Why You Should Adopt the Subscription Model in eCommerce
Previously overlooked in favor of more traditional models, the subscription model in ecommerce is gaining steam. As of 2019, 71% of people had an online subscription. Given the Pandemic accelerating the shift to online, this number has likely increased. And if you fail to offer an online subscription you could be leaving a lot of money on the table.
At Upscribe, we provide Shopify brands the tools that they need to supercharge their subscription business. We’ll teach you the main reasons why so many ecommerce businesses are enabling subscription products on their ecommerce to grow. Read on to find out whether it’s the right choice for your brand.
What is the Subscription Model in ecommerce?
The subscription model in ecommerce isn’t too different from the subscription model in any other business. In the old days, you might pay for a monthly subscription to a magazine and have it delivered to you once per week. Nowadays, a customer might pay for a monthly subscription to your ecommerce store, and they’ll get some of your products delivered to them once every 60 days.
Please note that not all subscription companies follow this exact modelt. The subscription model in ecommerce means that your customers sign up to receive certain products, discounts, or other perks in exchange for a monthly fee.
The 3 Subscription Models
To help you find the best subscription model for your business, we’ve listed the 3 most common subscription models that ecommerce businesses use. We’ve also offered 3 examples of subscription companies, 1 for each model.
The Membership Model
The membership model is quite like the traditional subscription. In ecommerce, a customer might pay for a “membership” with a particular company. Naturally, the membership confers certain benefits to subscribers. These could include access to products before release, special sales, and other goodies.
The Membership Model in Practice
Let’s take the example of GNC, an ecommerce company that sells supplements. Of all the consumer subscriptions that exist out there, few outline their value proposition in such a detailed manner.
With this subscription, customers get access to exclusive sales 7 times per year along with free expedited shipping and reward points. This accounts for the discounts. But customers are also guaranteed to get two pro boxes per year, which contain various supplements and other nutritional goodies.
As you can tell, you could mix all sorts of offerings like this yourself. Just make sure that prospective customers understand the value of what you’re offering.
The Curation Model
When you think of consumer subscriptions in ecommerce, you probably think of the curation model. After all, the subscription box industry was initially led by small-time online businesses that would send you a little box of soaps and beauty products every month.
The point of the curation model is that it lets consumers try different things. Instead of buying the same soap over and over, they might get exposed to a new scent, or a new texture. Many find this experience invigorating. If you sell a wide variety of products, you would do well to mix and match them into monthly subscription boxes.
The Curation Model in Practice
Hello Fresh is a great example of mundane items being spliced together into a subscription box. As one of the leading meal-prep platforms, Hello Fresh sends a basket of groceries and a few recipes to its subscribers every week. Customers can notify the platform about their food sensitivities and allergies ahead of time. Moreover, they give you the ability to skip weeks if you don’t want to have the meal.
This is such a great way to turn a mundane activity like meal prep into a new adventure every night. Not to mention, this solves a major problem for a lot of consumers. Many don’t have the time or energy to cook elaborate meals all the time. Hello Fresh points them in the right direction.
The Replenishment Model
The replenishment model is simple. A subscriber decides to purchase a whole bunch of a product that they know they need ahead of time. After making their initial payment, they can be secure knowing that they won’t need to buy any more of the item for the foreseeable future. This could be anything from razors, as exemplified by the dollar-shave club, to coffee. We will provide a coffee example later.
In the case that this model involves bargains, it’s also known as subscribe to save. Many subscription-based companies feel comfortable giving a discount if they know the customer is going to buy a lot of goods. That said, the line between this model and the membership model gets blurry once you start adding a whole bunch of other perks.
The Replenishment Model in Practice
To serve coffee drinkers, Upscribe customer Cloud Picker Coffee adopts this model. Customers choose from a variety of different blends. Once they select which blend they’d like, they can purchase a subscription to have the coffee sent to them at a defined frequency.
Cloud Picker Coffee replenishes their customers’ stock according to their consumption habits which is very convenient for the subscriber.
5 Benefits of Running Subscription-based Companies
Running subscription companies provides you with a whole host of benefits. The most prevalent ones involve consistency. Subscriptions always end up smoothing consumption. Therefore, you’ll need to rely less on growing your customer base and more on cultivating relationships with loyal customers.
Get a consistent stream of revenue
Subscription-based companies are at a massive advantage because they know they’ll be getting their payments every month. All they need to do is offer a consistent product and maintain the quality that brought customers over to them in the first place.
With such revenue streams locked down. You can focus on maintaining your current product, but this could also free up time for you to work on other areas. If you offer a basket of different products, then you could also mix in a few new product lines you want to test and ask for customer feedback. The possibilities in the subscription box industry are endless.
Make your inventory forecasts more predictable
You’ll have a fixed number of customers locked into subscriptions, and hopefully, a stable churn rate that you can anticipate ahead of time. Consequently, you won’t have to worry so much about peaks and troughs in your demand.
When you can easily predict turnover, the rest of your processes become easier as a result. Your suppliers will love working with you if they know they can expect a steady amount of business from you every month. The positive after-effects of this only compound in the future.
Increase your Customer Lifetime Value and the Value of Your Company
When customers are consistently buying from you like this, you increase their lifetime value. This ends up paying dividends for you down the line. Later, you can upsell and cross-sell customers who have already demonstrated loyalty.
Under this model, the best way to grow customer lifetime value is to grow your subscribers. Find out how Four Sigmatic increased their active subscribers using Upscribe.
Harder to Lose Customers
Once customers have already signed up with you, they’ll also find it harder to let go. Even if they were disappointed by what you offered one month, some will be willing to wait the month out. Others might be too lazy to cancel the subscription. Consumers are stubborn.
Meanwhile, customer retention is a lot more challenging when your customers buy one-time products. Even if they liked what they bought, they could still forget you. And if they don’t like what they got, they won’t be coming back.
It’s More Engaging Than Buying Standard Products
Think about it, wouldn’t you like to get a little surprise every month? That’s what subscription companies offer.
With the right brand positioning, you also get to feel as though you’re part of a movement. Customers often identify with the brands they purchase from. Imagine how they might feel when they were getting personalized boxes from their favorite brand every month.
Additionally, customers get to save time that they would normally waste shopping for items. Many find themselves overwhelmed by the constant choice offered to them on the market these days.
Treat Your Customers like Royalty With Upscribe
The subscription model in ecommerce is such a powerful tool for your business. The only problem is that getting your customers to agree to a subscription requires that you win their trust in the first place.
To help you win more subscribers, Upscribe will make your customer experience as seamless as possible. Onboarding is one of the things that ecommerce platforms don’t handle so well. We give you an advantage over your peers by making this process as quick and stress-free as possible.
Furthermore, you can reduce support time and extract new insights with our advanced analytics. This will help you increase customer retention and thereby increase the lifetime value of your customers.
If you want to join leading ecommerce companies and grow your subscription sales, join Upscribe today.
