What is Subscription Commerce?
Subscribe ProMarch 7, 2016
Why your eCommerce business needs subscription commerce
If you work in eCommerce, or are considering launching an eCommerce business, then one revenue model that can’t be ignored is subscription commerce (sometimes also referred to as subscription eCommerce). Why? Because the subscription business model is highly scalable and can provide recurring revenue that is often more reliable than traditional eCommerce.
What is subscription commerce?
Subscription commerce allows eCommerce websites to offer regular (weekly, monthly, etc.) purchases of a product or group of products. There are essentially two models for subscription commerce: Autoship and Curated Subscription Box.
Autoship: These are the subscriptions of varied length to particular products or SKUs. Subscribers receive a supply of the same product on a regular basis. Amazon’s Subscribe N Save program.
Curated Box: The box or club model has gotten a lot of attention in recent years with Birch Box and others. Typically, a company curates a set of products and ships them to subscribers on a periodic basis. For example, Blue Apron sends members a weekly box full of fresh ingredients and instructions to make a delicious meal. There are many types of products which lend themselves very well to this model, particularly food and beverage items but also clothing, toiletries, and makeup. You name it and there’s probably a subscription available for it. There’s even a subscription box service for pets!
Why you need it
Quite simply: Nothing beats the convenience of recurring revenue. It’s easy to scale, especially with automation. Best of all, it’s predictable. The easier it is to forecast monthly revenues, the easier it is to scale. And the easier you can take advantage of economies of scale; the more you grow the higher your profit margin. All the while, you’re also building brand loyalty, and can create automated programs to increase that (refer a friend discounts, anyone?).
What you need to pay attention to
- Churn rate, or the rate at which customers cancel subscriptions. It’s the bane of the subscription business model. Keeping it low is essential to long-term profitability.
- Automation will help you make fulfilment easy. Setting up the process correctly from the start will help you ensure smooth operations.
- Competitors abound in the subscription world because it’s relatively easy to set up a subscription business. Which means you have to keep a close eye on Cost per Acquisition (you should be doing this anyway, of course).
- Supply chain issues can mess up any eCommerce business, and with subscriptions the impact can be even more hazardous. When customers don’t get their regularly-anticipated package, they get angry. And when they get angry, they cancel.
Ready to jump in? Reach out to us for a free demo and we’ll get you started.