What Makes Subscription-Based eCommerce Successful?

In today’s digital business age, there’s little chance a new enterprise will succeed unless it’s largely driven by an online presence.

Indeed, while a website domain acts as a crucial online base, social media accounts and email communication prove critical for effective marketing and customer engagement.

Now, of course, far from all companies are yet to go all the way and become eCommerce-only ventures. Yet, more and more are following that model – not least a subscription eCommerce model.

In fact, according to the Subscription Economy Index, over the past ten years, the revenue growth of subscription enterprises outpaced that of Standard & Poor’s 500 revenues by more than five times.

But just why are so many business folks getting in on the online-based subscription game?

This article will explain what subscription eCommerce is and break down its various models, as well as examine why it’s proving such a successful component of 21st-century business.

How Do Subscription eCommerce Models Work?

Fundamentally, subscription eCommerce works like any other subscription format – whether it’s concerned with, say, selling cosmetics and health consumables, or providing a B2B VoIP telephone service.

That’s to say, a customer signs on with a product retailer or service provider and, for a recurring payment over a set period of time, they receive products or services.

So, from the retailer or service provider’s viewpoint, the aim is to meet the needs of the customer to the extent that a successful relationship is established. One that’s built on consistent service delivery, at first, then trust and loyalty so the subscription period is extended and its terms expanded.

What Are the Subscription eCommerce Models?

There are several different subscription models that eCommerce companies deploy. The following are the most common: 

Consumables/Replenishment

Otherwise known as a ‘subscription box’, this model provides consumer products that fit customers’ interests. Being ‘replenished’ at set intervals, then, these products are often sold at discounted rates.

Consumables available this way are the likes of cosmetics, toiletries, books, vitamins, pet food, groceries, and other foodstuffs.

Often, this model can result in particularly impressive conversion and retention rates because it offers customers a universally appealing, easy way to receive essential products.

But this is also a great opportunity for retailers, who can boost the volume of products per basket, thereby increasing spending based on scale. 

Curation/Discovery

With an emphasis on ‘discovery’ or ‘surprise’, this model sees products grouped together for each individual customer based on their personal tastes, wants, and needs. Indeed, it may well involve some form of carefully applied price discrimination.

Commonly featuring the likes of health and beauty, wellness, and apparel products, tailored offerings for this alternative ‘subscription box’ model are created by capturing and harnessing data in answers to online questionnaires.

From a customer perspective, this model sits at the higher-quality, pricier end of the subscription eCommerce spectrum. Without a doubt, it relies on the customer being successfully convinced they’re a valued eCommerce customer.

So, from a retailer’s perspective, it requires significant investment in marketing, branding, and packaging to properly appeal to buyers – and to satisfy their expectation of a high-quality experience.

Access/Bargain

This strategy gives customers access to ongoing members-only-available promotions and discounts. Such benefits, then, relate to a wide range of products that customers like to purchase online on an ongoing basis – usually apparel, health and wellness, and packaged goods.

As with other subscription eCommerce models, the ‘access’ type proposes customer convenience; yet, its specific appeal comes down to the long-term cost savings it delivers.

Any eCommerce retailer looking to get into the ‘bargain’ realm, however, should consider the need for consistent price monitoring, as well as the need to review the necessarily shifting terms and conditions of discounts on individual products.

Digital/Online

Finally, digital service subscription models are designed to provide a whole host of different IT needs for business customers. They cover services like website domain and software, smartphone apps, project planning apps, and online learning services.

In many cases, this eCommerce model is available via adaptable, tiered subscriptions, ensuring customers can scale up or down the services they pay for, as and when they need them.

Alternatively, online content subscriptions are best known for the B2C resources they allow access to. That is, content provided by streaming companies, whether they’re giants like Amazon Prime or Spotify, or far smaller, disruptor start-ups.

Like other subscription eCommerce models, these online ventures make use of discounts (to secure sign-ups) and loyalty rewards.

