What Are the Pros and Cons of the Subscription Business?

Would you like to see your business featured in Vogue? That’s what happened to Nelli’s.

Founded by two women in 2018, Bundleboon aims to make parenthood easier and…more enjoyable!

Bundleboon is a subscription service of kidswear curated by a team of experts. Once you've answered a few questions about your child's interests and size, a stylist will create an outfit tailored to their preferences, which will be delivered to you in a box, in only a few days!

For Nelli, success hasn't come from only switching to a subscription service; it has been a process of understanding what it means, what it requires, and how to prepare for it.


It's not that subscriptions are a new concept; newspapers and magazines have been selling on this basis since the 1700s. However, subscription business models have become INCREASINGLY POPULAR over the last few decades.

Yes, they're sensible, convenient, and money-making; but that's not all they're about.


Are you thinking about switching to a subscription model for your Shopify business? Good news: today, we’re going to be discussing all the pros and cons of the subscription business to make this decision easier and better for you. Stay tuned!


Pros and Cons: A 4-Part Comparison of the Subscription Models

Subscription business models have become increasingly feasible due to infrastructure developments, but feasibility alone does not explain subscription economic growth. For businesses and the customers they serve, it's important to understand the subscription model in all shades, from bright to dark.

Pros:


1. Predictable Income

You can pretty much predict your company's income on a monthly basis with a subscription model. Subscription services sell a single product with a guaranteed price, and in return, they guarantee that the buyer will receive their chosen item at their desired frequency. This is unlike a website that lists hundreds or thousands of items whose popularity can change depending on a variety of factors. It’s been the biggest motive for many people to convert, knowing that it’s the best factor to weigh when it comes to determining the pros and cons of the subscription model on Shopify in unstable markets.


2. Customer Loyalty

The challenge with most sales is that customers rarely make repeat purchases, so it is difficult to engage and build relationships with them.

With sales being repeated, while running a subscription business, you have an extended window of time to build a relationship with your customers; get to know them, and create a bond. Not to mention that word-of-mouth continues to be a crucial method of generating business in this age of social media. When purchasing a product becomes a habit in your buyer's lifestyle, there’s a high chance that they will recommend you to their friends or family.


3. Data-driven Insights

“Data has become an asset, and nobody has more customer information than a subscription business. Traditional companies are launching entire subscription offerings just for the data they provide”

John Warrillow, The Automatic Customer: Creating a Subscription Business in Any Industry


With predictive analytics and forecasting backed by data, future decisions can be made with confidence. In order to define focused customer segments, forecast sales, analyze the market, and minimize risk, companies need to choose the right data sets and extract information. Considering this option is essential if you’re planning to draw out the pros and cons of the subscription service for your business based on information. Tailor the products you’re gonna bring into the market based on your buyers’ taste and sell what has proven to be sale-worthy.


Information is one of the most important factors in considering the pros and cons of the subscription business
Subscriptions Allow Shop-Owners to Make Data-driven Decisions

4. Personalization

The importance of experiences for modern consumers has never been greater. Prices and value still play a role in determining consumer spending, but the customer experience is largely determined by personalization when it comes to doing a subscription business. According to an online survey by Epsilon, 80% of customers (between 18 to 64) announced that they’re more likely to buy from a company if there’s a personalized experience involved.

In running a subscription service, personalizations are inevitable. Whether it is the delivery frequency or the collection of items, subscription businesses are giving their customers some agency.


Take Bundleboon for example; they don't just sell clothes, they sell experiences. You're likely to see kids and moms coming back to the store again, as it offers a sense of mystery and personalization.

Cons:


1. Churn Risk

Having a high churn rate is a danger for subscription-based businesses. A customer's subscription indeed brings some steady revenue, but when considering the pros and cons of the subscription models, we have no choice but to ask the difficult questions too.

What keeps customers happy, or more importantly, what prevents them from canceling when they decide it's no longer worth the expense? The key to minimizing this risk is to build good customer relations regarding cancellation and extra fees, as well as prepare for this risk in advance.


2. Contract Management

From tiny businesses to huge ones, it’s highly important to be able to manage all the purchase information in order to make shipping on time.

Subscription contracts include payment methods, card information, delivery frequencies, and tools. Handling all these dilemmas manually can be a lot of work. That's where setting up subscriptions on Shopify comes in handy. Your orders are going to be fulfilled automatically when you install Subify as your subscription app.


3. The Competition

Competition is fierce in this market. It would be best if you always kept an eye out not to let your competitors outdo you with your subscription model. Are you explaining clearly what your end customer will gain from your product or service? Do you provide encouragement or rewards (e.g., discounts, free delivery)? Stand out from the crowd by defining your brand identity and being unique.

We’re happy to let you know that with our customer success managers at Subify, you won’t be alone in the game.

Our agents are available to provide you with tips on:

  • Gaining more subscribers

  • Presenting your service perfectly

  • Keeping your buyers in the business


4. Refunds and Exchanges

There are customers who run into frequent issues with returns and exchanges. Perhaps they won't like the items you've carefully selected for their mystery/gift boxes, or maybe there will be delivery delays. There’s always the risk of missing items, too; products may not be found in the subscription box, no matter how much you were certain you packed them in.

However, subscribers are not ordinary customers (well, to be true, no one is), so you must be fully prepared for these occasions. In fact, occasions like this are the reason why you should be considering the pros and cons of the subscription business before actually running it. Handle the refunds or exchanges well enough not to lose a customer over a mere inconvenience, and of course, feel free to reach out to Subify support team, anytime.

What Makes Bundleboon a Great Example?

It may seem complicated at first, but actually, Bundleboon is following a few simple rules to get where it is now. It’s all about following a few pros and avoiding a few cons. Let’s hear it out:


  • There's a strong customer-seller bond at work here:

This brand's concept is based on understanding the struggle of motherhood. “No more drama in the dressing room, but a personal clothing package that your child can try on at home.” they say. Customers are going to understand and relate to that.


  • They’re trading data for decision:

Getting information from your customers and using that to decide which products to sell is a winning strategy. As well as being a safe and secure move, it is a sign that you value your customers' tastes.


  • They’re super personalized:

Upon answering a few questions, Bundleboon will create you a subscription box tailored to your child's likes and dislikes. You'll feel like you're getting a gift box even if you're paying for it!


one of the most important pros and cons of the subscription model is the significance of personalization
Use Personalization to Stand Out in the Subscription Models

Using automatic surveys to take orders gives them the capability of having a stylist team. Imagine how much more work there would have been if they had to process orders manually!



  • They’re winning:

Remember what we talked about while reviewing the pros and cons of the subscription business? It’s a competition, and…Bundleboon is clearly winning. One of the biggest categories using subscription models is the clothing and apparel industry, however, with simple yet practical steps, Bundleboon has succeeded to stand out.


  • They’re handling refunds pretty well:

It is not necessary for customers to accept all the items in their package. They can send back the ones they don’t like (completely free of charge) and keep the ones they do. Also, those who decide to keep the whole package will be rewarded with a 10% discount!


Conclusion

A subscription model business does have some advantages, but it can also have some downsides too. Converting to subscription models is a serious decision, but it doesn’t have to be difficult.


Here at Subify, we’ve studied all the pros and cons of the subscription models, with the goal of highlighting the pros and solving the cons (for you).

The first step to making a successful business decision is recognizing the different aspects involved. And next? find a companion with whom you can go through them together.

According to Starterstory, Bundleboon is now making $420K a year, and…we believe you can too.


Trust us with your values and we’ll increase them for you; Subify is always just a click away.





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