Ecommerce subscriptions are the next new big thing for online businesses.
Big companies everywhere are using the subscription model to scale their revenue. If you’ve ever used Netflix or Spotify, then you’ve used a subscription service. These companies sell their software to you on a monthly basis for a fee. Software-as-a-service (called SaaS ) is a business strategy for companies seeking a loyal customer base and higher revenue.
Subscriptions let a customer pay for a product or service on a recurring basis – typically monthly or annually.
The business model of subscriptions is spreading like wild fire. For example, Joshua Tree Coffee Company sends subscribers weekly bags of locally roasted coffee straight to their doorstep. And the female-founded startup Sipsby makes discovering tea fun with a monthly box of curated tea from around the world.
Consumer habits are moving towards instant gratification, convenience, free delivery, and discounts. Subscriptions help you tick off all these boxes.
Subscriptions let customers order an item once and enjoy the convenience of repeat deliveries. It allows them to shop with little effort.
In this article, we’ll cover the benefits of ecommerce subscriptions and how to turn your product into a subscription.
Ecommerce subscriptions leads to higher revenue
It’s easy to use Netflix because of their subscription model makes it hassle-free. You can watch anything you want and you’ll be automatically billed without having to do anything.
Imagine if you had to enter your credit card information every month over and over again? You probably wouldn’t use their service.
Subscriptions take care of recurring billing, so customers are more likely to stick around month after month.
Subscriptions are an excellent way to fuel growth by creating die-hard loyal customers.
Customers are showing their commitment by ordering a product on a repeat basis. Repeat orders means repeat income. E-commerce subscriptions help online businesses have predictable revenue. Repeat customers also means a lower churn rate and higher retention rate.
Subscriptions are even more important since Covid-19
Many businesses have closed up their shops or experienced extreme ups and downs in their revenue. Subscriptions help by creating predictable income that is reliable. This is helpful for managing and planning inventory.
Having a strong relationship with your customer helps you lower churn rates which can help lower acquisition costs. It’s also been proven that your chances are much higher of being able to up-sell to an existing subscriber. By being a subscriber, you’ve already won over their confidence and trust so you don’t need to start from ground zero.
Ecommerce subscriptions are paving the way to earn higher revenue on your online store.
By offering subscription products on your online business, this makes you a more valuable business if you ever decide to sell your company. Investors are interested in recurring revenue and value it higher than a business making their revenue with one-off sales.
Ecommerce subscriptions also help increase revenue by offering discounts on repeat orders, which incentivize shoppers to become a subscriber to save money on an order.
The Subscription industry is rapidly growing
Subscriptions sign ups are on the rise
Subscription companies are growing at twice the rate of their competitors.
While S&P 500 companies continue to shrink, subscription based companies are experiencing rapid growth.
Typical retailers who don’t adapt to new ways of shopping behavior are going to be left in the dust. It’s do or die in this type of economy.
Business is booming for subscription companies. The subscription economy grew more than 500% over the last five years with more than half of customer growth being attributed to renewals.
Chuck Longanecker, founder of Digital Telepathy, said his revenue increased by 300 percent after switching to a subscription model for his business.
Research by McKinsey & Company points out
- 15%of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis
- 46% of consumers subscribed to an online streaming-media service, such as Netflix
- 35% of these consumers have three or more subscriptions
Covid-19 Pandemic makes subscriptions even more desirable
Subscriptions offer the highest form of convenience to customers, especially now when they need it most.
People want to save time and money, and most importantly, stay safe by not going outside.
The coronavirus has not only changed the way we live our lives, but how we shop.
People are more prone to shop online now with strict-stay-at-home orders and a growing concern of going to public spaces.
But the proof is in the numbers. Black Friday and Cyber Monday 2020 recorded a historically high amount of online orders.
Subscription company Instacart offers groceries delivered within 2 hours and is currently eyeing a 30 billion valuation when they IPO in 2021.
Companies who offer recurring orders will win
Subscriptions offer a “set it and forget it” model that is more desirable now during the pandemic.
The shopping trend is to order it once, and enjoy constant deliveries of your favorite items or services. Modern life is hectic with working from home and family obligations. People are demanding a hassle-free shopping experience more than ever.
Subscriptions give your customers just that.
People don’t want to have to think about re-filling their pantry or re-ordering an item, they simply want a company to take care of it for them.
With lockdowns in place around the world, shoppers are looking for ways to get the items they need delivered straight to their house. The fact is most people are more willing to shop online for an item than to pop into the store.
Since subscriptions offer a discount savings, convenience and free home delivery… shoppers are quickly adopting the subscription lifestyle.
Quip offers toothbrush subscriptions as well as gum, floss, and toothpaste refill plans. Source: Quip
Explore, refill, & memberships
Basically, there are three different categories of subscriptions:
- Curation – Getting surprised with a variety of personalized items (example: BirchBox beauty and grooming subscription box)
- Replenishment – Refilling your shelves with common household items (Dollar Shave Club razors for men)
- Access – VIP access to services and membership perks (Thrive Market discount health food groceries)
Curation & Replenishment subscriptions lead the way
Most subscribers are fond of the Subscribe and Save model which lets the customer get a discount for placing repeat orders.
