thrive in a shifting competitive landscape.
Subscription models have come a long way in recent years. A McKinsey study found that large retailers went from generating $57 million in subscription revenue in 2011 to $2.6 billion in revenue in 2016. Retail subscriptions now generate $15 billion in monthly revenue, according to our May 2022 edition of the Subscription Commerce Conversion Index. There are now subscription models for almost everything, from streaming services and luxury goods to clothes and groceries.
The appeal of subscription models to consumers is clear — they offer convenience and peace of mind, granting instant access to the products and services they want.
For ecommerce merchants, retaining steady customers means less reliance on new customers, which can be challenging to convert. Advances in technology and design have enabled streamlined user experiences that support the rising adoption of ecommerce subscriptions.
A modern online ecommerce shopper is looking for an immediate, efficient and wide selection of products readily available through easy purchase options. With a wide variety of subscription model offers, merchants are more capable of handling this demand. As a result, subscription commerce is effectively disrupting traditional ecommerce. Rising trends in subscription demand represent an opportunity for traditional ecommerce businesses to pivot product offerings.
Before you start creating your subscription ecommerce store, however, it’s essential to take time to understand the value of your product. Questions that may help provide clarity include:
These questions provide critical insight into how to craft your subscription model strategy that fits your target customer needs. Once you've focused on your core offering to your target customer, you can start to build a subscription model that fits your product or service.
When it comes to creating a subscription model in ecommerce, there's no one-size-fits-all solution. Ecommerce businesses must consider their unique products and business goals to select the subscription model that will scale best. There are a few subscription models to consider:
Starting your subscription business requires testing, learning, adapting and being strategic with key insight metrics that help scale revenue. It’s important to invest in the longevity of your store. There are a few key things to keep in mind when beginning a subscription ecommerce business:
A robust shipping and fulfillment infrastructure is the backbone of any subscription operation. Solidifying these practices is especially important if you plan to offer monthly or weekly subscriptions, as customers expect their orders to arrive on time and as promised. A few negative customer service experiences can have a lasting impact on the success of your store. Having consistent shipping and fulfillment is key to delivering a trusted customer experience that generates repeat visits.
In crafting a go-to-market strategy, you'll need to develop a pricing plan that strikes the right balance between remaining competitive in a crowded market and generating enough revenue to sustain your business. In addition, it's vital to create a marketing plan that will attract and retain subscribers. A clunky signup process will turn even the most engaged customers off.
One of the most significant risks in offering a subscription plan is customer churn. Whether a shopper unsubscribes by choice or necessity, it's essential to evaluate why the churn happens. Declining retention rates can signal that an existing offer isn't resonating with your target audience. If your business doesn't adapt to changing consumer preferences, churn could become an existential threat to your ecommerce store.
Based on its growth, it's clear that subscription models are here to stay. As consumers become more discerning about their products and services, they demand more control over their subscription options. This shift is driven by customers' increased demand for convenience and flexibility. In short, they don't want to waste time on clunky and inefficient systems.
By understanding and responding to changing customer preferences, businesses can stay ahead of the competition and build lasting relationships with their customers
While there are many aspects to consider before launching a subscription ecommerce business, the potential rewards are significant. A successful subscription business can provide customers with convenience, value and peace of mind — all of which are essential for long-term success in a market increasingly embracing subscriptions. The sticky.io platform gives you powerful insights to understand your business’s performance.