Learn more about eCommerce subscriptions and how you can set them up on your Shopify store.
eCommerce has grown 2 to 5 times faster than before the pandemic. A large number of consumers have now made online shopping a routine. Traditional brick-and-mortar stores have transitioned to online sites.
An increase in the number of eCommerce stores has given the consumer more options than ever before. Meanwhile, for the online store, it has become tougher to bring back and retain customers.
That’s exactly where the eCommerce subscriptions model can help. And it’s time to explore it for your Shopify store.
What is an eCommerce subscription model?
An eCommerce subscription model allows customers to buy products or services on a recurring basis. In this model, customers subscribe to products or services that they require on a regular basis and make payments periodically. Subscriptions can be weekly, monthly, quarterly, yearly, etc.
Subscription models help increase customers’ lifetime value. This model isn’t something new. Merchants have been offering it for years, especially in some particular niches.
For years, people have been using this model to buy items such as newspapers, milk, bread, medicines, etc.
However, since 2021, subscription models have seen a 41% growth. An increasing number of brands are incorporating it in their overall marketing strategy. But why?
Why eCommerce subscriptions?
Subscription-based eCommerce has seen tremendous growth.
According to a study by McKinsey & Company, 15% of online customers have signed up for one or more subscriptions. That’s because it is highly beneficial.
What benefits does an eCommerce subscription model deliver?
It can generate consistent revenue
In today’s competitive eCommerce space, companies have to put in a lot of effort to generate revenue. The subscription model helps build a loyal customer base, which contributes to consistent revenue. It helps businesses ensure a steady flow of income.
It makes revenue predictable
With periodic subscriptions, companies have a better prediction of their revenue. Hence, they can make business decisions accordingly. For example, they’ll be able to manage inventory in a better way. They’ll have a sense of the available cash for expenses.
Improves business decision making
A subscription model makes a lot of factors predictable – the number of subscribers, the amount of revenue it would generate, the exact dates of incoming cash, inventory needs, etc. This helps different teams in the company make business decisions easily, based on data and numbers; not just assumptions.
Helps increase customer retention
The subscription model is based on long-term relationships – customers sign up to buy products or services on a regular basis. This automatically reduces churn and increases customer retention.
Greater company value
Predictable and recurring revenue improves companies’ stability. This makes businesses more valuable to investors. Customers too, receive benefits from stable businesses, as they’re able to offer more benefits.
Greater customer value
62% of customers join subscriptions because it offers a good value for price. As this model assures consistent revenue, companies often offer a discount or members-only benefits to customers. This is a great attraction for customers. It improves their purchase experience. Moreover, retailers can take a customer-centric approach to offer value based on customer needs.
Regular customer engagement
Due to the recurring nature of the model, companies have more opportunities to reach out to customers. This helps them increase customer engagement. Businesses can send out regular communication, offers, newsletters, announcements, etc.
It brings ease to customers
With subscription models, buying items on a recurring basis becomes easier for customers. They do not have to purchase items everyday, every week or every month. By buying a subscription, they have to make the payment once and get their items delivered to them regularly.
Increases opportunities to upsell
Subscription models help build long-term relationships between brands and customers. Over a period of time, it builds loyalty and trust. This makes it easier for brands to upsell or cross sell other products or services. Customers too, become more open to trying new products or services from brands.
Makes scalability easier
When executed well, subscription models improve the scalability aspect for brands. With growing numbers of subscriptions and cash flow, businesses can come up with subscriptions of different pricing to suit different customer needs. They can even create subscription options based on customers’ demands.
As listed above, subscription models have innumerable benefits. But how do you know if it will work for your business? Let’s explore the different types of subscriptions to help you determine which type would work better for you.
Types of eCommerce subscriptions and examples
Replenishment subscription model
The replenishment model, also known as ‘subscribe and save’ and ‘auto-ship service’, is a subscription under which customers receive deliveries of products on a regular (mostly pre-decided) basis, for example, daily, weekly, monthly, etc.
This subscription model is most common and suitable for food and beverages, health and medical supplements, and personal care items, among others – essential items that need to be replenished on a regular basis.
Why it works:
- Brands can offer better prices through discounts
- Customers can enjoy lower prices
- It’s easy and convenient
- Products can be offered daily, weekly, monthly, etc.
Pro tip:
Preempt your subscribers’ wants in a time-efficient manner. Customize offers and let customers feel they have the power to pick and choose. Bring in the ‘flexibility’ aspect within the replenishment subscription model.
Example:
Here’s a brand that offers diapers through the replenishment model. Customers can pick and choose items that they want in their monthly package, every month.
