What was 2023 like for the Subscription Model of E-commerce? The e-commerce subscription model experienced a notable surge in 2023, with an approximate market value of $600 billion. But before discussing trends and forecasts for subscription businesses, it can be helpful to gain some understanding of the state of the Ecommerce Subscription Model industry as a whole and what to anticipate by studying the general market and subscription trends 2024.
Subscription services have already become the norm for many industries, with companies offering customers the opportunity to receive products and services on a regular basis. This is an incredibly attractive offer for customers in both business and consumer markets, and it’s likely to become even more popular as the years pass.
Taking a closer look at the subscription model in ecommerce and what to expect in 2023, today we examine what the future holds for you, and your company. Stay to learn more!
Why Is the Subscription Model Popular?
There are numerous reasons why different types subscription models are popular.
- First and foremost, it offers customers a more convenient way to receive the products and services they need on a regular basis. Customers don’t have to worry about reordering or going to the store to pick up items, as they can simply have them delivered to their door on a regular basis. This is especially helpful for customers who rely on certain items to maintain their quality of life.
- Furthermore, the subscription model offers customers a more cost-effective way to purchase the items they need. Companies offering subscription services typically offer discounted prices for customers who commit to a long-term subscription plan. This is an attractive offer for customers who need to purchase certain items on a regular basis and want to save money in the process.
- Lastly, the subscription model offers companies an effective way to retain customers. Customers who sign up for a subscription plan are more likely to stick with it for the long-term, rather than switching to another company. This is beneficial for companies, as it allows them to build a loyal customer base and maintain a steady stream of revenue.
It’s expected that the subscription model in ecommerce will become even more diverse in 2023. Companies are likely to offer subscription services for a wider variety of products and services, from food items to clothing to beauty products. This will make it easier for customers to find the items they need on a regular basis and will make the subscription model even more attractive.
Ecommerce Subscription Predictions for 2024
Since Ecommerce Subscription Models are a component of the Ecommerce market, they are impacted by the broader changes in Ecommerce as well. Take a look at these statistics:
- Global retail sales are expected to reach $31.1 trillion in 2024, a 4.9% increase from 2023.
- By 2024, mobile revenue might surpass $600 billion.
- In 2024, B2B Ecommerce revenues will exceed $2.3 trillion.
- By 2024, mobile sales are predicted to account for 70% of retail Ecommerce sales.
- Social media will play a significant role in Ecommerce firms’ sales strategies.
It is expected that subscription services will continue to become the standard across a range of businesses and the subscription model will become more and more popular as it grows. Businesses are appealing to both the commercial and consumer markets because they provide their clients with regular goods and services.
Difference Of Between Ecommerce Subscription Models
It’s critical to understand the different kinds of subscription e-commerce businesses that are out there before you launch a new subscription business or begin working on plans to expand the one that already exists.
But why is it so important to comprehend the various kinds of subscription models?
Offering subscriptions in a universal solution is not effective! The following reasons help you to understand the degree of importance of knowing the various subscription model options:
- Choose the subscription plan that works best for your product.
- Decide which model will benefit your customers the most, making it the most appealing model.
- Determine the cost of the subscriptions.
- Meet your customers’ need for customization
- Boost client involvement to increase loyalty
*Remember: not every kind of business can benefit from every type of subscription e-commerce! Choose your ecommerce subscription type wisely!
Types of Ecommerce Subscription Models
Now that you understand how important it is to know different types of Ecommerce Subscription Models, let’s go over the many varieties of models that are frequently employed in e-commerce. After discovering each type, we’re going to take a look at ecommerce subscription model benefits for both consumers and retailers:
1. Replenishment / Consumables Subscription Model
Customers must buy a certain number of goods, including food, medicine, health supplements, and groceries regularly. Most people plan to shop based on a monthly or weekly schedule. So, these kinds of products suit the best strategy for an Ecommerce Subscription Model.
By using a replenishment subscription model, customers can easily receive their desired products on their specific planning, without the constant need for reordering. In this way, they not only save time but also save money. Many subscription models come with off for subscribers. This is what we refer to as an “automatic purchase”.
