Today’s consumers are selective of the brands they choose to back. They want ultimate convenience, flexibility and value for their money as the cost of living increases. While 2023 ecommerce sales are projected to hit $6.51 trillion, the most profitable brands will be those with a consumer-first mindset.
Rising acquisition costs in 2022 showed ecommerce merchants the profitability of high-value customers. In this competitive market, offering subscription options is an increasingly viable way for ecommerce businesses to build retention. As of November 2022, more than 21% of consumers use at least one retail subscription service and more than 40% may be interested. Subscription models 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.
Subscriptions offer a reliable source of recurring revenue for growing businesses, providing financial security for companies with seasonal sales fluctuations. The steady stream of customers also helps businesses save on marketing and advertising costs — which is especially valuable in the face of a recession.
Subscription sales are projected to reach a whopping $38.2 billion in 2023 — up from a mere $57 million in 2011. 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.
Since consumers can’t simply download the shoes they want (not yet, at least), they need the next best thing: personalized, flexible, recurring shipments of shoes straight to their doorstep.
The modern online shopper looks 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 a subscription strategy that fits your target customer needs. Once you've decided on your core offering to your target customer, you can start to build a subscription model that fits your product.
When it comes to creating a subscription model, there's no one-size-fits-all solution. Ecommerce businesses must consider their unique products and business goals to select the type that will scale best. Popular methods include:
Scaling your subscription business requires testing, learning, adapting and strategizing with key insight metrics that measure the longevity of your store. There are a few important things to keep in mind when beginning a subscription 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 recent growth and projections, 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 volatile ecommerce market. The sticky.io platform gives you powerful insights to understand your business performance.