eCommerce Subscription Model: All You Need to Know

Subscription eCommerce business model or Subsciption Commerce is growing rapidly.

According to research conducted by McKinsey & Company, 15% of online buyers have signed up for one or more subscription services.^[i]

This model of eCommerce is certainly one of the best and has gained popularity because it gives consumers flexibility and provides business sustainability to online store owners.

In this blog post, we will talk about how a subscription-based model can benefit your business. So, let’s get started.

Types of Subscription-Based eCommerce Models

Before we get into the benefits, let’s talk about the types of models first.

The 3 main types of models are:

Replenishment Subscriptions

The replenishment model enables your customers to automate the purchase of essential items they use regularly like toiletries, groceries, etc.

For example, Amazon’s ‘Subscribe and Save’ option offers a 10% to 15% discount per subscription if the customer receives products from 5 or more subscriptions in a given month.

Curated Subscriptions

The curated subscription model focuses on fulfilling your customer’s unique preferences by offering personalized products. This subscription model generally includes beauty products, food, and clothing.

For example, Niyama Sol’s ‘Sol Box’ offers a curated box of the brand’s signature leggings, a workout top, and other goodies that you need to indulge in self-care.

Access Subscriptions

The access subscription model aims at providing an exclusive experience to your customers by offering an exclusive membership. This membership gives them access to lower prices, member-only perks, or first-access deals.

For example, JustFab is a women’s fashion brand that offers up to 30% discount to their VIP members.

Benefits of Subscription-Based eCommerce Model

A subscription-based model, if implemented right, can help your business grow by leaps and bounds. Here are some benefits-

Wider Customer Base

Subscription-based models have transformed purchases into monthly payments. As a result, luxury brands have the opportunity to reach a new and wider customer base.

For example, customers who earlier could not afford Gucci shoes can now purchase it at a manageable cost. This way, people can afford a luxury lifestyle without shelling out a lot of money at once.

Recurring Revenue

Subscription models make financial forecasting easier by offering predictable MRR (Monthly Recurring Revenue).

As a result, getting insights into your monthly revenue will help you streamline your business processes including sales and inventory planning.

Personalized Shopping Experience

Strategically planned subscription models give you access to customer data and behavior.

You can then use this data to have a clear understanding of your customer’s needs as well as use it to offer personalized experiences to them.

Besides, the gathered data can help businesses in making informed decisions and marketing strategies to build brand loyalty.

Built-in Virality

When customers are happy with the service of a particular brand, they are more likely to share their experience with peers.

You can take benefit of this opportunity by offering give-away subscriptions or other perks to your customers are brand advocates.

How to Choose the Right eCommerce Subscription Revenue Model for Your Business?

Given the benefits an eCommerce subscription model provides, it is definitely worth exploring.

But before you begin your journey to adapt the subscription revenue model, it is important to ensure that you are taking steps in the right direction.

Here are some of the tips that may come in handy-

• Take a note of your new and repeat customers and the percentage of sales they contribute to.
• Map out the buying patterns of your new as well as repeat customers.
• Identify the products your customers purchase repeatedly.
• Determine the average period of time over which these repeat purchases are made.
• Decide the products you can sell as subscriptions. Additionally, create bundles of products that are more likely to be bought together.
• Calculate your buying and selling price to check at what price you can sell your subscription and see if you can offer additional discounts on them.
• Choose a subscription model that fits your needs.
• Test your chosen model on a few products to see the response.
• Optimize your subscription model for better responses.

Key Takeaway

A subscription model focuses on engaging consumers for a long-term commitment to your eCommerce store. Simultaneously, it also ensures secure and recurring sales over a time period leading to business growth.

However, turning a subscription model into a success takes a lot of insights into customer data and understanding the buyer persona better.

Need Help Implementing a Subscription-Based Model? Contact Us!

References:

Thinking inside the subscription box: New research on e-commerce consumers- McKinsey and Company