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The subscription eCommerce business has been around for a while. As more individuals look for ways to save money, it has recently grown in popularity once more. With numerous companies hopping on board, it is anticipated that this trend will continue in the upcoming years.
According to Orbelo, 15% of the 2.14 billion online buyers globally have subscribed to at least one eCommerce service at some point in their lives. By 2025, it is projected to be worth $478 billion worldwide.
It is crucial to understand how this will benefit you and different types of subscription models before starting one or working on strategies to expand an existing one.
What is subscription model?
An eCommerce subscription model is a business model where customers pay for recurring deliveries of products or services.
Subscription models have made their appearance since the invention of the printing press when customers would subscribe to magazines and books that were published in installments. In recent years, cable TV was one of the most widely used subscription services. Different types of subscription models have now been adopted by many eCommerce businesses and used in novel ways.
The objective of this business model is to create lasting customer relationships with automated billing. Through subscriptions, businesses will convert customers who already recognize the value of your goods or service into devoted customers. By encouraging long-term loyalty, more repeat purchases are generated.
Benefits of a subscription eCommerce business
Creating a subscription eCommerce business has several benefits, regardless of the sector you’re in or the market you’re trying to reach. Every year, more and more brands use this type of business model, so this time it might be you.
1. Improve customer lifetime value (CLV) and brand loyalty
Another important benefit is that a subscription eCommerce model can help boost your customer lifetime value. The longer subscribers stay subscribed, the more familiar and at ease they feel with your business, enabling you to forge enduring relationships with them.
The good thing about these long-term partnerships is that they increase your opportunity to interact with your customers through various channels, making it simpler to build trust and then upsell and cross-sell your products more effectively.
Subscriptions also increase customer loyalty by offering a variety of special benefits that are only available to subscribers. Your subscriber base will increase and stick with you and your business.
When a customer subscribes to your service, you can easily promote new services to them. And since they’ve already trusted your brand, they will be more likely to pay for them. According to Accenture:
57% of consumers spend more on brands to which they feel loyal.
2. Reduce customer acquisition costs (CAC)
By concentrating on subscriptions, you can reduce customer acquisition costs (CAC) as loyal customers typically spend more money.
As mentioned above, long-term relationships with your customer base can be developed through different types of subscription models. This will eventually reduce your dependence on new customer acquisition and increase the likelihood that customers will recommend your products to others instead.
3. Recurring revenue
High subscription counts and recurring billing are what make subscription eCommerce businesses stay afloat.
By using eCommerce subscriptions, your business can benefit from recurring billing and a recurring income model. You can provide subscriptions annually, monthly, bimonthly, weekly, or at any other interval you decide, depending on your service and what your business needs.
With this convenience and flexibility, you can be sure to have a reliable cash stream, avoiding any possible financial problems.
4. Simplify inventory management
A subscription business enables you to plan everything in advance so that you keep your inventory full and supplies on hand at all times. You can see how many members you have and how much stock you actually need by using eCommerce subscription services.
With types of subscription models, eCommerce businesses can simplify inventory management
This convenience would ensure your customers always get what they desire without waiting for too long. Moreover, this level of accuracy makes it possible for you to predict future demand and schedule inventory well in advance, saving you time and money, and preventing any inventory management issues.
5. Positive cash flow
Contrary to the conventional eCommerce business model, all different types of subscription models let you quickly and precisely estimate and forecast monthly revenue. A more accurate understanding of your company’s KPIs can be gained by having the ability to predict future revenue based on existing subscriptions.
Thus, this makes business decisions easier and offers a safety net in case the supply chain is disrupted in the future, increasing your chances of having a positive cash flow.
6. A more enhanced customer experience
Subscription eCommerce businesses can offer a seamless customer experience by automating the entire process. This allows customers to save time from searching around for the items they want or manually entering their payment information for each purchase.
Types of subscription models can help eCommerce businesses offer a seamless customer experience
Besides, with the consistent stream of orders that all types of subscription models provide, you can gain more knowledge about your customers’ payment methods, purchasing preferences, and timing preferences in order to enhance their subscription experience.
Overall, it is helpful for any business that wants to establish relationships with its clients and achieve the highest customer lifetime value from every sale.
Types of subscription models for eCommerce businesses
After learning how the eCommerce subscription model is beneficial for you, let’s go over all the different subscription models that are frequently employed.
Subscription models for physical products
1. Replenishment
A replenishment eCommerce business model, which is also called the auto-ship subscription model, is where a customer subscribes to get recurring deliveries of the same kind of product. Then, these products are automatically delivered to them at certain intervals, usually at a discounted price.
This type of subscription eCommerce, sometimes known as a “subscribe and save” model, is becoming more and more common in the food and beverage, health and wellness, and grooming sectors. The following examples are typically items that customers seek on replenishment:
- Vitamins
- Groceries
- Pet food
- Toiletries
1st Phorm is an example of a successful business utilizing this model. It is a manufacturer of nutritional supplements for fitness that wants to keep your workout program going strong. Choose your supplements and have them delivered at biweekly or monthly intervals for regularity (plus, you will save money when you subscribe), whether it’s a pre-workout blend for weightlifters or all other kinds of vitamins.
1st Phorm is an example of a successful business utilizing the replenishment eCommerce business model
Thanks to the convenience it provides, a replenishment eCommerce subscription model has a high conversion and retention rate. For the time-crunched customer of today, replenishment subscriptions are their favorite as they find it appealing to have their selected consumables delivered directly to their door on a regular basis by setting this up with just a few clicks.
2. Subscription box
Subscription boxes give customers a way to receive products on a regular basis
Subscription boxes are, in fact, the evolution of product-based subscriptions, which give customers a way to receive products on a regular basis relevant to their interests.
