Is Now The Time To Adopt a Subscription Ecommerce Model?

|06th Oct 2017

We live in a world where convenience is prized above all else. The growing popularity of subscription services is a testament to this trend.

But what’s so special about the subscription ecommerce model and is now a good time to get on board? Let’s take a closer look.

Something for everyone

According to a recent study, Millennials are far more likely to sign up to a subscription service than any other generation. Whether it’s meal kits, beauty boxes or wine clubs, it seems as though millennials can’t get enough of the convenience afforded by ecommerce subscription services.

You only have to go online to see how huge the market for subscription box has become. It seems as though there is a subscription service for almost anything. From hand-picked clothes to period boxes and even pet-friendly subscriptions, there really is a subscription service for virtually any need you can think of.

What is a subscription service?

An ecommerce subscription service is (usually) a monthly service that customers sign up for in advance for a set fee. Popular examples include Birchbox, the monthly beauty box that delivers five or six hand-selected makeup and beauty products, and Netflix, which offers virtually unlimited streaming of thousands of TV shows and films.

Millennials lead the way

In the study, performed across the pond in America by Fluent, researchers found that, on average, millennials were 16% more likely to have a meal kit subscription than any other age group, 25% more likely to have a shave club subscription, and 22% more likely to have a beauty box subscription.

But why are millennials more likely to sign up to subscription services? The answer could lie in technology. Millennials are seen to be faster to adopt and trial new ecommerce services, whilst different generations may approach with more caution initially.

However, with more and more retailers wanting ‘in’ on the subscription box act, it seems likely that pretty soon other generations will be equally smitten with the convenience and potential savings offered by the subscription model.

So with the popularity of ecommerce subscription boxes going from strength to strength, is now the time to get involved and begin a subscription service of your own?

Let’s take a look at the pros and cons for businesses:

Pros of subscription ecommerce

  • Predictable cash flow & demand: Managing and accurately predicting cash flow can be a nightmare for business owners. With subscription services businesses are better able to anticipate demand and order just the right amount of products to meet that demand. Waste is greatly reduced, as are the chances of being stuck with lots of stock that’s not moving.
  • Future income: Unless you were to lose a large chunk of subscribers overnight, you are more able to forecast and plan ahead when you offer a subscription service. The number of customers you have will not vary as much month to month as it would in a conventional ecommerce store. As an added bonus, most subscription models require the customer to pay in advance which is great for ensuring a steady, smooth cash flow.
  • Customer loyalty & feedback: When a customer receives something from your business every month, you have a fantastic opportunity to build trust and really become part of their life. These frequent opportunities for interaction and feedback are precious and incredibly valuable for helping brands to learn how to improve their service and products.

Cons of subscription ecommerce

  • Set value customers: Getting subscription customers to spend more isn’t always easy. People tend to pay out for their monthly box or service and don’t buy much else from the same retailer. This puts a cap on the value of each customer that doesn’t exist in more traditional transaction-by-transaction ecommerce stores.
  • Churn: The high customer churn rate (percentage of customers who discontinue their subscription to a service each month) is problematic for subscription services. In order to keep the growth rate higher than the churn rate it’s essential to have fresh ideas for how to constantly evolve the service and make it better.
  • Saturated marketplace: The market is flooded with subscription services, so how will yours stand out? What will you do differently? There’s a lot of competition out there so it’s important to think about the longevity of your service and whether you have the skills to make your service stand out.

Let’s work together

Are you interested in starting up your own subscription ecommerce service? Whether you’re an established brand looking to expand your services or a small start-up with a unique idea, Fluid Digital can help you create and build the perfect website to promote your budding business.

Take a closer look at our Magento ecommerce services or contact our team today to discuss your vision.

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