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Subscription Business Models Offer Flexibility and Value

Consumer preferences are shifting, and ecommerce merchants must adapt quickly. See how to build a thriving subscription model to stay on top of an evolving ecommerce market.

Updated:  

January 25, 2023

Subscription merchant packing shoes.

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.

The Rise of Ecommerce Subscription Models 

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.

Subscription sales are projected to hit $38.2 billion in 2023.

How To Offer Subscription Value

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:

  • Which product or products will you offer as a subscription?
  • Why would someone want to subscribe to your product or service?
  • Who is your ideal customer?

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.

Find the Subscription Model That Works for You

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: 

  • Product curation or discovery — Customers receive a curated selection of products on a regular basis. This type of subscription is ideal for merchants who want to introduce their customers to delightful new products and keep them engaged for more. 
  • Replenishment — Customers regularly receive a new stock of supplies of essential products. This type of subscription is ideal for ecommerce stores that supply customers with products they often need, such as razor blades or toothpaste. 
  • Access model — Customers pay a monthly fee for access to an exclusive product or service. This type of subscription is ideal for businesses that strive to create a sense of exclusivity around their product or service and ultimately boost their perceived desirability. This subscription format is popular amongst fashion and wellness brands. 
  • Freemium — Customers access a free offering with limitations not included in a paid account. This type of subscription aims to convert the free customers into paid users through enhanced features behind a paywall. This model is typical in music streaming services, which often feature a free tier with ads. 

How To Scale Your Subscription Offering

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:

Reliable Infrastructure

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. 

5% of consumers canceled subscriptions in Q4 2022 due to erratic deliveries.

Compelling Marketing

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. 

Churn Mitigation

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. 

The Future of Subscriptions

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.

sticky.io Helps Build a Scalable Subscription Solution

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. 

Launch your ecommerce subscription model with technology built for convenience and reliability. Discover the sticky.io features that will give your customers the flexibility they crave.