The subscription-based business model can work well for your business, if and only if your products create the recurring need in the market.
Answering the question straightway, a subscription plan can add values to your business. Still, it is not apt for all target industries. Before opting for this mode, you need to check with your current offerings. If you are selling the products of the once-in-a-lifetime category or even seasonal, this business model is not meant for your ecommerce store.
Before making any conclusion, please make a list of your product categories and get an understanding of their utility for your customers. Even if it doesn’t fall in the category of essentials, it will work if that’s the consumer’s requirement. This will help you in getting clarity about whether a subscription-based business plan will work for you or not. Further, we will guide you with the types of ecommerce subscription service plans and how you can benefit from them.
How Does The Subscription-based Model Work?
The businesses use subscription-based models to provide their offerings continuously on the prior payment periodically. This model is mostly adapted by service-based businesses, as their offerings are not in terms of physical products. Customers opt for services leveraging such a model, as they can use the costly services with the plans that will fit in their budget.
In addition to services, this SaaS business model is now adapted by certain ecommerce store owners. In such a model, customers can choose the subscription plans, and they will get the products delivered for that period automatically. The count of ecommerce subscribers is increasing with the need of time. This subscription-model has been working so well for entertainment and media business.
How Can Ecommerce Leverage The Subscription-model?
Ecommerce businesses can create a plan for offerings they will give in the subscription model by understanding the type of models. You can count on:
Replenishment subscription service
When you are selling the products which will be required repeatedly, it will set the need for a replenishment model. The offerings will be consumed in the meantime, and you can still give up on their demand. It includes razor, toiletries, sanitary napkins, groceries, food, and now even the masks.
The customer can change the brand of the product they are using or change the shop, but the demand for the product will not terminate. Considering this situation as an opportunity, Dollar Shave Club, Misfit Market, and even Amazon create subscription plans. By offering a subscription plan, you provide a discount for the customer for annual or biannual payment. Leveraging this option, you will get a huge amount from each of your customers.
The stores selling child care products are offering a replenishment based subscription model for selling.
Curation subscription service
In the replenishment model, the customer doesn’t have the choice to change the type of product they are ordering. The product that’s once chosen will be served for the rest of the time. If a customer likes to add any other product that can be done, but an exchange will not be possible. Curation subscription type is created to give a free hand to the customer to select the product of their choice, but from the product, list offered from the store. Such offers are blessing clothing and fashion businesses. Customers will be getting heavy discounts, and businesses will get a fair chance to clear the stock and add the latest inventory. This will reduce the In-stock time of the product and will help the company in maintaining the cash flow.
An online toy store, Loot Crate, and fashion business Stitch Fix used the idea of sharing the monthly selection of clothes and fashion accessories to the subscribed customers of the store. The users have the liberty to choose and buy the products of fix range in place of opting for the same product.
Access subscription service
The membership-based discounts several marketplaces and organizations give to users to grow business networks. The product-based businesses and brands like Amway, Modicare, and several others have deployed this idea.
In this model, businesses connect customers as members. After signing up for a membership, the products will be allowed to the customers on discounted rates for a lifetime. Further, customers can connect several other customers as members in their hierarchy and earn a profit on their earnings. This collective earning will boost customers’ confidence and make them feel an important part of the brand. The access can be given for discounted rates without allowing the power of membership. The choice of offerings with access based subscription is solely yours.
If any of these ideas fit well, you must plan to create a subscription model for your business. Evaluate the risks, behavior of customers, and trends in the market. If your competitor businesses are not offering such a service, it is the right time for you to think in this direction. It can be a lot favorable for your ecommerce store.
How can the subscription-model add value to your business?
We aren’t deficient in the reasons behind the utility of the subscription model. Let us share the crucial reasons with you:
- Add more loyal customers: In contrast to one-time conversion on the store, subscription-model add customers in your cart for six months or a year. Mostly, if a customer had a trouble-free experience with your offering for over a year, they are more likely to convert the next year as well. This will automatically improve customer lifetime value and improve the count of loyal customers.
- Personalize user experience: Even if you get one subscriber for your subscription-based plan, it is much better than your business’s one-time subscriber. You will get a lot of instances for communication with your subscription plan users. The more you will engage with them, the better your understanding of the needs of customers will be. The information that you will acquire from those customers will help you understand the demand of the market. With this understanding, you can improve your inventory and create more options for business growth.
- Sales forecasting: Even with a handful of users, your business will be running flawlessly. Subscription plans will give the basic count of sales you will be getting in every month. This will be the count of guaranteed sales. Further, it will help you forecast inventory requirements and set threshold limits for in-stock products.
- Improved customer interactions: When you are targeting the user-base from scratch, you target every customer from the perspective of conversion. When you already have the subscribers, you get exposure to target their network as well. While following this path, you have more scope to gain exposure that can refine customer interactions. One of the major benefits of subscription-based business is the improvement of the ROI of your paid promotions.
Now that you know the benefits of the ecommerce subscription model, you need to plan your offerings accordingly. For better understanding, analyze your previous sales reports to gain insights about customer’s behavioral information. Find the problems that your subscription service will solve for your customers and create ads that trigger the requirement of your offering. This strategy will work well in the implementation of your subscription business model.