The most popular is Amazon Subscribe and Save which is quickly gaining traction with households interested in skipping a trip to the store.
Replenishment subscriptions let customers refill on common household items such as razors, diapers, pet food, contact lenses, feminine products, etc.
For example, Kabo is Canada’s top fresh dog food delivery that focuses on whole foods. They realized dog owners needed a solution to ordering dog food every month and hence a subscription dog food company was born.
Curation subscriptions surprise and delight customers with highly personalized items tailored to give them an outstanding experience.
Curation subscriptions are growing quickly with city-dwelling millennials who make on average between 50-100k per year.
Access subscriptions are trending upwards
Access subscriptions let customers get VIP perks and discounts for being a member.
This is quickly becoming the new normal. Customers are adapting to pretty much everything becoming a subscription.
For example, the American e-commerce membership-based retailer Thrive Market offers natural and organic food products for a discounted price.
Grocery items are delivered within 2-3 business days in a beautiful recycled box. This experience offers customers a chance to save up to 50% off retail prices.
Turn any product into a Subscription
There aren’t any rules when it comes to offering subscriptions. Pretty much anything these days can become a subscription from dog food to diapers. What use to be considered normal as a subscription has paved the way for new types of subscriptions such as tampons, cat toys, gaming gear, and coffee bags.
If you think it up, chances are you can create a subscription company.
For example, the company Quip sells sleek electric toothbrushes with a subscription brush head delivered automatically. They have more than 1 million subscribers.
CEO Simon Enever of Quip says, “We wanted to make a toothbrush that was accessible, desirable, and wanted by the 80% of people that have not ever upgraded or been bothered to upgrade their toothbrush [to an electric one].”
His idea: make brushing your teeth more fun and easier.
While other more recognized brands such as Oral B sell electric toothbrushes for hundreds of dollars, Quip is disrupting the industry by giving people access to oral hygiene at a low cost with a cancel-any-time subscription.
Tip #1 Personalization is Paving the Way
Consumers are getting used to be catered to. They expect more these days. They want you to know their interests and make personalized recommendations to fit their unique needs or wants.
Personalization is one of the best ways to increase customer retention.
With so much competition though you’ll need to separate yourself from the crowd.
Letting customers choose what they like not only helps you create a special box for them, but it also gives you highly valuable information. Quip toothbrushes come with a free iOS app that helps you track and monitor your dental hygiene journey.
Offering personalized subscriptions gives you deep insights into your customers behavior, which you can later use for cross-selling.
Tip #2 Create a brand with “stickiness”
You want your customers to stick around. You want to make your subscription hard to walk away from.
Above all, make something useful people want. If your customers find value in your product, they will renew their subscription.
For example, Quip created a sticky product: people use their electronic toothbrush 2+ times a day and will need a new toothbrush head every three months.
Another great way to create stickiness is to offer amazing discounts that are hard to stay away from.
By creating a brand that has “stickiness” you ensure that your customers will be long-term clients.
Here are a couple ways to create stickiness:
- Create a personalized and tailored subscription box
- Offer value (it’s not always about price in the end)
- Help customers explore products with curated items
- Incentivize with amazing discounts
- Opt for free shipping
- Offer fast and friendly customer service
- Create a product that needs to be refilled periodically
As a subscription company, your #1 enemy is churn rate. Churn rate is the percentage of customers choose cancel their subscriptions.
Tip #3 Pay attention to power users
Power users are your customers who use your product the most. They can help you understand what is working and whats not in your business.
Since they use the product or website often, they’ll be the first to offer feedback.
Paul Graham from Y Combinator, an investment company in Silicon Valley, advises startups to “talk to users.”
By asking your customers questions about their experience, you can gain useful insights. Knowing your demographics is important for running ads and paid acquisition.
You can create a dedicated Facebook group where customers can ask questions, and offer their opinion on polls/surveys.
Fact: Subscriptions are more common with women, but men tend to have more subscriptions overall than women.
How to offer subscriptions on your Shopify store
Interested in how you can offer ecommerce subscriptions on your Shopify store? Try out Ongoing
Ongoing is the #1 Subscription and recurring billing app for Shopify.
By installing this app on your store, you can easily transform any product into a subscription product. Your customers can place recurring orders with one-click.
Ongoing allows you to create custom subscription plans that you can offer to customers. Customize everything from delivery dates, and billing schedule to discounts and more.
Subscription discounts are a great way to incentivize repeat orders which leads to recurring revenue.
Ongoing makes subscriptions easy with automated recurring billing handled entirely by the app. It also helps you keep track of orders, monitor your churn rate, and keep an eye on cash flow.
Get Ongoing today for repeat customers, repeat orders, and repeat revenue.