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The Rise of E-commerce Subscriptions and How To Get Started

Are you someone exploring ecommerce business models that get you recurring revenue and stabilize growth? Here’s what our partners at Appstle suggest is important for you to know about ecommerce subscriptions and how to get started!

March 30, 2022
7
mins read
The Rise of E-commerce Subscriptions and How To Get Started

In the past few years, there’s been an acceleration in the growth of the eCommerce subscription business, and it’s not a mere fad. According to an infographic published by Invesp, more than 50% of online consumers claim to have subscribed to at least one subscription box service. This number is quite significant, considering the 2.14 billion global online shoppers in 2021.

Moreover, the eCommerce subscription market is projected to reach $473 billion by the year 2025. To put things into perspective, this number was just $15 billion in 2019. This exponential growth has created an exciting opportunity for eCommerce store owners to launch their own subscription service.

And you’ve landed on the right blog to help you understand the growth and get you started with the eCommerce subscription service.

In this post, we will understand what eCommerce subscription is, how it has grown over the course of time, and its benefits. We’ll also see how brands are dominating this space globally. And before concluding, we’ll provide you with a 6-step guide to get started with the eCommerce subscription model.

Without further ado, let’s dive right in!

What Are eCommerce Subscriptions?

In simple words, an eCommerce subscription is an automated solution for customers to buy regularly needed products/services on a recurring basis instead of having to buy them every single time. These subscriptions can be offered weekly, monthly or annually, depending on what the product is. Moreover, buyers can set the frequency of delivery as per their preference.

Businesses that follow the subscription model focus more on the regular customer, which means they prioritize customer retention over acquisition. The idea is to give customers continuous access to the required product/services, converting one-time purchases to recurring ones.

Types of eCommerce Subscription Business Model

Subscription models can primarily be categorized into three types — replenishment subscription, curation subscription service, and bargain or access subscription.

  • Replenishment Subscription: Providing recurring delivery of a product/service to the consumers, this type of subscription model is also referred to as “Subscribe and Save”. It is one of the most popular subscription models among digital shoppers. This is the best option for businesses that already have transactional products/services and want to jump into the subscription model.
  • Curation Subscription Service: This one’s also called the discovery model, where the idea is to surprise and delight the buyers by shipping new products or some sort of highly-personalized experience. It is best for niche products like beauty, apparel, food, etc.
  • Bargain or Access Subscription: The subscribers, in this model, pay a subscription fee (monthly or annually) to avail hefty discounts and other members-only perks. In some cases, it is compulsory to be a member to have access to the company’s products.

Growth of eCommerce Subscriptions

The eCommerce subscription market is at its peak, and there’s no shortage of reasons behind this popularity. In 2020, when the market was supposed to take the hit, the growth of the eCommerce market skyrocketed. Here are some statistics that tell the growth story of the eCommerce subscription market.

  • In a span of mere five years (2011 to 2016), the revenue generated by the largest eCommerce retailers rose from $57 million to $2.6 billion. (McKinsey and Company)
  • People aged 25 to 44 years are onboarding to the retail subscription box trend if the product aligns well with their needs. Their income varies from $50,000 to $100,000, making them eligible to opt for the most popular subscription boxes. (McKinsey and Company)
  • Millennials have always preferred eCommerce over traditional markets. In 2019, 31% of millennial online shoppers had subscribed to at least one eCommerce subscription. In the next six months, the number rose by another 38%. (USA Today)
  • According to a McKinsey study, most digital buyers will subscribe to your brand if you can provide an end-to-end experience with tangible benefits. Around 30% of the subscribers believe personalized experience to be the driving force behind their decision to continue with the subscription.
  • In 2020, the eCommerce subscription market generated sales of $23 billion. In 2023, the numbers are expected to be somewhere around $38 billion, which is more than twice the sales in 2019. Such huge jumps indicated that the subscription model is here to stay. (Statista)

5 Benefits of eCommerce Subscriptions

In the above section, we have given you enough numbers to know that by providing subscription services, your business can generate massive revenue or at least make the revenue more stable. Here are some of the benefits that the subscription business model boasts:

1. Regular Customer Engagement

When customers subscribe to your ongoing products and services, you’ll find consistent opportunities to engage with them throughout the subscription period. For companies like Netflix that provide ongoing services throughout the month, customer engagement becomes more regular.

Even the companies providing comparatively isolated subscription services (like scheduled recurring delivery of a specific product) can engage with their customers throughout the subscription period but in different ways. If you lie in this category of companies, you can send letters, stickers, or an additional gift with the subscription.

2. Predictable Revenue

When you know what amount of fixed money is going to enter your account every month, determining things like sales forecasting and inventory management becomes much easier for you. It also helps you plan better budgets for the upcoming cycles.

Moreover, you are less affected by the sudden dry spell that most eCommerce businesses are scared of. And when you have a fixed number of deliveries every month, you can predict better shipping costs and the total number of deliveries per month.

3. Easier Inventory Management

As most of us already know, inventory management is the spine of eCommerce businesses. With eCommerce subscriptions, you have a much better idea of how many pre-booked deliveries you have to make and how much stock you’ll need. The point is, you can anticipate the demand with better accuracy and plan your inventory ahead of time.

4. More Interest From Investors

Investors prefer subscription business over transactional eCommerce. One of the first things that investors ask when presented with an opportunity is the valuation of the company. And when they see a consistent cash flow in the business, they come up with a significant value for the company.