Amazon is the best example of a consumables subscription model.
How does this model benefit consumers?
- The main goal of replenishment subscription models is to maximize customer convenience. With little to no effort on their part, customers can receive products on a regular basis through this model.
- Thanks to this model, Customers no longer have to waste time and effort remembering when to place orders or which brand they ordered previously.
- Customers can save money with this model by potentially receiving discounts for long-term, recurring orders.
- Customers don’t wait around. They require quick delivery of their order when they place it. Customers can schedule product deliveries at desired intervals and at the appropriate times with the replenishment subscription model.
How does it benefit retailers?
- A replenishment subscription model gives a brand a competitive edge. Customers who value this model’s convenience would pick your brand over those of your rivals who don’t carry it.
- Customers who sign up for regular deliveries at pre-arranged intervals guarantee a steady flow of income for the brand. Orders received via the replenishment model allow the retailers to forecast demand and product delivery dates, which helps them better manage inventory.
- Retailers are able to more precisely predict demand and balance the supply and demand for their goods.
- Retailers can raise their customer retention rate by using this model.
- The customer lifetime value subscription directly benefits from higher rates of customer retention. Also, better returns on expenditures and customer acquisition efforts are implied by this.
2. Curation Subscription Model
The “surprise” component is the foundation of the curation subscription business. Customers in this model are unaware of what will be delivered with each delivery! In this strategy, retailers assemble a variety of goods and distribute them to clients on a set schedule.
This kind of Ecommerce Subscription Model, sometimes referred to as the “curated box,” offers a great degree of customization potential. Products that align with consumer preferences and choices at a single (person) level can be branded.
The most popular uses for this style are for drinks (coffee, liquor), toys, books, chocolates, condiments, cheese, wine, etc. Brands can easily encourage customers to try new goods by simply adding them to the curated box, which is a major benefit of this strategy.
How does this model benefit consumers?
- Customers’ desire for personalization is satisfied by the curated subscription model. Customers are frequently asked to check or cross out products when they sign up in order for brand managers and artificial intelligence to know what they like and dislike.
- Customers who receive personalized curated boxes report having a better overall experience, characterized by a sense of being respected and understood.
- Customers experience a sense of excitement from the surprise and delight elements included in curated subscription boxes.
- Customers can try new products through curated boxes that they otherwise might not have purchased.
How does it benefit retailers?
- The curation subscription model provides all the standard advantages of other subscription models, including better forecasting of revenue and demand, inventory, and higher returns on customer acquisition costs.
- A curated subscription model gives brands a great chance to cultivate deeper connections with their clientele.
- Since brands can readily gather customer preference data, they are able to provide highly customized experiences for their patrons.
- One of the best things about this model is that happy customers promote brands and help them get more business.
3. Bargain / Access Subscription Model
Customers who use the bargain or access subscription model pay a monthly subscription fee in order to receive access to new products, products at reduced or bargain rates, and other exclusive offers available to members only. Product lines in the culinary, fashion, and health and wellness sectors frequently employ this Ecommerce Subscription Model.
Customers who use this model are certain to receive fantastic and exclusive discounts on products; it is especially advantageous for budget-conscious and frequent buyers.
The exclusivity component is further used by the cheap subscription approach. When consumers get access to new products, products at a discount, and products with exclusive offers, they feel unique or exclusive.
How does this model benefit consumers?
- Customers who use the bargain subscription model can receive special offers and discounts on products and services.
- Customers using this kind of subscription model can easily cancel at any time.
- Budget-conscious customers can take full advantage of this kind of subscription model.
How does this model benefit retailers?
- Retailers can guarantee steady revenue for every kind of product in their inventory by using this model.
- Within this model, brands are able to offer various pricing models.
4. Fixed / Flat-rate Pricing Subscription Model
Retailers sell a predetermined set of products for a predetermined amount of time at a preset price under the fixed subscription model. The most prevalent use case for this kind of Ecommerce Subscription Model is in SaaS (Software as a Service) offerings. SaaS providers give a set amount of features for a set cost over a predetermined amount of time. Any additional costs take effect when the usage exceeds a predetermined threshold.
