Those who hesitate to bet on subscription-first ecommerce are leaving money on the table. But there’s more to it —they’re missing the opportunity to trade transactions in for customer connections.See How We Compare
For Subscription-First eCommerce, Revenue and Data Go Hand in Hand
From Salesforce to Netflix, subscription models have proven their value long ago. Up until recently, digital goods including software and media have dominated the space—but with consumers hungry for a subscription to everything from coffee and vitamins to moisturizer and razors, there’s a massive amount of opportunity for brands. Today, a typical U.S. consumer has two to three subscriptions, yet this is only the beginning.
To meet the growing demand, subscriptions have exploded over the past 10 years. In 2020 alone, direct-to-consumer (D2C) subscriptions have increased by almost 100%. And, by 2025, the market is projected to reach $478 billion, with 75% of D2C brands slated to offer subscriptions in the next two years. But while food and beverage, health and wellness, and beauty drove the first wave of subscription models, others are now joining in to help usher in a new era—the era of subscription-first ecommerce.
In the early days of ecommerce, acquisition was king. But as the ease of spinning up an online store increased competition in the space, growing customer acquisition costs have made the traditional ecommerce playbook expensive and unsustainable. With ecommerce brands forced to shift their focus to retention, a subscription-first approach becomes a no-brainer.
Not only does a subscription model promise recurring revenue, but there’s also less of a dependence on new customer acquisition. For a subscription-first business, retention becomes the priority, delivering a higher ROI at a more affordable cost. And that’s just the short-term benefit. In the long term, subscription-first business enables companies to leverage first party data to further iterate on not only how they sell but what they sell on an ongoing basis.
In short, those who hesitate to bet on subscription-first ecommerce are leaving money on the table. But there’s more to it than that—they’re missing the opportunity to trade transactions in for customer connections, which hold more value than any one cart transaction.
The Immediate Subscription Opportunity
Whether a consumer is buying a bottle of shampoo or a luxury watch, traditional ecommerce is built on acquisition: businesses need to spend money to continuously attract new customers. This model is an uphill climb that’s unpredictable and does not lend itself to repeat purchases or and revenue stability.
A subscription-based model alleviates many of these challenges, however. Even basic subscription solutions on the market today manage churn by offering flexible alternatives to cancellation, such as skipped shipments or changing delivery frequency. And, by guaranteeing recurring revenue in this way, subscriptions give businesses the ability to forecast and plan. With consistent working capital, companies can overcome inventory challenges, confidently make hires to expand their team, or invest in other top-of-funnel marketing opportunities focused on brand and content.
Practically any business can leverage these advantages, even big box brands that have historically relied more heavily on brick-and-mortar sales than on ecommerce. With the cost of partnering with retailers skyrocketing, many big box brands are betting on subscription ecommerce, yet existing models aren’t fully meeting consumers’ needs. By opting for a subscription-first model, however, big box and online first brands can write their own rules, keeping costs low and customer experience high, while guaranteeing themselves a reliable revenue stream.
But revenue is just the tip of the iceberg: the real power of subscriptions lies in data, not predictable dollars.
Subscription Data Powers Growth
Subscriptions hold the key to a wealth of data that can support growth in two ways: growing the value of existing customer relationships and forming new ones. Current subscription solutions provide upsell options to brands, like recommending other products to customers. But this approach has largely become table stakes.
Strengthening existing customer relationships and driving growth requires deeper insights. Understanding the reason why a customer is canceling—and including prompts that might deter that cancellation—provide both insights and an opportunity for retention. For example, if a highly customized list of potential reasons for canceling is offered to the customer and they select the option deliveries are too frequent, there can be a followup prompt that invites them to change shipment frequency—staving off churn and possibly strengthening a connection with that customer.
Tracking even small behavioral changes, like why a customer is switching from one product to another, or adding a product to a recurring subscription, can provide valuable information that brands can then use to improve customer experience, inform marketing actions like email campaigns, and even adjust their product line or roadmap.
Beyond leveraging data to navigate and improve existing relationships, the future of subscription management will enable brands to attract new customers. Consider this: technology will soon be able to identify first-time buyers that exhibit similar characteristics and purchasing behaviors to subscribers and recommend incentives that brands can use to convert those shoppers into members.
Using data in this way ushers in an entirely new era of subscription management—one that completely flips the traditional business roadmap from a model that prioritizes acquisition to one that leans on retention as a vehicle for growth. But to unlock these and other opportunities, brands need a subscription solution that does more than manage their subscriptions—they need a partner that’s capable of leveraging data for growth.
Whether you’re a budding startup or an established brand, as the subscription economy evolves, the right solution will mean the difference between a stagnant company and a thriving one that is set up for growth and longevity.