Subscriptions are a predictable form of revenue. Traditional ecommerce businesses can be a bit unpredictable month-to-month given the fluctuations in traffic and conversion. However, when you enable subscriptions for your ecommerce business you are able to more accurately forecast and understand how much revenue you will be capturing each month and therefore make stronger business decisions.
More predictable revenue makes it easier to plan inventory. Understanding what products are actually going to sell in a given month or quarter will make it easier for you to plan your inventory. This will allow your business to potentially operate leaner and be less likely to have to liquidate product, which will improve the overall profitability of your business.
Subscriptions increase customer loyalty. By offering customers a frictionless subscription experience where they can receive their favorite items on auto-pilot and you make it simple for them to manage their subscription (through email or SMS) you will be delivering a stronger brand experience and drive great loyalty.
Adding subscriptions are a way to “diversify” your business without much time and effort. It’s no secret that the DTC ecommerce landscape is shifting from growth at all costs to survival at all costs given the macro-economic climate. By adding subscriptions to your offering, you will be adding a new, more predictable revenue stream to your business that as detailed above will drive greater brand loyalty and a more efficient business operation. The best part? Adding subscriptions to your business is easy to do thanks to Upscribe.
Under a replenishment ecommerce subscription model, you will be enabling customers to purchase the same item(s) on a recurring basis. Items that would be good for a replenishment model include coffee and other food & beverage items (both human and pet related), razors or health and beauty items.
A curation subscription model means that the subscription is geared towards a specific customer or category. For example, it could be a “fun sock of the month” subscription or a subscription tailored towards fitness items that are sent to you every selected period (i.e. 30, 60 or 90 days). You generally see a lot of curation subscription businesses offer “subscription boxes.”
With a special access subscription model, subscribers pay a certain fee to gain access to a particular sale or to gain early access to new products. This type of subscription model is common in the fashion and apparel industry as well as the fitness space.
Average Order Value (AOV):
This term is not only applicable to ecommerce subscriptions, as it is relevant to your entire ecommerce business operation. Your Average Order Value (or AOV) means exactly what it sounds like; it is your average order value that you capture on your site. Subscriptions will likely help you increase your AOV, which is a reason as to why subscriptions are so important for your business.
Bunding is when a customer selects a set number of products to purchase from an assortment that you create. The benefit of bundling from a consumer’s perspective is that a sliding discount will be applied to the order based on the number of products that are being ordered in the bundle.
For example, let’s say that you are a brand that sells athletic socks. Your bundle offer could be if a customer purchases 3 pairs of socks they get 15% off, if they buy 4 pairs of socks, they get 20% off and so on and so forth. Bundling incentivizes customers to purchase more items from you so they can get a more attractive discount from your brand. And as a customer when you subscribe to a “bundled” product, you can change the assortment of the products in future subscriptions (so you could change the colors of the socks that you receive for example).
By enabling build-a-box, you offer the box for a set price for a defined number of items. To see how this works in action, we will provide another example using a sock brand. If you were a sock brand that charged $17 per pair, you could offer an “athletic sock drawer refresh box” of 5 pairs of socks for $65 (a savings of $4 per pair). The customer would personally select the specific 5 pairs of socks that they wanted for the box. As a merchant you can create a different sized box for your customers (i.e. you could have a 3 pair build-a-box, 5 pair build-a-box and so on and so forth).
Churn in the context of subscriptions is when a subscriber leaves your subscription program. Ideally you have very minimal churn, but in some cases churn may be unavoidable. Perhaps your subscriber has too much product, they can no longer afford it or simply do not want to be a subscriber anymore. It’s important that you understand why your subscribers may be churning so you can take action on your business to help prevent it.
Customer Lifetime Value (CLTV):
This term refers to the value of a particular customer over time. You want to keep this metric high which is a clear indication that the customer is going to spend a larger amount of money with you over time. Subscriptions help to increase a CLTV due to the recurring nature of them.
Number of Subscribers (or Active Subscribers):
This term refers to the number of active subscribers that you have in your subscription program. The more subscribers you have in your program, the better because as we outlined above, subscribers are likely to have a higher AOV (average order value) and CLTV (lifetime value).
Do specific verticals cater to subscriptions more than others?
While any business can launch a subscription program, those businesses with products or services that require replenishment or reorders on a regular basis tend to do very well in subscriptions.
I already have a strong business, why should I add subscriptions to it?
Subscriptions allow a business to gain access to a more predictable cash flow every month. Additionally, subscriptions tend to increase a customers lifetime value and average order value.
What are some common issues that you would need to think through when launching a subscription offering?
If you are launching a subscription product or service, you should think through logistically how (if at all) this will change how you ship your orders. You will will also need to think through how you will price your subscription offering and the different cadences that you will let subscribers register to receive your product (i.e. every 30, 60 or 90 days for example). Finally, you will want to come up with customer service best practices for those subscribers who reach out to your support team with issues.
How long does it take to launch an ecommerce subscription program?
The answer depends on how robust of a program you are going to be launching. If you are simply leveraging existing products on your site to offer a subscription product, launching a subscription program can take minutes. If you are changing up the product offerings and need to build a fully customized experience for your subscription program, it will likely take a bit longer to launch your new subscription offering.