Subscription model businesses and brands and becoming more and more popular, and now you can get a subscription for almost all products. However, many brands who were quick to try and capitalise on this subscription trend found out that it is a difficult model to sustain.
The current subscription eCommerce revenue is currently around £150 billion annually and is looking to grow rapidly.
In order to succeed and win over subscribers eCommerce businesses must earn customer’s loyalty and offer a seamless customer experience.
What is subscription commerce?
A subscription business model is basically a model used to sell products on a recurring basis, and can range from weekly to monthly to quarterly, in order to maintain customer loyalty and ultimately consistent sales and revenue.
In order to run a seamless subscription eCommerce model, the correct processes and systems need to be in place to ensure that the subscription orders are being fulfilled accurately and on time. Utilising a fulfilment centre, like UK Fulfilment, to handle your subscription service’s orders can alleviate a lot of the stress on your business and improve customer service.
Obviously the subscription business model isn’t correct for every eCommerce product or business, but it is ideal for items which need to be replaced or replenished often, such as toiletries or vitamins.
There are 3 Different Subscription Models:
All eCommerce subscription businesses charge there customers on a recurring basis, but the way subscription businesses run their service varies:
Curation Model:
This is the most poplar subscription model which businesses and brands follow. Businesses will provide a subscription which offers varying products, often either with the choice of selecting specific products for them, or having pre-chosen products for their customers.
Membership subscription:
With a membership model, members will pay a fee for exclusive discounts, products or even content, which businesses like EE, Virgin and Amazon Prime take advantage of.
Subscribe to save Model:
In this model, the same product is shipped on a recurring basis to its subscribers in order for them to save on the cost, through a more drawn out wholesale model. It not only offers convenience and savings to the customer, it also benefits the business by providing more consistent sales.
Benefits of Subscription Models
More predictable and consistent revenue and inventory:
Subscription models allow you to reliably forecast the inventory you need, along with aiding in the ability to predict your revenue from the subscription model.
Improved Consumer Data:
With subscription models comes enriched customer data, due to subscription customers 'purchasing' so frequently, businesses can collect valuable data on their customers' preferences and behaviour.
Disadvantages of Subscription Models
High Churn Rate:
With subscription eCommerce being a very competitive market your business is likely to see high rates of churn. Unless you stay constantly evolving, though both meeting your customer demands, and also changing your business to be in line with market trends, your subscription business will see high rates of churn. The subscription model with the least churn tends to be the replenishment model as they are usually needed products not wanted products.
Complex Operational Logistics:
Like a normal eCommerce business, a successful subscription business requires integration with third-party solutions, like UK Fulfilment's WMS software StoreFeeder, which can give you full visibility of the entire fulfilment process from inventory management, to picking, packaging to returns management and more. Spending your business's valuable finite time and man power on your operations and logistics results in less time and resources available for growing your sales and expanding your business. Outsourcing your logistics and fulfilment to a third-party provider, like UK Fulfilment, can remove wasted time spent on logistics for your business.
Advice for Starting an eCommerce Subscription Model Business
Find a Niche
Finding a niche in the market can be difficult as it becomes more and more saturated, however there are still a lot of gaps for niche subscription services, and if you already have an eCommerce business you probably already have a niche product. Finding a niche is the most important part of the process, and once a niche is found it will still need constantly evolving and expanding to remain competitive, as subscription market becomes more competitive.
Obtain Quality Products
If your products look and feel cheap and inferior to other products on the market, a great subscription savings offer won’t be enough to propel your business. Sourcing high-quality products is essential to success, and starts with researching online or at trade shows and requesting product samples. With most subscription models if you can only source one supplier for your products you may need to rethink and rejig your strategy. A number of suppliers means not only you have a larger variety of products to choose and test from, but also can give you greater negotiating power and a much more resilient and stable supply chain.
Focus on Reduction of Customer Churn
Maintaining the retention of your customers in a subscription model can be difficult and needs to be minimised to maximise revenue. eCommerce subscription businesses need to make it easy for their customers to adjust their subscription by allowing them to pause orders, change the frequency of orders or change their order completely.
Show thanks to your subscribers to maintain loyalty and customer experience. This can be done through offering a free gift or thank you notes.
Make it easy if a customer wants to cancel their subscription and churn. Thank them for their time with your business, or you can offer incentives like discounts if they subscribe again within a certain time period. The more you personalise your subscription service the better.
Predict demand in order to scale effectively
Whilst starting out you may be able to fulfil all your subscription orders in-house, however as your business blooms and your orders mount up this will become not possible to fulfil all these orders in-house. When scaling up your subscription business using a specialist fulfilment partner, like UK Fulfilment, can improve your order efficiency and even lower your costs. Companies like UK Fulfilment are well adept in handling subscription model businesses however complex.
If your subscription business is just starting out and needs help with its logistics or is flourishing has outgrown the ability to fulfil your orders in-house, get in touch with UK Fulfilment for a free quote.