How does this model benefit consumers?
- This subscription model is the easiest to use because everything is pre-arranged.
- Customers can easily comprehend and make decisions about their purchases with this simple subscription model.
- Consumers can monitor how much they use, how much is left in their plan, and when they will incur additional fees by tracking how much they use.
How does this model benefit retailers?
- Retailers are able to forecast their revenue and adjust their business plans accordingly.
- Retailers are able to guarantee steady and recurrent income.
- With the use of this model, brands can establish enduring connections with consumers that will enable them to provide customized goods and services.
5. Unlimited Subscription Model
With Ecommerce Subscription businesses, an unlimited subscription model is not very typical. With this approach, users pay a set fee and get unrestricted access to a product. For instance, several bars provide limitless beverages together with a set admission price! Unlimited subscriptions, however, may be a viable option based on the product and the customer’s typical use case. For instance, for a certain monthly fee, newspaper subscriptions provide unrestricted access to news and article content!
Another effective example of this kind of business strategy is Netflix, which charges a monthly fee for unrestricted access to its streaming material.
How does this model benefit consumers?
- Customers using this subscription model receive an endless supply of a particular product.
- Customers can easily make a purchase decision because there is a set payment amount required, which simplifies pricing.
How does this model benefit retailers?
- Because this kind of subscription model draws a lot of customers, retailers can guarantee greater sales.
6. Pay As You Go (PAYG) Subscription Model
A usage-based subscription model is pay-as-you-go. With the pay-as-you-go (PAYG) pricing model, users only pay for the amount of service they utilize. While many phone carriers cost based on minutes utilized, cloud storage service providers may charge based on storage capacity used. Clients pay according to the quantity of a good or service they utilize.
When they initially introduce a product or the firm, many small businesses employ this subscription model to get off the ground. These are the majority of subscription models utilized by telecom and internet providers.
How does this model benefit consumers?
- Customers are guaranteed that they will not be charged more because they only pay for the quantity of goods or services that they utilize.
How does this model benefit retailers?
- Launching new products is made easier for brands by this subscription model.
- It aids companies in gauging consumer reaction to new offerings.
7. Premium Member Subscription Model
Customers pay a charge to utilize products or to access premium services under this subscription model. The guiding idea of this business model is to provide clients with a sense of exclusivity and uniqueness. Amazon Prime is a prime illustration of this membership business. Several businesses, including eCommerce, food and restaurant, apparel and leisure, etc, are using this subscription model.
How does this model benefit consumers?
- Customers receive special advantages. They experience exclusivity and feel valued and special.
How does this model benefit retailers?
- Strong, enduring relationships between brands and consumers are possible.
- Using this model, brands can provide customers with customized experiences.
8. Build Your Own Box/DIY Subscription Box
Customers pay a charge to utilize products or to access premium services under this subscription based ecommerce business model. The guiding idea of this business model is to provide clients with a sense of exclusivity and uniqueness.
Amazon Prime is a great illustration of this membership business. Several businesses, including eCommerce, food and restaurant, apparel and leisure, etc., are using this subscription model.
How does this model benefit customers?
- Consumers have the freedom to select the goods, the quantity, and the pricing.
- Consumers own their subscription box and enjoy freedom and flexibility.
How does this model benefit retailers?
- This model can be used by Ecommerce Subscription Model stores with a smaller product catalog so that customers don’t feel as though their boxes aren’t varied enough. Brands that sell a certain category of goods, for instance, can apply this strategy.
- Customers have flexibility and freedom because they have a choice. This promotes client satisfaction.
Keep Your Subscription Based Ecommerce Business Model Trendy
As the world continues to move towards a more digital-focused future, subscription based ecommerce business model need to stay up-to-date to remain successful. In 2023, there are several ways for the subscription model in ecommerce brands to be updated so that businesses can stay ahead of the competition.
11 of them are listed below:
1. Focus on Personalization
Customers are looking for more personalized experiences that speak to their individual needs and preferences. By leveraging data and AI-driven systems, ecommerce subscription brands can deliver highly personalized services to their customers. This could include customizing product recommendations, personalized discounts, and tailored content.