Curated subscription model
Most often, companies that sell liquor, wine, chocolates, coffee, toys, books, etc., follow this model. In the curated subscription model, brands put together an assortment of products that are delivered to customers based on the period they choose. The curated subscription model can be offered by brands that produce and sell their own products or brands that sell products of many different brands.
Why it works:
- There’s a surprise element so it keeps customers excited and engaged
- It makes it easy for brands to get customers to try new products
- It helps brands use all products in their inventory equally
- It gives brands control over the products and the cost of every curated box, hence profits
- This model works for brands selling their own products as well as those that offer products of different brands in the box
Pro tip:
Allow customers to add an extra item in their curated box. That way you can make their experience better and increase your revenue.
Example:
A socks brand offers the curated box subscription. Customers can choose the plan, the style of socks and for whom (him or her).
Bargain or access subscription model
This type of subscription model enables customers to pay a monthly fee to avail bargained prices or members-only access to discounts and deals. For example, this model is commonly used in the health and wellness, packaged food, and fashion industries. This method also helps build engagement.
Why it works:
- Helps brands build customer communities
- Improves loyalty and retention due to the added benefits such as discounts and perks
- Enables customers to buy regular items at lower prices
Pro tip:
Create an irresistible value proposition for customers. Offer them something so good that they’d want to pay the subscription amount month-after-month.
Example:
A meat brand offers unlimited free deliveries for its bargain subscription.
Fixed subscription model
As the title suggests, in this model, brands offer a fixed set of products for a fixed price for a defined duration. One of the best examples of fixed subscriptions is SaaS products – they offer a fixed number of features for a fixed price for a specific duration. Depending on your products or services, you can add features and raise the price.
Why it works:
- This model is straightforward
- It is easy to communicate
- It’s also easy to sell because it is simple
- Revenue prediction is easy and straightforward
Pro tip:
This subscription model isn’t too flexible and doesn’t change much so make sure the fixed plans you offer are enticing from the start.
Example:
Appstle offers fixed subscription plans. The tiered subscription model has different plans for different denominations and features.
Unlimited subscription model
This type of subscription model is not common in the eCommerce world. In this model, customers pay a certain amount and are allowed unlimited usage of a product.
For example, a lot of burger joints charge customers a certain fixed amount and provide unlimited refills of soft drinks. You might have seen this model being used in pubs where they charge a fixed entry fee and provide unlimited drinks. This model, however, isn’t always suitable for eCommerce businesses.
Why it works:
- The word ‘unlimited’ has a psychological effect on customers
- It’s easy to sell this subscription
- Certain niches such as libraries, music, etc. can use this model effectively
Pro tip:
Price your unlimited subscription model correctly, or else, it can result in a loss.
Example:
A books reading and listening app offers unlimited subscription.
Pay as you go subscription model
This is a usage-based subscription model. Customers pay on the basis of how much of a product or service they use. A lot of smaller companies use this subscription model to get started when they first launch a product or the company. This model of subscription is most commonly used by telecom and internet companies.
Why it works:
- This model can work well depending on the product or service you offer
- This model enables an easy entry into a new market
- For brands that launch new products, this can be a good way to get customers to try their products
- Customers can save money by paying only for the amount they use
Pro tip:
To avoid running into losses due to customers making high usage, charge them fairly on usage once they cross a certain threshold.
Example:
An article and keyword analysis brand offers the pay as you go subscription model.
Premium member subscription model
In this subscription model, customers have to pay a fee to access premium services and use products. As the name suggests, this model works on the principle of making customers feel exclusive and special.
Why it works:
- Depending on the products or services a brand sells, this model can help brands build communities
- Brands can engage customers by way of special offers and perks
- Brands can increase revenue through the membership fee
Pro tip:
To make your premium member subscription model a success, make it actually exclusive. Don’t offer the same incentives and perks in other models or to customers who haven’t subscribed to this model.
Example:
The eCommerce giant charges a fee to customers in return of free deliveries, and access to unlimited music, video, etc.
Final thoughts
So, were you under the assumption that subscription models are only for the food business? You clearly hadn’t explored its possibilities. Subscription models are for all kinds of businesses selling all kinds of products or services.
If you’re looking to set up a subscription model on your online store, you’re in luck with Appstle.
One of the best Shopify subscription apps, it can help you from A to Z of setting up a subscription model on your Shopify store with free customer support, and success.
About the author
This guest post was submitted by the eCommerce experts who have built Appstle Solutions to enable online businesses with powerful tools to increase their sales.