Why Is Subscription eCommerce Successful?

So, what specifically is it about this type of eCommerce approach that, in today’s age of digital dominance, ensures it can be so effective and profitable? Let’s find out.

A Faster Purchasing Process

Firstly, subscription eCommerce allows automation to take center stage in the purchasing process.

This means the process is consistently easier, smoother, and faster – customers don’t have to spend time looking for products/services or manually input payment data every single time.

The automation takes care of it and customers are happier, more satisfied, and more likely to return again and again.

Better Customer Retention

Speaking of customer loyalty, the efficient personalization of subscription eCommerce is one of the major reasons why the model is so popular – and, in turn, so effective for retailers and service providers.

That’s no idle assumption, either: the stats back it up. In 2020, Accenture found that 57% of consumers spent more on brands they felt loyalty towards.

In addition to the personalization, the convenience and security of subscribed eCommerce models get an uptick with customers.

This results in them subscribing to, remaining with, and confirming their loyalty to companies that implement and successfully operate this type of model.

Reduced Customer Acquisition Costs

Retaining customers is a boon for a business not just because it brings in consistent revenue but because it also saves on costs.

It achieves this by ensuring a business doesn’t have to siphon off as much revenue into attempts to attract new customers. In other words, it transforms browsers into committed spenders.

In business jargon, then, customer retention reduces customer acquisition costs (CAC).

Such cost savings have the knock-on effect of business owners being able to divert funds to other areas they need to invest in to grow the business.

For instance, a phone service for a small business might well look to develop its service offering via improved tech or hiring more and better employees to boost its internal processes and drive up standards.

Happier Subscribers = More Purchases

Naturally, a big benefit of customer retention is repeat business. Yet, just as important is the opportunity it brings to grow the volume of sales from individual, loyal customers.

When customers trust a company, they become loyal; when they’re loyal, they’ll buy products/services from that company over and over again.

So, thanks to all the data that subscription-based businesses can gather from repeat customers, they’re able to optimize the purchasing experience to meet the needs of each individual customer.

That’s because such data provides insights into customer buying/ booking habits, timing choices, payment preferences, and more.

Moreover, the more a seller knows about a customer, the greater the likelihood of connecting and engaging with them across different channels, enabling cross-selling and up-selling.

Easier-to-Predict Revenue = Easier Planning

With customers signing up for an ongoing service rather than buying things ad-hoc, a business can more accurately forecast monthly revenues.

This happens because calculations are based on actual figures via subscriptions rather than predictions of unknown sales.

Of course, the more predictable the revenue stream and cash flow, the more secure a company owner will be when the unforeseen happens, such as disruption to supply chains.

Similarly, this will also have a positive impact at the time of making important business decisions, especially when it comes to speculating to accumulate – say, updating communications via a phone system in the cloud.

Improved Inventory Management

More accurate planning, however, extends beyond financial management, of course.

The subscriber model enables an eCommerce business to keep on top of its inventory pretty much all the time because it’s always aware of the lowest volume of stock required to meet customer demand.

So, finally, this means inventory can be planned well in advance with, again, a strong degree of accuracy. Naturally, this helps stimulate efficient workplace processes and promotes a balanced, effective, and settled workforce.

The Bottom Line: Subscription eCommerce Is Built to Succeed

So, to sum up, with its several different models, subscription eCommerce has quickly established itself as a foremost mode of delivering top-quality customer service, in exchange for customer loyalty and the opportunity for expansive service offerings and increased returns.

Highly flexible sources of revenue for everything from retailing high-end consumables to rolling out and maintaining an efax service, eCommerce subscription models deliver fast, efficient purchasing processes for loyal, satisfied customers.

Likewise, company owners can reap the benefits of not just consistent, repeat business, but easier-to-predict revenues, streamlined internal processes, and improved inventory management and future planning.

So, not only are subscriber models here to stay, but they look set to lead the way in eCommerce for many years to come.