Companies with a recurring revenue model are valued eight times more than the transaction-based business model. And it's not just the higher value that you get as recurring revenue also allows you to establish a reputation as a solid company.

5. Ease For Customers

Convenient and hassle-free delivery is one of the biggest reasons why customers are opting for eCommerce subscriptions. In this model, customers don’t have to go through the repeated cycle of ordering the same product.

On the business side of it, your customer support team will have to deal with fewer complaints because the customers are already satisfied with your product and know how you as a company operate. Moreover, it also helps customers in budgeting as the product/service becomes a fixed expense.

5 Examples of eCommerce Subscriptions

By understanding the audience and showing creativity, every company can offer the subscription-based business model irrespective of which industry they belong to. Here are some examples of global companies that are ruling the eCommerce subscription industry.

Amazon Subscribe & Save

Amazon is the online retail behemoth. Its Subscribe & Save retail model automatically delivers everything from household needs to beauty products to baby products. If you subscribe and buy more than five products, you get a discount of up to 15%, and you get up to 20% if you are a prime member.

Dollar Shave Club

In the Dollar Shave Club subscription model, you just have to select your shaving preferences like what you shave, how often you shave, hair type, problems, etc. You’ll get a personalized selection of products shipped to you every month.

Ipsy

Ipsy beauty subscription service delivers a personalized box of products based on your preferences. You get these products at discounted prices. It is one of the most personalized beauty product subscriptions as it allows you to customize every item of the bag.

Blue Apron

Blue Apron is a well-known example of curation customer service. This is mainly a meal-kit company that delivers all the ingredients that a customer might need to cook delicious meals quickly. You can choose any of the recipes designed by their chefs and get the ingredients in perfectly portioned amounts.

Birchbox

As far as subscription-based eCommerce models are concerned, Birchbox has an amazing success rate. Operating in more than six countries, they have over a million subscribers. The subscribers just have to select their style preference and skin type, and they’ll receive a box full of beauty samples each month.

6-Step Guide to Get Started With the Subscription Model

Today, almost every eCommerce company is looking to provide subscription services to their customers. However, most of them don’t know where to start. You can follow the six steps mentioned below to get started with ease.

1. Identify Your Products

The first step towards launching a successful subscription business is finding the right idea. And the answer to three questions will clear things out for you.

  • What is your target market?
  • Which niche do you want to target?
  • How can you stand out from your competitors?

Once you find your target audience and niche, figuring out the next one will be simplified. You can look into market trends and your sales data to identify what your customers are looking for on a recurring basis. These are the products that your customers will want to subscribe to.

2. Get Customer Insights

If you are finding it difficult to determine what your customers would want from your subscription service, you can always ask them. All the customers who have made the purchase from you must be aware of your brand and the other products you have. You can run a survey and collect insights from it about the most suitable products for your subscription service.

This survey will also help you in creating personalized combos. For example, if you are a hair product company, and there’s a customer with a hair fall issue. They can subscribe for a combo that includes anti-hair fall oil, anti-hair fall shampoo and condition, and a special comb that doesn’t damage the hair.

3. Pick a Subscription Model

We have already mentioned the three overarching types of the subscription business model — replenishment, curation, and access. Each of these types comes with its own advantages and disadvantages.

It is important to identify which one of those will align well with the physical and digital products you’re selling. Not just product type but your capacity to produce those products and your business goals also play a major role in determining the subscription model you should go forward with.

4. Get the Required Solution

After following everything we have mentioned so far, it’s time to set up the wireframe of your eCommerce subscription model. You can opt for a solution like Appstle Subscriptions that can help you not just set up the subscription model, but also tailor its elements based on your business goals. 

It is a comprehensively built solution that enables you to set up eCommerce subscription models in no time - no matter which path you choose; building a conventional subscription model or offering build-a-box.

5. Set It up on Storefront

Once you are done with the set-up of the subscription wireframe, you can integrate it with your store and launch it. After the launch, you’ll have to work on promoting your subscription offers. You can add a CTA on your homepage or make a custom subscription page. When customers are checking out, the option of subscribing to the product must be there for maximum conversion.

Moreover, you’ll also have to ensure that everything from packaging to doorstep delivery is running smoothly. Monitoring the subscription model performance constantly and optimizing it with feedback is the only way to be successful in this domain.

6. Monitor the Performance

Now, there is no shortage of ways to track the performance of your subscription model. Here are some of the metrics that you can track:

  • Revenue and Margin: Average order value, average subscription value, and gross merchandise value.
  • Program Size: Number of active subscriptions, total enrollments, monthly addition, etc.
  • Conversion: Percentage of buyers that become subscribers, the top products that get subscribed.
  • Retention: Churn, lifetime value (LTV), number of recurring orders, etc.

While you’re monitoring the performance, keep optimizing things on the go to improve it. It’ll ensure that new customers become your subscribers and already subscribed customers do not leave.

Ready to Create Your eCommerce Subscription?

In the past couple of years, subscription-based business models have dominated the eCommerce space, and they will continue to do so. The subscription business model is relevant for every industry out there— if Porsche can do it, there’s no reason why any other business can’t.

That’s why Appstle is here to make it simpler for businesses to understand and implement a subscription model. Built by ecommerce experts, Appstle Subscriptions is a subscriptions app that comes with pre-built features required to set up this business model. From replenishment, curation, build-a-box and more, it is the one solution that helps you set up and tailor the subscription model you want to offer to buyers in no time.

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