2. Consider Sustainability
Customers are increasingly looking for brands that prioritize sustainability, and ecommerce subscription brands should be no exception. Brands can focus on sustainable packaging, using eco-friendly materials and minimizing waste. They can also focus on offering products that are made from sustainable materials or that are sourced from ethical suppliers.
3. Analyze Competitor Strategies
Analyzing the strategies of your competitors can help you stay ahead of the competition and identify areas for improvement. Keeping an eye on your rivals can help you refine your subscription model in ecommerce competitions. It will give you ideas about the steps you should take and the actions you should avoid.
4. Focus on User Experience
User experience is becoming increasingly important for e-commerce subscription brands. Focusing on user experience can help you create an intuitive and enjoyable experience for customers and increase customer satisfaction.
- Provide helpful customer service and support.
- Ensure easy and secure billing and payment systems.
- Create an intuitive and user-friendly interface.
- Offer detailed product descriptions and informative FAQs
- Make it easy to upgrade and downgrade plans
- Make the subscription process simple and straightforward
4. Loyalty Programs
A loyalty program can give customers an incentive to keep coming back. Brands should offer rewards such as discounts, free shipping, or exclusive access to products and services.
Here is a detailed guide to creating the best loyalty programs for your Shopify store.
5. Build a Community
The subscription model in ecommerce platforms has no way around building a sense of community. Customers are looking for a sense of connection with the brands they purchase from. Brands should focus on creating content that speaks to their customers and promotes a sense of loyalty, dedication, and belonging, around their brand.
6. Make Use of Chatbots
Chatbots can be a great way to provide customers with answers to common questions and inquiries. By leveraging chatbots, you can provide customers with a more seamless and efficient customer service experience.
7. Implement Automated Advertising
Automated advertising can be a great way to target customers with relevant ads. By leveraging automated advertising, you can deliver ads to customers at the right time, increasing the chances of conversion.
As another channel of automated advertising, make sure to use email marketing as a cost-efficient marketing tool. In compatibility with Shopify, Subify will help you with sending emails to your subscribers, without any extra apps.
8. Offer Mobile-First Experiences
By the year 2023, it’s estimated that nearly 70% of all e-commerce transactions will be conducted through mobile devices. To keep up with this trend, it’s important for your subscription model in ecommerce platforms to offer a mobile-first experience. This means your website, subscription widget, customer portals, and customer service channels need to be optimized for mobile devices.
9. Create Video Content
Video content is a great way to engage with customers and build trust in your brand. Creating educational videos or tutorials can help customers to better understand your product and services, as well as build a strong connection with your brand.
10. Cross-selling and Upselling
Cross-selling and upselling can help to increase sales and encourage customers to purchase more items. Utilizing these strategies can help to increase the value of each customer and boost your Shopify subscription brand’s revenue.
11. Track Your Performance
With the help of analytics and insights, you can monitor the performance of your store. Shopify offers an extensive range of analytics and insights to help you track key performance indicators such as conversion rates and average order value.
When you test different methods for your subscription model in ecommerce platforms, and keep track of how they are paying off, you’ll get the right results at the right time.
How to start an ecommerce subscription model in 10 steps
Now is the time to construct your ecommerce subscription service and test your concept on actual users. The actions you must take to accomplish that are as follows:
1. Choose the suitable subscription plan
Selecting the subscription model that best suits your business is the first step in starting an Ecommerce Subscription Model. We’ve already mentioned the types of e-commerce subscription services.
2. Choose your products
Choose the products you’ll be selling in addition to the subscription model you intend to use. Plans for replenishment demand just a limited number of commodity products, whereas plans for curation call for a monthly rotation of products.
3. Set up subscription programs
Decide on the monthly fee you will charge your subscribers. Once you’ve determined all of your products, variables, and fixed costs, you should aim for a profit margin of at least 45%. Researching the behavior of your target consumer base will help you create a variety of plans to meet their wants.