Books, recipes, cosmetics, toiletries, and other types of consumer goods are frequently included in subscription boxes. Among the top subscription box services are Loot Crate, Birchbox, Stitch Fix, etc.
3. Curation
The curation eCommerce subscription model is a type of subscription box that is most frequently used for apparel and beauty products.
This subscription eCommerce business offers a selection of products based on the preferences and needs of each individual customer. Prior to making their first purchase, customers’ preferences are typically gathered via a questionnaire or a brief form.
For example, Hunt A Killer provides a mystery game that may be solved at home using the special components that come in each box. With each fresh delivery per month, the plot gets more complicated. Users who sign up for one of several games get new details about the mystery in each box, with the sixth and final box offering the chance to solve the case and catch the murderer.
Hunt A Killer provides a mystery game that may be solved at home using the special components that come in each box
Due to the level of customization it provides, this kind of subscription model is regarded as being both expensive and high-quality. To draw in and keep loyal customers, you need to be prepared to spend more on marketing, branding, and packaging.
This is a great subscription type as it meets the rising need for personalization among customers. The elaborately crafted customer experience that results from receiving a monthly box of hand-selected treats makes subscribers feel understood, appreciated, and connected.
? Feel inspired and want to enable one of these types of subscription models to your Shopify store? Let’s give your customers subscription offers they love!
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Subscription models for digital products
4. Service
Service is among the types of subscription models that allow customers to subscribe to a service they frequently require. Examples of the services provided using this type of model are:
- Online learning
- Email software
- Mobile phone services
- Website domains
- Project planning apps
Moreover, there are examples of Mailchimp, WordPress.com, Avada.io, and Statista among the businesses running the Service Subscription business models. So, you can see that this type of subscription model is getting more popular as more businesses are leaning toward providing SAAS (Software as A Service).
Service subscriptions harness value-based pricing. Thanks to this, tiered subscriptions are available to customers, and they will only pay for what they need and have the option to scale up or down as their needs change.
Additionally, the various payment options and extra perks improve the quality of life for the customers.
5. Access
Subscribers to access-based subscriptions pay a regular fee in exchange for enticing member-only benefits like exclusive discounts or first access to new products.
This kind of subscription strategy is popular with businesses that sell digital subscriptions as well as the fashion, apparel, and food industries.
Membership fees are automatically recurring payments under this model. By automating membership fees, access-based eCommerce subscription businesses allow clients to utilize their products continuously.
Eight Sleep offers access to a smartphone app that requires a membership to analyze each night’s sleep
For example, a mattress manufacturer called Eight Sleep offers access to a smartphone app that requires a membership to analyze each night’s sleep. They propose that you purchase the mattress only once and make monthly payments to keep track of your sleep every night. A special pricing plan is available to members who want to upgrade to the newest mattress technology.
Customers prefer access subscriptions because of the substantial discounts, ease of use, and extensive product selection they offer. The drawback of this subscription model is that in order to remain competitive with companies in your industry, your terms must be frequently evaluated and improved.
6. Digital content
With the internet becoming more widely accessible, numerous industry titans have begun to provide digital content subscription services. Simply put, this is one of the recently popular types of subscription models that gives users access to premium online resources where initial sign-up incentives sometimes include loyalty benefits and discounts.
Netflix is one of the top businesses that provide subscription services for digital content
Giants like Netflix, Spotify, and Amazon Prime are some of the top businesses that provide subscription services for digital content. Users who sign up for such services receive special privileges, which makes them feel special and fosters brand loyalty.
How to choose the right subscription model for your business
The subscription model is a terrific method to expand your eCommerce business, and almost any kind of business can run a subscription model.
Yet, the very first thing to start an eCommerce subscription business is to learn all the types of subscription models for eCommerce businesses and choose the right one for your own. There are several ways to help you with that.
1. Online resources
There are plenty of online resources which can help you decide what type of model matches your service and best represents your brand. Similar to our blog, we have defined all of the major subscription model types for you, along with their advantages and the industries that should use them.
All you need to do now is reflect on your business goals to see how each of them will best fit your business. Before finalizing your decision, you can conduct further research to enrich your understanding.
There are plenty of online resources which can help you decide what type of model matches your service
2. Learning from your rivals
You can observe your rivals to determine what types of subscription models suits them best so that you can incorporate it into your own. If none of your rivals are currently offering an eCommerce subscription, think about how you may differentiate yourself by being the first.
Although it is good to learn from others, it is not always the same for all. This means that the right one for them might not be right for you. So, you should carefully evaluate each aspect of their businesses and compare them to yours to see if their business types would fit in.
One of the best ways to learn what shopify tools are your rivals using is Koala Inspector: The Best Ecommerce Tool – Koala Inspector provides you with all the secrets behind every Shopify store. In one click you can reveal every strategy the store owner uses, the best selling products, and pricing. No matter if you use Etsy, WooCommerce, or any other eCommerce platform, now you have the opportunity to follow and track any Shopify store you’d like!
3. Online open-source platforms
You can access open-source platforms online to assist you in getting started. The goal of these open-source platforms is to help eCommerce business owners in building websites for different subscription models. You can ask for any necessary information and even professional support to help you find the right option.
Ecommerce subscription plug-ins, eCommerce subscription templates, and WooCommerce subscriptions are some of the greatest open-source platform solutions.
Final words
Building a subscription business can be truly beneficial yet a little daunting. However, with the appropriate knowledge of this business model, you can run a successful business with the least amount of time and work.
Throughout this blog, we highlighted the perks of running a subscription business and all types of subscription models. Since you know what it is, you can get started by selecting products, stocking your inventory, and planning to sell your subscriptions effectively.
Now, you will be good to go and may end up creating a lucrative subscription business. Good luck!
Grow endless recurring revenue with SubBox
