Subscription models in e-commerce:
why and how should it be introduced?
E-commerce has evolved tremendously over the past years, with many innovative solutions designed to improve the shopping experience and support business growth. The subscription model is one such solution that is rapidly spreading in global e-commerce. Subscription-based systems allow customers to access the products they want on a regular basis with a one-time setup, while providing sellers with stable and predictable revenue. In this article, we take an in-depth look at how the subscription model works, what benefits it offers to both customers and operators, and why you should consider adopting such a solution.
How does the subscription model work?
The subscription model quickly became popular because of its simplicity. Buyers select the product when they first order and then select the subscription option to specify the regular delivery frequency (e.g. weekly, monthly or quarterly). Once the buyer has entered the billing information, the system automatically deducts the appropriate amount at the specified intervals and the seller delivers the product on a regular basis. The system is both convenient and reliable, offering significant benefits to both parties.
The subscription model is particularly advantageous for products that customers consume regularly or require a continuous supply. The following product categories are particularly ideal for the introduction of a subscription system:
Consumer goods
Essential products such as shavers, nappies, toothpaste, vitamins and cleaning products that require regular consumption fit well into the "replenishment" model. Such products are often available at a discount to subscribers, which is an added attraction.
Food and beverages
Subscriptions for coffee, tea, wine or snacks are popular, as customers regularly want to replenish their stocks. Monthly or weekly deliveries are a convenient way for shoppers to avoid trips to the store.
Beauty products
Many beauty companies, such as Birchbox, offer new products and samples through a subscription system. These subscriptions give customers the opportunity to try new products on an ongoing basis, providing them with a personalised experience.
Pets
For pet owners, the subscription is also useful as it allows regular deliveries of pet food, treats and other accessories. This ensures that they never run out of essential supplies.
Hobby and leisure products
Subscription boxes are particularly popular for products related to leisure activities such as books, hobby tools (e.g. craft kits), or even passions such as collectibles.
Flowers and plants
Subscriptions to such products are also gaining ground, especially among those who want to receive fresh flowers or new plants on a regular basis.
Subscription models can therefore be used in a wide range of product categories, especially where they are easy to maintain because of the continuous, regular demand. This allows businesses to ensure predictable revenues while offering customers convenience and continuity of supply.
Benefits of the subscription model for customers
Convenience and time savings
Customers can simply set up a subscription for the product they want, so they don't have to manually order again and again. This is particularly beneficial for everyday consumer goods such as cleaning products, coffee or personal hygiene products. Subscribing saves customers time and effort while ensuring that the products they need are always available.
Stable supply and continuous availability
With the subscription model, customers can be sure that they will not run out of the products they use regularly. For sellers, a subscription model provides the opportunity to deliver products on time, avoiding stock-outs and disruptions. This is particularly important for products such as vitamins, medicines or other products where regular consumption is essential.
Discounts and loyalty schemes
Subscription schemes often include various discounts, such as discounts or free delivery. You can further increase the loyalty of your dedicated customers by offering exclusive offers or gifts to your subscription customers. These discounts not only make the subscription option more attractive, but also build a long-term relationship with the brand.
Flexibility and customisation
Subscription models allow customers to freely modify their orders. They can change the frequency of delivery, add or remove products, or even pause the service. This flexibility increases customer satisfaction and boosts engagement.
Benefits of the subscription model for online store operators
Predictable and stable source of income
The subscription model provides sellers with predictable revenue. Regular payments provide a stable source of cash, which helps with inventory management and business planning. Sellers can easily plan their inventory and delivery schedules because they know exactly what quantities they will need in the coming months.
Increase customer retention and brand loyalty
Subscription models make a big contribution to increasing customer retention. Regular delivery and ongoing contact help customers to develop a closer relationship with the brand and make them less likely to switch. Long-term customer relationships mean that subscribers have a higher lifetime value, which increases the stability of the business.
Optimisation of marketing and targeted offers
The subscription model provides an excellent opportunity for sellers to better understand their customers' habits and preferences. Based on the customer data collected in the system, they can offer personalised offers, increasing engagement and click-through rates. In addition, targeted offers and promotions are a more efficient use of marketing spend because they reach the right target group.
Logistics efficiency and inventory management
The subscription model optimises delivery scheduling and inventory management. Because sellers know exactly when and how much product they need to deliver, they can manage logistics operations more easily. This also reduces shipping costs and inventory costs, which increases operational efficiency and improves profitability.
How the subscription system works on the webshop operator side
From the operators' point of view, the introduction of a subscription model requires some technical preparation, but it will facilitate operations in the long run by setting up automated processes. Subscription options for products need to be carefully defined and then the subscription options need to be displayed in the webshop. Sellers can set up automated order management and payment processes to deliver products accurately at all times. Logistics preparation and customer service flexibility are also key to the smooth operation of the system.
How the subscription system works on the customer side
The customer experience is simplified with the subscription model, as customers only need to place an order manually once and everything else is done automatically. Customers select the product and subscription option, and the system securely stores payment details. Each order period the amount is automatically deducted and customers are notified of a new delivery. They have the flexibility to change or cancel their subscription if they wish, further enhancing the user experience.
Summary
The subscription model is clearly attractive to both buyers and sellers, offering convenience, a stable source of revenue and efficiency. It helps customers save time and energy, while ensuring continuous product availability and often offering discounts. For operators, the subscription model improves customer retention, optimises inventory management and makes marketing more efficient. It is therefore worth considering a subscription model as it provides a competitive advantage in e-commerce and increases the long-term success of the business. Such systems can contribute to business growth and competitive advantage by improving the customer experience and increasing efficiency.
We strongly recommend the use of the subscription model for the TRNDX Communications web store building service.
References
- Autoship Cloud, "The Top 10 Types of Product Subscriptions in 2023 and How to Set Yours Up"
- Shopify, "Subscription Business Models: 6 Types to Consider in 2024
- Pet Product News, "Pet Product Subscriptions Continue to Grow