4. Determine all terms and conditions
The operation of your subscription service is outlined in your terms and conditions. You need to figure out how customers can cancel their memberships, return policies, and auto-renewal alternatives.
5. Design packaging and branding
Deciding on the package your products arrive in is just as important as branding your new subscription service. Every month, you should look forward to unboxing your product. Creating an image that appeals to your subscription base and draws in new business is the climax of all of this.
6. Set up fulfillment and shipping
You should definitely outsource shipping and fulfillment unless you currently have your own internal fulfillment operation for products that are already in place. You can choose from a wide range of businesses to provide these services.
7. Set up subscription managing and billing.
A process for managing subscriptions and monthly billing must also be developed. This includes handling declined transactions, processing credit card payments, and urging clients to have their subscriptions automatically renewed.
8. Create an inventory
Now that your backend operations are established, you can start developing your inventory. You’ll need to outsource your production to one or more businesses that can supply the quality and quantity you’ll require on a monthly basis, unless you’re selling the products your company already offers.
9. Start marketing
You need to get subscribers before you ship a single box. This entails developing and carrying out a marketing strategy using a range of media, including social media, to reach your target market.
10. Start the service
If you’ve read this far, It’s time to introduce your new membership service. You are all set and good to go!
Examples of Ecommerce Subscription Models
So far You’ve realized that is the best time to start a subscription service or add one to your existing business. You might find it fascinating to know that e-commerce services have increased by 90% since 2016. These kinds of numbers are encouraging.
Customers love it, business owners enjoy it! It’s a one-time endeavor but full-time reward in return!
By making or adding a subscription business model in e-commerce, you’d make the most loyal clients ever. Time and money efficiency are the two things people are looking for nowadays. Now, let’s take a look at the subscription model in e commerce examples that are innovative and useful on a new level.
1. Bluum
Category: Toys
Bluum’s offerings: Selected products for infants on a monthly schedule, e.g. lip balm, tiny toys, snacks & baby wipes.
The target consumer: Working mothers who lack the time to research and purchase items for their child.
Positioning: Bluum helps mothers in finding new products to use. Although Amazon and Diapers offer a wide selection and fast shipping, they do not assist mothers in looking for other options. Bluum’s business model is based on the notion that mothers are too busy to try and learn everything for their infants and they already have too much to take care of. With the help of Bluum and the subscription model, mothers can find and test new products at a discounted price each month.
2. Birchbox
Category: Cosmetics
Birchbox’s offerings: Birchbox provides its clients with a monthly subscription of samples of beauty products that they have never tried. By doing so it encourages people to try and learn new products. Additionally, clients can decide to keep purchasing the products they like.
The target consumer: Women who enjoy taking care of themselves and are between the ages of 25 and 39 are the target market.
Positioning: Birchbox helps clients in a convenient way to find new beauty products every month. Samples of beauty products can’t be found anywhere else. It is difficult for consumers to trust new products because they want to give them a try before deciding if they are the right fit for them.
3. Pet Circle
Category: Pet Food
Pet Circle’s offerings: Pet Circle offers a one-stop shop for all of the pet-related products. Everything from food to toys, beds, grooming supplies, and health items can be purchased.
The target market: Pet owners
Positioning: Because of the perception that Ecommerce Subscription Model wasn’t appropriate for the pet industry, many people thought Pet Circle would fail when it first launched in 2011.
Observing that the parents were only buying 4 kg of pet food because they couldn’t carry the heavier bags home, Mike Frizell, the company’s founder, came up with the concept for Pet Circle. Now Pet Circle helps the clients profit from the subscription model by purchasing each item separately from Pet Circle or selecting auto-delivery, which has products delivered on a predetermined schedule.
Also, the company offers a 10% discount for the first month of auto-delivery to entice customers to switch to subscriptions.
Sum Up
In 2023, e-commerce subscription models saw a sharp increase in popularity. Ecommerce companies must comprehend the various subscription model types in order to choose the best one for their goods or company. After choosing the best Ecommerce Subscription Model for your business, and make sure to consider Subify, as your subscription management app, it’s time to create one. Also knowing the trends will help you with the revenue stream.
